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Virtual reality industry direction lull

Virtual Reality, In A Lull, Needs To Shift Course to Build Sustained Success

The push for virtual reality continues unabated, but here in 2017, after billions of dollars in investments by companies great and small in hardware, software, production systems and many experiments in entertainment experiences, we’re not quite as far along as we need to be.

In fact, key members of the industry itself are calling for mid-course corrections to keep alive the promise of VR and its potentially even bigger cousin, AR.

Walt Mossberg, in his valedictory column for The Verge this past week, noted that we’ve hit “a strange lull” in the seemingly endless procession of tech transformations of the past few decades.

Mossberg hastens to add, however, that the lull won’t last. We’re sitting on the cusp of breakthroughs on several fronts, including augmented and virtual reality, as computing power gets more distributed, invisible and ingrained in daily interactions that require less and less of us.

That will certainly benefit VR and AR experiences that now involve clunky, heavy head-mounted devices that often are tethered to a hefty PC or at least a PlayStation or a smartphone. But that transformation is not here yet.

And meanwhile, lots of VR industry people I’ve talked with at a series of recent conferences and conversations are trying to figure out how best to keep 2016’s admirable energy and momentum sustained during the lull.

“We have all thought the opportunity for VR was in games. We all came from games and assumed that’s the way it would go. It’s not. It’s in the enterprise,” I was told this week by a long-time industry veteran who now does strategy for one of the most-buzzed-about startups in VR, AR and mixed reality. He spoke off the record because his company very much is still focused on entertainment.

Last week, I noted the naming of Jay Samit as vice chair of Deloitte’s big digital arm, charged with driving the consulting giant’s deals to help enterprises knit VR and AR tools into their everyday business processes.

“To me, what’s really exciting is this is about workplace transformation,” Samit told me then. “At its most basic, it’s about how do you transmit knowledge within an organization?”

The emerging consensus from various conferences and conversations I’ve had seems to be that entertainment/game opportunities will continue unfold, just more slowly over the next several years than people may want.

VR entertainment will be a compelling but niche opportunity, some are now saying, but the tools and, more importantly, the killer apps that push augmented reality into the mainstream will create a huge business opportunity there and into AR and mixed reality.

“Right now the conversations are all about the technology, not the content,” said Owen Hurley, who is Vice President, Creative for Technicolor’s Animation & Games unit. To that end, his storied Hollywood company is opening an  “experience center” in Culver City to experiment more broadly with the new VR tools, motion capture and related technologies.

Bravo to Technicolor for encouraging experimentation in the form. The company’s visual-effects unit The Mill also collaborated last year with The Guardian on “6 x 9,” which let people feel briefly what it’s like to be in solitary confinement, as 5 million U.S. prisoners are. That VR experience was part of a broader journalistic exploration by the Guardian of the efficacy and problems caused by solitary confinement, in a way that mere words couldn’t fully do just to.

We could use more of that, but first things first. We need companies that can sustain.

At the recent L.A. Games Conference, I talked with the young CEO of a much smaller startup that bootstrapped its way to viability by doing work-for-hire with film studios, digital agencies and other companies. That approach allowed her company to make its way without a batch of anxious investors looking over her shoulder, even as the company has done well enough to begin creating its own projects.

But, she said, “Those companies that took big money (from investors) a couple of years ago have to be feeling pretty nervous now.”

More than $4 billion has already been invested in hundreds of VR startups. A just-released study by Brabant Development Agency suggests that more than half of those startups think they’ll need multiple additional rounds of investment capital to keep going. But those same companies don’t expect to see enough revenue coming in that would justify continued investments by venture capitalists and others.

That’s a problem, compounded by a string of other issues highlighted by VR Society President Jim Chabin in a recent event sponsored by the society and Legend VR, a big visual-effects and VR company with long ties to traditional Hollywood.

“We’re in a vulnerable state in VR,” Chabin said. “We need hits. If we’re not creating compelling content, all this will be for naught.”

As the strategy guy for that buzzed-about VR startup said to me: “There are launch apps and there are killer apps. Launch apps make you interested in a new platform and show what’s possible. Killer apps are what make the new platform a must buy. Arguably, we’ve had neither so far in VR.”

Will Maurer, who heads Legend’s VR and visual-effects units, agreed that it’s a delicate time for the industry.

“We’re on the cusp right now,” Maurer said. “It’s easy to chase the revenue instead of building a core competency. Everyone has a VR company these days, it seems. But the lack of experience is hurting the market. It’s hard to compete with free, but lots of companies are giving away services for market positioning. Ultimately, consumers end up with a bad product.”

The day before the Legend event, Chabin was in New York to discuss a still-unreleased study of the VR business with leaders from the consumer-electronics and entertainment sectors. The study spotlighted several issues:

  • There’s no VR equivalent of movie-review compiler Rotten Tomatoes to spotlight good content. Without reviews, how will consumers know what’s worth watching or, especially, paying for?
  • There’s no central place to find new content, an iTunes Store or Netflix for VR.
  • What content is available is often exclusive to one of many mutually incompatible VR headsets. Compare that to video gaming, where most big titles are available on most major platforms.
  • Creators don’t have “a clear path to monetization” so they can afford to keep building new experiences. Maurer said companies and creators are “still a little bit away” from consistent money-making opportunities.
  • There’s “major pushback” on VR advertising, an otherwise promising way to generate revenue. Users “don’t want to be held hostage by immersive ads,” Chabin said.
  • The “Blue Shirts,” salespeople at Best Buy and similar big box retailers, are confused about the VR products they sell. And if the Blue Shirts are confused, there’s no way a 42-year-old mother of three will get the information and reassurance she needs to make a purchase of several hundred dollars.

“We need to act as a real, collective industry, not just a bunch of self-interested companies,” said Chabin. “It’s not the Wild West anymore. How do we get smarter? I think this is the time to take stock in where we are.”

The survey did contain some good news, Chabin said. Consumers will pay for good content, as much as $14 to $20 for a good experience. Some 14 percent of those surveyed either own or use a VR headset weekly. And about 40 percent of those between the ages of 16 and 34 are interested in buying a VR headset.

“We thought, considering how new the industry is, that these numbers are very good,” Chabin said.

The industry should get a well-timed boost of attention next March with the arrival of Steven Spielberg’s film adaptation of Ready Player One, a sci-fi thriller set in a VR-like online space.

“The average movie ticket is $8,” Chabin said. “If that movie makes $800 million, that means 100 million people went to see it. We will have very few opportunities to explain VR to the global community like that.”

And some solutions are already coming forward. I moderated a panel this past week at Digital Hollywood that featured two executives from LOOT Interactive, which now is working with Sansar and its not-yet-released collaborative tools that allow people to share the VR experience.

That’ll be big in the consumer market, but I have to think it’ll be massive in the business world, especially as air-travel restrictions such as laptop bans make international meetings increasingly difficult. If you can avoid the travel and have a pretty good collaborative VR-based meeting, maybe you’ll just do that instead.

So, again, we’re back at pushing VR and AR into new spaces far beyond games and entertainment that hold great promise and perhaps more near-term potential.

In the meantime, we need more thought and concerted cooperation about midwifing the nascent industry forward on a variety of fronts. That’s a reality needed far beyond the virtual.