V I R T U A L E N T E R T A I N M E N T A N D M A R K E T I N G

I n P a r t n e r s h i p w i t h
U C L A ’ s S c h o o l o f T h e a t e r , F i l m , a n d T e l e v i s i o n
Season 1
V I R T U A L
E N T E R T A I N M E N T
A N D M A R K E T I N G

18LA - UCLA TFT - WHITE PAPER
18LA is part of the
global Havas innovation
network for research
and strategy insights.
In collaboration with
UCLA’s School of Theater,
Film, and Television
(TFT), 18LA has produced
an analysis of the key
topics that will drive
the entertainment
economy in the next 18
months. The Future of
Storytelling research
includes five white
papers that provide
actionable insights into
the evolving state of
the cultural industries
at the intersection of
media, content, data, and
technology. The initiative
integrates priority
business objectives with
cutting-edge scholarship.
O v e r v i e w
This paper looks at the role of emerging
formats Augmented Reality (AR) and
Virtual Reality (VR) in the entertainment
industry, from gaming to film and
television. It provides an overview of the
current state of the technologies and their
use in marketing. While AR and VR are
seen as pioneering and promising formats,
original content development is still in
progress given the limited availability of
consumer distribution outlets. Through a
case study of Microsoft’s HoloLens, the
paper also showcases other uses of AR and
VR beyond marketing.
Key Takeaways
• There are currently three distribution
channels for AR/VR - the roadshow, the
physical space (arcade-like), and in-home
use (smartphones, headsets, gaming
consoles).
• AR/VR is unlikely to replace traditional
film and television - instead, it will form
a new media channel that works in
conjunction with existing ones.
• Innovation in AR/VR will come from
video games rather than film and
television given the gaming industry’s
long-term involvement in the new
technologies.
• Investments in AR/VR, at this stage, are
limited given their rapid evolution - it
remains to be see what format will be
dominant and how consumers react to it.
• AR/VR content cannot be simply adapted
from gaming, film, and television - as a
new format, it requires new storytelling
techniques.
• AR/VR will be part of the trend towards
wearable technologies and smartphones
are unlikely to sustain the formats for a
long time.
2

V I R T U A L E N T E R T A I N M E N T
A N D M A R K E T I N G
Introduction
The Key VR Content Strategies
The Key VR Technology Strategies
Stakeholder Interest in VR
What the Challenges of VR Foretell about Emerging Formats
Case Study: Microsoft HoloLens

Introduction
Virtual reality (VR) and augmented reality
(AR) offer new immersive platforms for
entertainment companies and brands.
While these two technologies will likely
converge in the future, they currently are
distinct, and, as such, they offer distinct
advantages and challenges to content
creators. On the one hand, VR can be
defined as technology that presents a
computer-powered simulation through a
headset (although some VR content is also
available through a browser). While a user’s
experience in the virtual world displayed
through the headset can be multisensory
and fully immersive, the user is not able to
see the physical world. On the other hand,
AR can be understood as technology that
presents a computer-powered simulation
through technology that allows the user to
still see physical world. With AR, the virtual
simulation is overlaid on physical reality.
Content for this format is being developed
by Hollywood studios (through digital
innovation labs), independent filmmakers,
both major and independent video game
companies, and digital studios on behalf of
brands. Meanwhile, both technology and
video game companies are creating the
headsets necessary to display this content.
Because VR has yet to become widely
available on a commercial level, however,
traditional media companies have been
slow to engage with VR. While this may be
due to the current lack of VR distribution
platforms more than any lack of confidence,
the slower pace at which these companies
are entering the VR space suggests that
VR will need to contend or converge
with other emerging formats, particularly
augmented reality (AR) technologies such
as the Microsoft HoloLens. That is, due
to the trend toward increasing levels of
immersion, content providers - including
Hollywood studios, filmmakers, video game
companies, and digital studios - need to be
prepared for content in both VR and AR.
The opportunities for creating original
and branded content in VR are ample, but
the format’s immersive nature requires
significant changes to how this content is
created, presented, and monetized. To be
more specific, VR not only provides a more
expansive field of vision but it also allows
for a multisensory experience that goes
beyond the purely sight and sound focus
of current mainstream media. Content,
then, cannot be simply transported from
existing platforms into VR; instead,
creators need to consider the technology’s
unique features even when VR content is
integrating with established media content.
For film, the dominant approach so far has
been to use VR for marketing purposes
through free, short-form, promotional
content to drive box office numbers and
subsequent release windows. VR for the
film industry, in other words, has been
used in service of a pre-existing revenue
stream. However, original VR short films
are in development at Oculus Story Studio,
which suggests that VR features will arrive
soon. At present, the only VR feature
film is Banshee Yell, a 2013 independent
horror title that has been adapted to play
in the Oculus Rift. Although it is certain
that film studios will eventually develop
longer-form content as well, they will
need to establish business and distribution
models to monetize this content.
4

Aside from film studios, VR innovation
is coming from video game companies,
advertisers, and startups. Video game
companies are exploring both how
to create new forms of gameplay and
how to transport existing genres into
VR. With the launch of VR storefronts
in early 2015, the video game market
in VR will continue to grow in a
manner similar to smartphone App
Stores. While independent video game
developers have been behind most
VR game content (such as Lucky’s
Tale from Playful Corp. and Keep
Talking and Nobody Explodes from
Steel Crate Games), current console
manufacturers - Sony, Microsoft, and
Nintendo - are also moving into the
VR and AR space in different ways.
Sony, in early 2016, will release its
Project Morpheus headset, which
will work with its PlayStation 4
console; Microsoft is developing the
Project HoloLens AR platform; and
Nintendo, through its partnership with
mobile game company DeNA, has
links to a VR investment venture.
Advertisers are using the technology to
deliver short- and long-form content
on behalf of brands while remaining
cognizant that VR not only makes
available new advertising techniques
but also necessitates them. Marketing
agency Relevent, for instance, worked
on both the Game of Thrones: Ascend
the Wall - which toured with “Game
of Thrones: The Exhibition” to help
create awareness for the fourth season
of HBO’s Game of Thrones television
series - and Marriott’s “Virtual Travel” -
which used a “teleporter” to reintroduce
the Marriott brand to younger travelers.
Framestore, meanwhile, debuted at
the 2015 Sundance Film Festival with
Merrell’s “Trailscape” experience, which
Advertising Age noted as the first “walk
around” commercial VR experience.
For all these stakeholders, however,
dedicated VR content will be only
a transitional phase as AR presents
new opportunities for immersive
experiences. AR - which includes
Microsoft’s HoloLens and technology
from startup Magic Leap - is not
expected to be released until after the
early 2016 releases of both Oculus
VR’s Oculus Rift and Sony’s Project
Morpheus VR headsets. Thus, although
VR will arrive on the market first, AR
will represent an alternative in that it
integrates virtual and physical reality.
It is because of this transitional
phase that VR content development
is progressing cautiously. More
specifically, while advertisers are
continuing to deliver innovative VR
content (such as Framestore’s work on
Merrell’s “Trailscape” experience),
Hollywood studios and major video
game companies are moving slower
in the space. The recent debut of
AR platforms with Magic Leap and
Microsoft HoloLens suggest that VR,
in its current state, will ultimately
serve as a stepping-stone toward
new, more advanced technologies.
Furthermore, it is likely that virtual
and augmented reality technologies
will converge. Therefore, the lessons
learned in creating VR content will
allow entertainment companies and
brands to move swiftly into the fastapproaching
AR market, whose
technology will likewise present new
opportunities and challenges.
5

Key Takeaways
• VR is attracting money and projects
because of its immersive nature; however,
AR represents a higher level of immersion
that is integrated with the physical
world. For this reason, entertainment
companies and brands should consider
how they can work in both VR and AR.
• VR poses an obvious application
for entertainment companies whose
content consumers already seek out.
• VR is a platform that is unique from other
media. Thus, VR requires unique content
rather than repurposing of existing media.
Creating this content requires a rethinking
of producing content for the medium.
However, its initial integration is likely
to occur through older forms of media,
such as video games, film and television.
• VR is unlikely to pose an immediate
threat to film and television. Rather
than displacing these platforms,
VR will represent a new pillar of
entertainment. While VR content will
likely adapt existing franchises and
intellectual property, it requires new
economic and distribution models.
• Three distribution models seem likely: as
a roadshow (such as Game of Thrones:
Ascend the Wall); in a dedicated physical
space (similar to an arcade in the lobby
of a movie theater); and in the home
(through dedicated and smartphoneintegrated
headsets). However, as
with film and video games, people will
primarily consume VR content at home.
●• While smartphones may pose the
most immediate and most affordable
VR solution at present, dedicated VR
displays (headsets) are the next step. This
seems especially true considering that
the wearable technology trend suggests
that phones will not be the primary
device for consumers for much longer.
• Video games will drive VR innovation
before Hollywood (e.g., film and television
companies) more markedly adopts VR
for distributing original content. This is
because video game consoles - as Sony’s
Project Morpheus, which works with the
company’s PlayStation 4 - are readily
equipped to integrate VR and AR.
• Before making a larger commitment,
brands and entertainment companies
are waiting to see if VR will prove to be
a utility or a novelty. This hesitation is
driven partly by the technology’s rapid
evolution, as suggested by Magic Leap
and AR technologies such as Microsoft’s
HoloLens. However, with 2016 marking
the release of consumer versions of Oculus
Rift and HoloLens, this hesitation should
not be a hinderance for much longer.
• AR technologies will prove even more
disruptive than VR. Magic Leap, for
example, presents the opportunity for
exhibition to occur anywhere and will
therefore challenge content companies
that desire for their content to be
exhibited in specific contexts such as the
controlled spaces of a television screen,
movie theater, or VR headset display.
6

T h e K e y V R C o n t e n t
S t r a t e g i e s
7

Approaches to
F i l m
creating content
for VR continue
to evolve.
The overall trend for Hollywood
content companies has been the
use of VR for promotional content.
In its current configuration, VR
experiences lead into cinematic and
television experiences, and, by doing
so, create buzz and conversation
in support of film and television
content. At present, producing
original VR content has been in
the hands of independent creators
and Oculus VR’s Oculus Story
Studio. Video game companies,
both major and independent, are
producing original content that relies
on and deviates from established
game mechanics and genres.
Further innovation in VR has been
explored through digital studios
working on behalf of brands. For
all of these stakeholders, however,
AR development should be a
consideration as well because AR
is already an established part of the
media economy, given the wide use
of smartphones and apps that use AR
features.
Whereas
traditional media
companies have
been distributing
original content
through Web
video,
the newness of VR has led these
companies to so far use the platform
as an advertising tool for their film and
television properties rather than as a
means for bringing innovative types of
narrative or experiential content. This
promotional content has come from
digital studios, such as Framestore, and
studio-based accelerator labs, including
DreamWorks Animation’s DreamLab.
Because VR technology has yet to attain
mainstream commercial adoption,
Hollywood promotional content has
been exhibited through roadshows and as
installations at events such as San Diego
Comic Con and South by Southwest.
These promotional experiences have
become media events in their own right,
and, as such, users who experience
the VR content have tended to share
their experiences through visual or text
impressions on social media, which drive
attention to not only the media product
8

eing promoted but also to the technology
being used. This use of VR, however,
is rather limited given that it merely
integrates the technology into an existing
business model (the theatrical feature film
release) and doesn’t offer an indication of
how Hollywood VR content will perform
with a wide audience.
The promotional work from digital
studios, though, has allowed independent
producers to experiment in VR with
Hollywood funding and brands. For these
independent producers, promotional
content represents a means to an end.
That is, independent producers and
Oculus VR’s Oculus Story Studio have
worked to create original VR content.
Facebook, through Oculus Story Studio,
is particularly well-suited to creating
original VR content because it has the
infrastructure to scale this content in its
social network. In fact, if Facebook uses
VR as a core strategy, it has the potential
to broadly establish VR and its content.
Compared to the promotional content
of Hollywood studios, this original
content will be available to consumers
through virtual stores accessed through
VR technology. While the independently
produced Banshee Yell (completed in
2012 but released in 2014) represents
the first feature film developed for
VR through Oculus VR’s Oculus Rift
headset, Oculus Story Studio has been
focused on creating short-form content
due to the current lack of a mainstream
market and due to the steep learning
curve with producing VR content.
Because these independent producers
are getting a headstart on developing
and monetizing original VR content
compared to the free, derivative emphasis
at the studios, it is uncertain when and if
Hollywood studios will be able to succeed
in the VR space, much less the AR space.
However, beyond creating content
for VR devices, the technology serves
a production application as well. For
example, James Cameron has said that
his film Avatar (2009) and its upcoming
sequels use what he calls “virtual
production.” He elaborates that this
process involves live actors working
within “a synthetic reality” and the
director interacting during shooting with
these actors’ characters that are moving
in a virtual environment. Therefore,
before Hollywood studios make the leap
into creating original content for VR,
the technology will provide assistance
in the production of traditional film and
television content.
9

V i d e o G a m e s
Because the Oculus
Rift was originally
pitched as a video
game platform,
media industrial trade and technology
blog articles have worked to assert that
VR has applications beyond video
games. Nonetheless, video games will be
the primary driver of VR technology and
content. This is because video games are
the most natural fit for an existing media
to be delivered through the VR platform
and were therefore the first media to
experiment in the platform.
Development for VR has come first from
Oculus VR, independent developers,
and more recently by established, major
video game companies. Although this
movement into VR game development
will most certainly increase as more
headsets (including Oculus Rift, Sony’s
Project Morpheus, and HTC and
Valve’s Vive) become available, it will
also grow in the meantime because the
virtual store inside Samsung’s Gear VR
opened in March 2015, which allows
developers to sell their VR content for
the first time.
Independent developers, such as
university game labs more interested in
experimentation than commercialization,
are currently the primary producers of
VR game content. By contrast, major
video game publishers – including
Electronic Arts, Activision, and Ubisoft
– appear, like Hollywood studios, to
be taking a wait-and-see approach to
VR. They cite market uncertainty and
the technology’s tendency to give users
motion sickness as reasons for their
delayed entry into VR. Video games in
VR will become a more attractive market
in 2016 with the release of Oculus Rift
and other headsets. Even before then,
developers will enter the market due to
the March 2015 opening of the Gear
VR virtual storefront, which The New
York Times hailed as “the biggest step
yet towards discovering what kinds of
creative works will prove most successful
in this medium.”
This is not to say, though, that major
publishers aren’t already adding VR
support to pre-existing console and PC
games and already experimenting with
the technology. Major publishers are
drawn to VR because it provides these
companies with another platform - that
they can control through proprietary
hardware - on which to release software
that helps to maximize the value of
existing, popular content. For instance,
Sony can integrate its Project Morpheus
VR technology with its PlayStation 4
console to create a new user experience
based around existing franchises.
Furthermore, despite hardware
manufacturer, game developer and
publisher Nintendo having insisted that
creating VR content would cannibalize
its established console business, the
company (which in 1995 released the
failed Virtual Boy portable VR console)
in March 2015 partnered with DeNA to
create mobile games. This is significant
because DeNA’s investment arm is
focused on VR, which suggests that
Nintendo may soon be joining Sony
10

and Valve as one of the only major,
established game companies to work in
VR. For the time being, though, content
from Oculus VR, Sony Computer
Entertainment, Valve, and independent
developers will drive not only the market
for video games but for all entertainment
in VR as well.
B r a n d s
In addition to
video games,
innovation in VR
content has been
coming from digital
studios working
on behalf of
Hollywood studios
and brands.
Currently, this content has been
proprietary to the client. Furthermore,
early VR marketing experiences have
been confined to exhibition at large
events, such as South by Southwest and
the Detroit Auto Show. Like Hollywood
promotional content, then, this branded
content is designed to expose the brand
not only to VR users but also to those
with whom the user shares his or her
experiences on social media in the form
of videos, pictures, or text.
While this content currently may be
proprietary and presented only at select
venues, as VR headsets are introduced
on a wider scale, additional income
could be generated for brands. That
is, branded content could be made
commercially available, with the client
receiving a cut of the revenue, through
virtual stores such as that which recently
launched for Samsung Gear.
While the initial branded content
for VR has been in an exploratory
experiential format created for a single
client, additional methods of integrating
advertising in VR will become possible.
First, pre-roll ads will play in front of
short-form VR video content. It will be
important, however, for these ads to not
be simply lifted from existing Web video
platforms such as YouTube; rather, the
ads must be created with VR in mind.
More specifically, as Weta Digital software
designer Daniel Smith told The New York
Times, “In V.R., there is this amazing
but very unforgiving 360-degree view of
the world.” Ads created for VR will need
to keep this and other features (such as
the ability for users to enter and explore
environments and have multisensory
experiences). 360-degrees views, for
example, will be able to present a more
immersive environment to users and can,
therefore, include more brand exposure.
These ads may follow the exploratory
experiential format currently being made.
Unlike existing Web video pre-roll, though,
users will be more likely to engage with
these virtual ads because they provide
an immersive experience. Second, postproduction
tools will allow for product
placement to be integrated after shooting,
with the ability to update this product
placement for each time an ad appears.
Third, post-video tags will follow a similar
format as those on YouTube, whereby
users are invited to engage with additional
content. Therefore, branded content and
brand integration for VR will both follow
and expand from what is currently being
used for Web video.
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T h e K e y V R t e c h n o l o g y
S t r a t e g i e s
12

While Samsung Gear VR and
Google Cardboard represent two
smartphone-integrated headsets
currently available to consumers,
the VR market will grow significantly with the introduction of dedicated headsets that
will launch throughout the remainder of 2015 and into 2016.
G o o g l e C a r d b o a r d :
A f f o r d a b l e s m a r t p h o n e
i n t e g r a t i o n
Google Cardboard
represents
one of several
smartphoneintegrated
VR
technologies,
with the others
including Samsung
Gear VR, Avegant’s
Glyph, Carl Zeiss,
and Dodocase.
Where Cardboard
differs from the
others is that
it not only is
Therefore, it is a VR device that
consumers with an Android phone can
currently purchase for an affordable
price. However, the main drawback
to Cardboard is that it presents a
version of VR whose display lacks
as high a level of resolution or as
wide a field of vision as dedicated
headsets. Ultimately, Cardboard will
be a transitional device that introduces
consumers to VR technology; in fact,
Google has even invested in more
advanced, but currently unreleased,
hardware from startups Jaunt and
Magic Leap.
available now
but that it costs
around $20.
13

Samsung Gear VR: S m a r t p h o n e
i n t e g r a t i o n w i t h O c u l u s V R
t e c h n o l o g y
Like Google
Cardboard,
Samsung Gear
VR uses a
smartphone,
but it differs in that the phone is
connected to a headset developed by
Oculus VR. Thus, Gear represents
an early VR device whose $200 retail
cost is significantly higher than Google
Cardboard but whose design is more
similar to subsequent, dedicated headsets
such as Oculus VR’s own Oculus Rift.
The benefit for Oculus VR in providing
Samsung with a form of their technology,
then, is that the Gear introduces VR to
developers and consumers before the
release of the Rift. Furthermore, Gear VR
content must be released through Oculus
Home, which is the proprietary storefront
controlled by Oculus VR itself. A more
advanced version of Samsung Gear VR
is reportedly going on sale in late 2015,
but it remains to be seen what impact the
Rift’s own late 2015 release will have on
Gear’s market viability.
Oculus Rift: Dedicated VR headset
with Facebook funding
Oculus VR’s Oculus
Rift was one of
the first publicly
announced modern
VR devices.
In August 2012, the first developer kit was
made available to backers on Kickstarter in
an attempt to drive content development
for the Rift. After the “Crystal Cove”
prototype debuted in January 2014,
Facebook acquired Oculus VR for
approximately $2 billion. This updated
prototype included refinements such as a
motion-tracking external camera, which
provides a form of data measurement
that likely only increased Facebook’s
interest in the Rift’s economic potential.
The most recently introduced version
of the headset is “Crescent Bay,” and it
is believed that the consumer version of
Rift will become available in late 2015
for between $200 and $400. Because of
the Rift’s comparatively longer history in
the contemporary VR space and because
of Facebook’s high-profile acquisition of
Oculus VR, the market performance of
the Rift will determine how Hollywood
studios, video game publishers, and
advertisers approach VR. Facebook, then,
has the potential to establish VR for the
mainstream.
14

S o n y P r o j e c t M o r p h e u s :
D e d i c a t e d V R h e a d s e t w i t h
P l a y S t a t i o n 4 i n t e g r a t i o n
While other
major video game
publishers are
taking a cautious
approach to VR,
Sony will use
Project Morpheus
to expand the
user base of
its PlayStation
hardware, which
includes the
PlayStation
3 and 4 home
consoles and the
PlayStation Vita
handheld system.
Whereas Oculus
Rift requires a
powerful and
expensive PC,
Morpheus works
with a standard
PlayStation 4.
Morpheus is said to debut in early 2016.
Implicitly, when introducing the product,
Sony will take a similar marketing position
with Project Morpheus as it did when
the PlayStation 4 launched in late 2013.
That is, it will focus on gaming capabilities
rather than the other entertainment
available through PlayStation 4, such
as streaming video. However, Sony
has recently introduced the PlayStation
Vue SVOD television service, and, with
Powers, it debuted its first scripted original
program for the PlayStation’s proprietary
online PlayStation Network. Therefore,
Sony may also bring non-gaming content
to Project Morpheus, and it is likely that
the company is initially emphasizing
the device’s gaming applications to
differentiate it from competing hardware.
In February 2015, Forbes speculated that
Sony, with Morpheus, could have the
upper hand in VR. First, Sony has been
experimenting in VR technology for a
longer period of time (as far back as the
PlayStation Eye motion-tracker in the
mid-2000s); second, Project Morpheus
is said to be more immersive than Oculus
Rift; third, Sony already has a loyal base of
PlayStation consumers; fourth, Sony can
leverage its intellectual property in video
games - including God of War, Gran
Turismo, and Uncharted - to drive mass
adoption of the Morpheus.
15

Valve and HTC Vive: Dedicated
VR headset that solves physical
and physiological issues
Valve and HTC’s
Vive headset is
the most recently
announced VR
device. With
hardware
developed by
HTC, the Vive’s
software relies
on Steam, Valve’s
hugely popular
(over 100 million
active accounts
as of September
2014) video game
distribution
service. The
integration
of Steam will
allow Vive,
which is expected
to become
commercially
available in late
2015,
to have a plethora of content available
through a distribution platform with
which many consumers are already
familiar. In terms of hardware, Vive’s
“Chaperone” feature allows users to
walk around without bumping into
other objects by using a system of laser
beacons positioned throughout a room.
Another advantage of Vive compared to
other VR hardware is that it, according
to Valve, helps to solve VR’s negative
physiological effects, which have
caused eye strain and motion sickness
in users. These negative effects have
been commonly reported with longer
VR experiences; therefore, if Vive
solves these issues, it will allow for longform
VR content to be comfortably
experienced. Therefore, the market
performance of Vive will further
determine how Hollywood studios,
video game publishers, and brands
approach VR.
16

S t a k e h o l d e r
I n t e r e s t i n V R
17

F i l m s t u d i o s
Studios have
launched
accelerator
programs to
fund startups;
although these
programs have
been more
focused on
mobile and social
applications than
VR at this point,
it is likely that VR will become a
stronger focus as the technology
approaches commercial availability.
While studio-funded startups have
failed to generate a return-oninvestment,
their intangible value is in
bringing innovation and fresh thinking
to studios’ established, typically riskaverse
units. Together with Web
video and mobile apps, virtual reality
represents a platform through wich
studios will deliver content. Although
this content has until now been
limited to promotion, studios will
likely use these accelerator programs
to experiment in the VR space with
original content. In terms of promotion,
VR offers studios a way of selling films
as not just films but as experiences, as
they invite users to live within the world
of the film. This promotional content
may even be made commercially
available to consumers. Original content
will arrive once the market for VR has
been proven viable, as studios have
been burned by the promise of previous
hyped technologies such as CD-ROMs
and 3D televisions.
V i d e o g a m e
c o m p a n i e s
Video games
appear to
be the most
appropriate and
most immediately
adaptable content
for VR.
Companies are experimenting with
bringing established game genres to VR,
such as first-person shooters through
Valve’s Half-Life 3 and platforming
through independent developer Playful
Corp’s Lucky’s Tale. Additionally,
VR’s immersive quality allows for
games that would be impossible to
deliver without the technology. This
is not to say, though, that VR will not
be integrated with existing video game
platforms, as Sony’s Project Morpheus
and its connectivity to the PlayStation 4
demonstrate. Therefore, VR could help
drive sales of traditional game hardware
and software. Finally, as physical game
sales continue to decline amidst the rise
of digital distribution, VR represents
another venue for which games will be
sold digitally.
18

S o c i a l m e d i a
B r a n d s
Facebook’s $2
billion purchase
of Oculus VR
suggests the
potential for
social media in VR.
At the time of the acquisition, Facebook
CEO Mark Zuckerberg stated that the
company expected to profit from the
deal through advertising, software,
and services. Facebook’s reputation
for working with advertisers, however,
inspired criticism about the prevalence
of ads that might litter VR. While it
is highly probable that advertising
will be integrated within Oculus’s VR
content, the best advertising in VR will
be content that users actively desire to
experience. For instance, a brand can
target its Facebook “fans” and drive
these fans to actively want to experience
(and re-experience) the brand’s VR
content. Facebook’s infrastructure can
further drive global adoption of VR if
an ecosystem for content is developed.
Lastly, motion-tracking software in VR
will provide Facebook with another data
measurement tool of user behavior.
For brands,
VR encourages
visceral consumer
experiences that
will be actively
sought out by
consumers rather
than interrupting
them.
That is, VR will help make advertising
attractive to consumers through
advertising that works like content.
For example, a consumer might
seek out a brand’s VR content if it
offers a new experience. While all
VR content will be a new experience
to consumers when VR technology
first becomes commercially available,
the challenge will be in keeping this
content innovative in the long-term.
It seems likely, though, that branded
content will also be made commercially
available, which will generate further
revenue. Finally, VR headsets’ motiontracking
capabilities will define how
users act in VR environments. Based
on this, content can be more efficiently
designed to maximize ad exposure and
engagement.
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W h a t t h e C h a l l e n g e s
o f V R F o r e t e l l
a b o u t E m e r g i n g F o r m a t s
20

Despite the
advantages that
VR presents to
Hollywood, video
game companies,
and brands,
it also comes
with several
challenges.
Second,
entertainment
companies
and brands
are waiting
to see if the
technology will
be adopted by
the mainstream.
Unless
First, despite
Valve’s work on
preventing motion
sickness,
not all headsets will be equipped with
the same preventative technology.
Because of this, VR, like 3D movies,
may not be a desired format for some
consumers. Unlike 3D, however,
VR allows for a far more immersive
experience, one in which the the content
not only envelops users’ vision but
other senses as well. It is this more
immersive, multi-sensory dimension
that makes VR more attractive than
3D to both consumers and content
creators. However, some consumers
may not want to adopt VR because of
its physiological effects.
entertainment
companies are
already working
on VR content,
the headsets that launch throughout
2015 will lack strong content with
a mainstream appeal. This lack
could delay wide adoption of VR
technology, which might further
dissuade entertainment companies from
investing in the technology. A further
deterrent to wide adoption could be an
overabundance of VR headset options,
which could create a “standards war.”
Consumers - as well as entertainment
companies and brands - might choose
to wait for this war to be over and for a
single or select number of headsets to
remain.
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Third, there is
speculation that
AR will ultimately
replace VR.
This speculation about AR has caused
companies to not only take a cautious
approach to producing VR content but,
for some, to also skip VR altogether
in order to work on AR technology.
Google, for instance, has created the
budget-priced Cardboard that allows for
VR viewing with existing smartphones.
However, the tech giant’s investments
in AR startups Jaunt and Magic Leap
suggest that it is also looking ahead
to AR rather than focusing solely on
VR. At present, AR represents a more
advanced technology than VR, although
current, less advanced AR technology
than either Microsoft HoloLens or
Magic Leap is easy to integrate into
existing smartphones.
Microsoft has even bypassed VR
development to work on the HoloLens.
This holographic technology represents
a powerful form of AR, whose Windows
Holographic software will work with
any Windows 10 device. Therefore, like
Sony’s Project Morpheus and Google
Cardboard, the HoloLens headset will
work with devices that people already
own. Unlike these other headsets,
Microsoft has been touting that
HoloLens’s application extends beyond
just entertainment.
The HoloLens will reportedly be
commercially released in late 2015.
However, it is possible that, because
AR systems require significantly
more processing power than VR,
other AR headsets will have a longer
road to release. Its early entry into
the marketplace and its recognizable
brand name could allow Microsoft to
have a monopoly on AR hardware and
software.
Still, with so much work being done
in VR in advance of AR’s release,
it is possible that AR will not so
much replace VR as converge with
it. That is, currently in-development
VR technologies could integrate AR
capabilities and vice-versa. Therefore,
it is unlikely that VR will be a passing
fad, and it is wise for entertainment
companies and brands to work with VR
technology. Those that work with the
technology in its early stages will have
the power to shape the direction the
technology and its market take.
22

C a s e S t u d y :
M i c r o s o f t H o l o L e n s
23

Microsoft
HoloLens
represents an
example of AR
technology that
eclipses what is
being said and
done in the VR
space. In fact,
The New York
Times has quoted
Microsoft’s
Todd Holmdahl
as saying
that HoloLens
represents “a new
product category.”
Furthermore, Forbes has called
HoloLens “the most ambitious (AR)
project to date.” This technology, then,
illustrates that content creators need to
consider not only VR but AR as well.
For Microsoft, the HoloLens functions
not only as a platform to maximize the
value of its video games but also as a
way of helping to repair its reputation
among consumers and software
developers. However, the company is
taking a different strategy to HoloLens
than it has with its Xbox video game
platform, in that, unlike Xbox, the
HoloLens will be fully integrated across
Microsoft. In particular, it will be used
with Skype, Windows, and Microsoft’s
video game development teams.
Although Microsoft has been clear
that HoloLens will feature content
and applications beyond video games
(such as those relating to entertainment,
business, and education), the company
will use video games as a mass market
product that drives consumers to the
technology. The announcement of
HoloLens followed the September 2014
news of Microsoft paying $2.5 billion
for the hit video game Minecraft and its
studio Mojang. Microsoft CEO Satya
Nadella has even told The New York
Times that HoloLens influenced the
decision behind this purchase. Tech
blog The Verge, meanwhile, has argued
that Minecraft will bring consumers
to HoloLens: “Minecraft has a huge
audience, and it’s comparably easy to
develop, but here’s its big potential:
Minecraft could help new users of
virtual and augmented reality headsets
feel comfortable in three-dimensional
space. And that’s essential.”
While video games might influence
consumer adoption of the HoloLens,
skeptics question Microsoft’s ability
to succeed with the HoloLens. First,
The New York Times has noted that
Microsoft has had a history of releasing
technology that, while innovative, fails
to find commercial success, such as
pre-iPhone smartphone software and
an early type of smartwatch. Second,
The New York Times also has quoted
an unidentified Microsoft executive
as saying that the HoloLens will cost
“significantly more” than a video game
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console, which tend to be in the range
of $300-$500. Third, a writer at CNET
has said regarding the HoloLens, “I
remain cautiously optimistic. The
limited field of view is going to be a
deal-breaker for many, but this device
remains something you’ll need to
see to believe.” Finally, a writer at
PC World is skeptical that HoloLens
will achieve mass market adoption,
at least immediately: “Right now, I
see HoloLens as a tool - one that’s
indispensible for some applications,
but not quite the Holy Grail that
Microsoft’s HoloLens team wishes it
could be.”
In terms of the technology, the
HoloLens are smart glasses that run
on Windows Holographic software
powered by a Windows 10 device.
This makes the HoloLens particularly
attractive to content creators because
it, like Sony’s Project Morpheus and
Google Cardboard, will work with
devices that people already own. What
is also attractive about the technology
is that, unlike these other devices, it
presents a virtual world that is overlaid
on top of the physical space in which
the user is situated. The user is able to
interact with this virtual overlay through
sight, voice, and gesturing. This level
of interaction goes far beyond what is
possible in VR.
innovation in filmic content. However,
Microsoft has even been touting
that HoloLens is for more than just
entertainment. For instance, the
promotional video distributed at
the announcement of the HoloLens
presents the technology as an
educational and business tool, with one
application being that users can create
their own holograms that can be created
in the physical world with a 3D printer.
Furthermore, it’s possible to imagine
that Microsoft could use Minecraft -
as a communication and educational
tool - to introduce consumers to the
broader applicability of HoloLens, such
as architecture and design. Hollywood
studios, video game companies, and
brands will be wise to begin considering
how they can develop content that
works in both VR and AR, as these
formats will eventually converge.
Because of this, content for HoloLens
(and AR more generally) will need
to be unique from that developed for
VR. As in VR, video games will drive
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