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
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I n P a r t n e r s h i p w i t h<br />
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<br />
Season 1<br />
V I R T U A L<br />
E N T E R T A I N M E N T<br />
A N D M A R K E T I N G
18LA - UCLA TFT - WHITE PAPER<br />
18LA is part of the<br />
global Havas innovation<br />
network for research<br />
and strategy insights.<br />
In collaboration with<br />
UCLA’s School of Theater,<br />
Film, and Television<br />
(TFT), 18LA has produced<br />
an analysis of the key<br />
topics that will drive<br />
the entertainment<br />
economy in the next 18<br />
months. The Future of<br />
Storytelling research<br />
includes five white<br />
papers that provide<br />
actionable insights into<br />
the evolving state of<br />
the cultural industries<br />
at the intersection of<br />
media, content, data, and<br />
technology. The initiative<br />
integrates priority<br />
business objectives with<br />
cutting-edge scholarship.<br />
O v e r v i e w<br />
This paper looks at the role of emerging<br />
formats Augmented Reality (AR) and<br />
Virtual Reality (VR) in the entertainment<br />
industry, from gaming to film and<br />
television. It provides an overview of the<br />
current state of the technologies and their<br />
use in marketing. While AR and VR are<br />
seen as pioneering and promising formats,<br />
original content development is still in<br />
progress given the limited availability of<br />
consumer distribution outlets. Through a<br />
case study of Microsoft’s HoloLens, the<br />
paper also showcases other uses of AR and<br />
VR beyond marketing.<br />
Key Takeaways<br />
• There are currently three distribution<br />
channels for AR/VR - the roadshow, the<br />
physical space (arcade-like), and in-home<br />
use (smartphones, headsets, gaming<br />
consoles).<br />
• AR/VR is unlikely to replace traditional<br />
film and television - instead, it will form<br />
a new media channel that works in<br />
conjunction with existing ones.<br />
• Innovation in AR/VR will come from<br />
video games rather than film and<br />
television given the gaming industry’s<br />
long-term involvement in the new<br />
technologies.<br />
• Investments in AR/VR, at this stage, are<br />
limited given their rapid evolution - it<br />
remains to be see what format will be<br />
dominant and how consumers react to it.<br />
• AR/VR content cannot be simply adapted<br />
from gaming, film, and television - as a<br />
new format, it requires new storytelling<br />
techniques.<br />
• AR/VR will be part of the trend towards<br />
wearable technologies and smartphones<br />
are unlikely to sustain the formats for a<br />
long time.<br />
2
V I R T U A L E N T E R T A I N M E N T<br />
A N D M A R K E T I N G<br />
Introduction<br />
The Key VR Content Strategies<br />
The Key VR Technology Strategies<br />
Stakeholder Interest in VR<br />
What the Challenges of VR Foretell about Emerging Formats<br />
Case Study: Microsoft HoloLens
Introduction<br />
Virtual reality (VR) and augmented reality<br />
(AR) offer new immersive platforms for<br />
entertainment companies and brands.<br />
While these two technologies will likely<br />
converge in the future, they currently are<br />
distinct, and, as such, they offer distinct<br />
advantages and challenges to content<br />
creators. On the one hand, VR can be<br />
defined as technology that presents a<br />
computer-powered simulation through a<br />
headset (although some VR content is also<br />
available through a browser). While a user’s<br />
experience in the virtual world displayed<br />
through the headset can be multisensory<br />
and fully immersive, the user is not able to<br />
see the physical world. On the other hand,<br />
AR can be understood as technology that<br />
presents a computer-powered simulation<br />
through technology that allows the user to<br />
still see physical world. With AR, the virtual<br />
simulation is overlaid on physical reality.<br />
Content for this format is being developed<br />
by Hollywood studios (through digital<br />
innovation labs), independent filmmakers,<br />
both major and independent video game<br />
companies, and digital studios on behalf of<br />
brands. Meanwhile, both technology and<br />
video game companies are creating the<br />
headsets necessary to display this content.<br />
Because VR has yet to become widely<br />
available on a commercial level, however,<br />
traditional media companies have been<br />
slow to engage with VR. While this may be<br />
due to the current lack of VR distribution<br />
platforms more than any lack of confidence,<br />
the slower pace at which these companies<br />
are entering the VR space suggests that<br />
VR will need to contend or converge<br />
with other emerging formats, particularly<br />
augmented reality (AR) technologies such<br />
as the Microsoft HoloLens. That is, due<br />
to the trend toward increasing levels of<br />
immersion, content providers - including<br />
Hollywood studios, filmmakers, video game<br />
companies, and digital studios - need to be<br />
prepared for content in both VR and AR.<br />
The opportunities for creating original<br />
and branded content in VR are ample, but<br />
the format’s immersive nature requires<br />
significant changes to how this content is<br />
created, presented, and monetized. To be<br />
more specific, VR not only provides a more<br />
expansive field of vision but it also allows<br />
for a multisensory experience that goes<br />
beyond the purely sight and sound focus<br />
of current mainstream media. Content,<br />
then, cannot be simply transported from<br />
existing platforms into VR; instead,<br />
creators need to consider the technology’s<br />
unique features even when VR content is<br />
integrating with established media content.<br />
For film, the dominant approach so far has<br />
been to use VR for marketing purposes<br />
through free, short-form, promotional<br />
content to drive box office numbers and<br />
subsequent release windows. VR for the<br />
film industry, in other words, has been<br />
used in service of a pre-existing revenue<br />
stream. However, original VR short films<br />
are in development at Oculus Story Studio,<br />
which suggests that VR features will arrive<br />
soon. At present, the only VR feature<br />
film is Banshee Yell, a 2013 independent<br />
horror title that has been adapted to play<br />
in the Oculus Rift. Although it is certain<br />
that film studios will eventually develop<br />
longer-form content as well, they will<br />
need to establish business and distribution<br />
models to monetize this content.<br />
4
Aside from film studios, VR innovation<br />
is coming from video game companies,<br />
advertisers, and startups. Video game<br />
companies are exploring both how<br />
to create new forms of gameplay and<br />
how to transport existing genres into<br />
VR. With the launch of VR storefronts<br />
in early 2015, the video game market<br />
in VR will continue to grow in a<br />
manner similar to smartphone App<br />
Stores. While independent video game<br />
developers have been behind most<br />
VR game content (such as Lucky’s<br />
Tale from Playful Corp. and Keep<br />
Talking and Nobody Explodes from<br />
Steel Crate Games), current console<br />
manufacturers - Sony, Microsoft, and<br />
Nintendo - are also moving into the<br />
VR and AR space in different ways.<br />
Sony, in early 2016, will release its<br />
Project Morpheus headset, which<br />
will work with its PlayStation 4<br />
console; Microsoft is developing the<br />
Project HoloLens AR platform; and<br />
Nintendo, through its partnership with<br />
mobile game company DeNA, has<br />
links to a VR investment venture.<br />
Advertisers are using the technology to<br />
deliver short- and long-form content<br />
on behalf of brands while remaining<br />
cognizant that VR not only makes<br />
available new advertising techniques<br />
but also necessitates them. Marketing<br />
agency Relevent, for instance, worked<br />
on both the Game of Thrones: Ascend<br />
the Wall - which toured with “Game<br />
of Thrones: The Exhibition” to help<br />
create awareness for the fourth season<br />
of HBO’s Game of Thrones television<br />
series - and Marriott’s “Virtual Travel” -<br />
which used a “teleporter” to reintroduce<br />
the Marriott brand to younger travelers.<br />
Framestore, meanwhile, debuted at<br />
the 2015 Sundance Film Festival with<br />
Merrell’s “Trailscape” experience, which<br />
Advertising Age noted as the first “walk<br />
around” commercial VR experience.<br />
For all these stakeholders, however,<br />
dedicated VR content will be only<br />
a transitional phase as AR presents<br />
new opportunities for immersive<br />
experiences. AR - which includes<br />
Microsoft’s HoloLens and technology<br />
from startup Magic Leap - is not<br />
expected to be released until after the<br />
early 2016 releases of both Oculus<br />
VR’s Oculus Rift and Sony’s Project<br />
Morpheus VR headsets. Thus, although<br />
VR will arrive on the market first, AR<br />
will represent an alternative in that it<br />
integrates virtual and physical reality.<br />
It is because of this transitional<br />
phase that VR content development<br />
is progressing cautiously. More<br />
specifically, while advertisers are<br />
continuing to deliver innovative VR<br />
content (such as Framestore’s work on<br />
Merrell’s “Trailscape” experience),<br />
Hollywood studios and major video<br />
game companies are moving slower<br />
in the space. The recent debut of<br />
AR platforms with Magic Leap and<br />
Microsoft HoloLens suggest that VR,<br />
in its current state, will ultimately<br />
serve as a stepping-stone toward<br />
new, more advanced technologies.<br />
Furthermore, it is likely that virtual<br />
and augmented reality technologies<br />
will converge. Therefore, the lessons<br />
learned in creating VR content will<br />
allow entertainment companies and<br />
brands to move swiftly into the fastapproaching<br />
AR market, whose<br />
technology will likewise present new<br />
opportunities and challenges.<br />
5
Key Takeaways<br />
• VR is attracting money and projects<br />
because of its immersive nature; however,<br />
AR represents a higher level of immersion<br />
that is integrated with the physical<br />
world. For this reason, entertainment<br />
companies and brands should consider<br />
how they can work in both VR and AR.<br />
• VR poses an obvious application<br />
for entertainment companies whose<br />
content consumers already seek out.<br />
• VR is a platform that is unique from other<br />
media. Thus, VR requires unique content<br />
rather than repurposing of existing media.<br />
Creating this content requires a rethinking<br />
of producing content for the medium.<br />
However, its initial integration is likely<br />
to occur through older forms of media,<br />
such as video games, film and television.<br />
• VR is unlikely to pose an immediate<br />
threat to film and television. Rather<br />
than displacing these platforms,<br />
VR will represent a new pillar of<br />
entertainment. While VR content will<br />
likely adapt existing franchises and<br />
intellectual property, it requires new<br />
economic and distribution models.<br />
• Three distribution models seem likely: as<br />
a roadshow (such as Game of Thrones:<br />
Ascend the Wall); in a dedicated physical<br />
space (similar to an arcade in the lobby<br />
of a movie theater); and in the home<br />
(through dedicated and smartphoneintegrated<br />
headsets). However, as<br />
with film and video games, people will<br />
primarily consume VR content at home.<br />
●• While smartphones may pose the<br />
most immediate and most affordable<br />
VR solution at present, dedicated VR<br />
displays (headsets) are the next step. This<br />
seems especially true considering that<br />
the wearable technology trend suggests<br />
that phones will not be the primary<br />
device for consumers for much longer.<br />
• Video games will drive VR innovation<br />
before Hollywood (e.g., film and television<br />
companies) more markedly adopts VR<br />
for distributing original content. This is<br />
because video game consoles - as Sony’s<br />
Project Morpheus, which works with the<br />
company’s PlayStation 4 - are readily<br />
equipped to integrate VR and AR.<br />
• Before making a larger commitment,<br />
brands and entertainment companies<br />
are waiting to see if VR will prove to be<br />
a utility or a novelty. This hesitation is<br />
driven partly by the technology’s rapid<br />
evolution, as suggested by Magic Leap<br />
and AR technologies such as Microsoft’s<br />
HoloLens. However, with 2016 marking<br />
the release of consumer versions of Oculus<br />
Rift and HoloLens, this hesitation should<br />
not be a hinderance for much longer.<br />
• AR technologies will prove even more<br />
disruptive than VR. Magic Leap, for<br />
example, presents the opportunity for<br />
exhibition to occur anywhere and will<br />
therefore challenge content companies<br />
that desire for their content to be<br />
exhibited in specific contexts such as the<br />
controlled spaces of a television screen,<br />
movie theater, or VR headset display.<br />
6
T h e K e y V R C o n t e n t<br />
S t r a t e g i e s<br />
7
Approaches to<br />
F i l m<br />
creating content<br />
for VR continue<br />
to evolve.<br />
The overall trend for Hollywood<br />
content companies has been the<br />
use of VR for promotional content.<br />
In its current configuration, VR<br />
experiences lead into cinematic and<br />
television experiences, and, by doing<br />
so, create buzz and conversation<br />
in support of film and television<br />
content. At present, producing<br />
original VR content has been in<br />
the hands of independent creators<br />
and Oculus VR’s Oculus Story<br />
Studio. Video game companies,<br />
both major and independent, are<br />
producing original content that relies<br />
on and deviates from established<br />
game mechanics and genres.<br />
Further innovation in VR has been<br />
explored through digital studios<br />
working on behalf of brands. For<br />
all of these stakeholders, however,<br />
AR development should be a<br />
consideration as well because AR<br />
is already an established part of the<br />
media economy, given the wide use<br />
of smartphones and apps that use AR<br />
features.<br />
Whereas<br />
traditional media<br />
companies have<br />
been distributing<br />
original content<br />
through Web<br />
video,<br />
the newness of VR has led these<br />
companies to so far use the platform<br />
as an advertising tool for their film and<br />
television properties rather than as a<br />
means for bringing innovative types of<br />
narrative or experiential content. This<br />
promotional content has come from<br />
digital studios, such as Framestore, and<br />
studio-based accelerator labs, including<br />
DreamWorks Animation’s DreamLab.<br />
Because VR technology has yet to attain<br />
mainstream commercial adoption,<br />
Hollywood promotional content has<br />
been exhibited through roadshows and as<br />
installations at events such as San Diego<br />
Comic Con and South by Southwest.<br />
These promotional experiences have<br />
become media events in their own right,<br />
and, as such, users who experience<br />
the VR content have tended to share<br />
their experiences through visual or text<br />
impressions on social media, which drive<br />
attention to not only the media product<br />
8
eing promoted but also to the technology<br />
being used. This use of VR, however,<br />
is rather limited given that it merely<br />
integrates the technology into an existing<br />
business model (the theatrical feature film<br />
release) and doesn’t offer an indication of<br />
how Hollywood VR content will perform<br />
with a wide audience.<br />
The promotional work from digital<br />
studios, though, has allowed independent<br />
producers to experiment in VR with<br />
Hollywood funding and brands. For these<br />
independent producers, promotional<br />
content represents a means to an end.<br />
That is, independent producers and<br />
Oculus VR’s Oculus Story Studio have<br />
worked to create original VR content.<br />
Facebook, through Oculus Story Studio,<br />
is particularly well-suited to creating<br />
original VR content because it has the<br />
infrastructure to scale this content in its<br />
social network. In fact, if Facebook uses<br />
VR as a core strategy, it has the potential<br />
to broadly establish VR and its content.<br />
Compared to the promotional content<br />
of Hollywood studios, this original<br />
content will be available to consumers<br />
through virtual stores accessed through<br />
VR technology. While the independently<br />
produced Banshee Yell (completed in<br />
2012 but released in 2014) represents<br />
the first feature film developed for<br />
VR through Oculus VR’s Oculus Rift<br />
headset, Oculus Story Studio has been<br />
focused on creating short-form content<br />
due to the current lack of a mainstream<br />
market and due to the steep learning<br />
curve with producing VR content.<br />
Because these independent producers<br />
are getting a headstart on developing<br />
and monetizing original VR content<br />
compared to the free, derivative emphasis<br />
at the studios, it is uncertain when and if<br />
Hollywood studios will be able to succeed<br />
in the VR space, much less the AR space.<br />
However, beyond creating content<br />
for VR devices, the technology serves<br />
a production application as well. For<br />
example, James Cameron has said that<br />
his film Avatar (2009) and its upcoming<br />
sequels use what he calls “virtual<br />
production.” He elaborates that this<br />
process involves live actors working<br />
within “a synthetic reality” and the<br />
director interacting during shooting with<br />
these actors’ characters that are moving<br />
in a virtual environment. Therefore,<br />
before Hollywood studios make the leap<br />
into creating original content for VR,<br />
the technology will provide assistance<br />
in the production of traditional film and<br />
television content.<br />
9
V i d e o G a m e s<br />
Because the Oculus<br />
Rift was originally<br />
pitched as a video<br />
game platform,<br />
media industrial trade and technology<br />
blog articles have worked to assert that<br />
VR has applications beyond video<br />
games. Nonetheless, video games will be<br />
the primary driver of VR technology and<br />
content. This is because video games are<br />
the most natural fit for an existing media<br />
to be delivered through the VR platform<br />
and were therefore the first media to<br />
experiment in the platform.<br />
Development for VR has come first from<br />
Oculus VR, independent developers,<br />
and more recently by established, major<br />
video game companies. Although this<br />
movement into VR game development<br />
will most certainly increase as more<br />
headsets (including Oculus Rift, Sony’s<br />
Project Morpheus, and HTC and<br />
Valve’s Vive) become available, it will<br />
also grow in the meantime because the<br />
virtual store inside Samsung’s Gear VR<br />
opened in March 2015, which allows<br />
developers to sell their VR content for<br />
the first time.<br />
Independent developers, such as<br />
university game labs more interested in<br />
experimentation than commercialization,<br />
are currently the primary producers of<br />
VR game content. By contrast, major<br />
video game publishers – including<br />
Electronic Arts, Activision, and Ubisoft<br />
– appear, like Hollywood studios, to<br />
be taking a wait-and-see approach to<br />
VR. They cite market uncertainty and<br />
the technology’s tendency to give users<br />
motion sickness as reasons for their<br />
delayed entry into VR. Video games in<br />
VR will become a more attractive market<br />
in 2016 with the release of Oculus Rift<br />
and other headsets. Even before then,<br />
developers will enter the market due to<br />
the March 2015 opening of the Gear<br />
VR virtual storefront, which The New<br />
York Times hailed as “the biggest step<br />
yet towards discovering what kinds of<br />
creative works will prove most successful<br />
in this medium.”<br />
This is not to say, though, that major<br />
publishers aren’t already adding VR<br />
support to pre-existing console and PC<br />
games and already experimenting with<br />
the technology. Major publishers are<br />
drawn to VR because it provides these<br />
companies with another platform - that<br />
they can control through proprietary<br />
hardware - on which to release software<br />
that helps to maximize the value of<br />
existing, popular content. For instance,<br />
Sony can integrate its Project Morpheus<br />
VR technology with its PlayStation 4<br />
console to create a new user experience<br />
based around existing franchises.<br />
Furthermore, despite hardware<br />
manufacturer, game developer and<br />
publisher Nintendo having insisted that<br />
creating VR content would cannibalize<br />
its established console business, the<br />
company (which in 1995 released the<br />
failed Virtual Boy portable VR console)<br />
in March 2015 partnered with DeNA to<br />
create mobile games. This is significant<br />
because DeNA’s investment arm is<br />
focused on VR, which suggests that<br />
Nintendo may soon be joining Sony<br />
10
and Valve as one of the only major,<br />
established game companies to work in<br />
VR. For the time being, though, content<br />
from Oculus VR, Sony Computer<br />
Entertainment, Valve, and independent<br />
developers will drive not only the market<br />
for video games but for all entertainment<br />
in VR as well.<br />
B r a n d s<br />
In addition to<br />
video games,<br />
innovation in VR<br />
content has been<br />
coming from digital<br />
studios working<br />
on behalf of<br />
Hollywood studios<br />
and brands.<br />
Currently, this content has been<br />
proprietary to the client. Furthermore,<br />
early VR marketing experiences have<br />
been confined to exhibition at large<br />
events, such as South by Southwest and<br />
the Detroit Auto Show. Like Hollywood<br />
promotional content, then, this branded<br />
content is designed to expose the brand<br />
not only to VR users but also to those<br />
with whom the user shares his or her<br />
experiences on social media in the form<br />
of videos, pictures, or text.<br />
While this content currently may be<br />
proprietary and presented only at select<br />
venues, as VR headsets are introduced<br />
on a wider scale, additional income<br />
could be generated for brands. That<br />
is, branded content could be made<br />
commercially available, with the client<br />
receiving a cut of the revenue, through<br />
virtual stores such as that which recently<br />
launched for Samsung Gear.<br />
While the initial branded content<br />
for VR has been in an exploratory<br />
experiential format created for a single<br />
client, additional methods of integrating<br />
advertising in VR will become possible.<br />
First, pre-roll ads will play in front of<br />
short-form VR video content. It will be<br />
important, however, for these ads to not<br />
be simply lifted from existing Web video<br />
platforms such as YouTube; rather, the<br />
ads must be created with VR in mind.<br />
More specifically, as Weta Digital software<br />
designer Daniel Smith told The New York<br />
Times, “In V.R., there is this amazing<br />
but very unforgiving 360-degree view of<br />
the world.” Ads created for VR will need<br />
to keep this and other features (such as<br />
the ability for users to enter and explore<br />
environments and have multisensory<br />
experiences). 360-degrees views, for<br />
example, will be able to present a more<br />
immersive environment to users and can,<br />
therefore, include more brand exposure.<br />
These ads may follow the exploratory<br />
experiential format currently being made.<br />
Unlike existing Web video pre-roll, though,<br />
users will be more likely to engage with<br />
these virtual ads because they provide<br />
an immersive experience. Second, postproduction<br />
tools will allow for product<br />
placement to be integrated after shooting,<br />
with the ability to update this product<br />
placement for each time an ad appears.<br />
Third, post-video tags will follow a similar<br />
format as those on YouTube, whereby<br />
users are invited to engage with additional<br />
content. Therefore, branded content and<br />
brand integration for VR will both follow<br />
and expand from what is currently being<br />
used for Web video.<br />
11
T h e K e y V R t e c h n o l o g y<br />
S t r a t e g i e s<br />
12
While Samsung Gear VR and<br />
Google Cardboard represent two<br />
smartphone-integrated headsets<br />
currently available to consumers,<br />
the VR market will grow significantly with the introduction of dedicated headsets that<br />
will launch throughout the remainder of 2015 and into 2016.<br />
G o o g l e C a r d b o a r d :<br />
A f f o r d a b l e s m a r t p h o n e<br />
i n t e g r a t i o n<br />
Google Cardboard<br />
represents<br />
one of several<br />
smartphoneintegrated<br />
VR<br />
technologies,<br />
with the others<br />
including Samsung<br />
Gear VR, Avegant’s<br />
Glyph, Carl Zeiss,<br />
and Dodocase.<br />
Where Cardboard<br />
differs from the<br />
others is that<br />
it not only is<br />
Therefore, it is a VR device that<br />
consumers with an Android phone can<br />
currently purchase for an affordable<br />
price. However, the main drawback<br />
to Cardboard is that it presents a<br />
version of VR whose display lacks<br />
as high a level of resolution or as<br />
wide a field of vision as dedicated<br />
headsets. Ultimately, Cardboard will<br />
be a transitional device that introduces<br />
consumers to VR technology; in fact,<br />
Google has even invested in more<br />
advanced, but currently unreleased,<br />
hardware from startups Jaunt and<br />
Magic Leap.<br />
available now<br />
but that it costs<br />
around $20.<br />
13
Samsung Gear VR: S m a r t p h o n e<br />
i n t e g r a t i o n w i t h O c u l u s V R<br />
t e c h n o l o g y<br />
Like Google<br />
Cardboard,<br />
Samsung Gear<br />
VR uses a<br />
smartphone,<br />
but it differs in that the phone is<br />
connected to a headset developed by<br />
Oculus VR. Thus, Gear represents<br />
an early VR device whose $200 retail<br />
cost is significantly higher than Google<br />
Cardboard but whose design is more<br />
similar to subsequent, dedicated headsets<br />
such as Oculus VR’s own Oculus Rift.<br />
The benefit for Oculus VR in providing<br />
Samsung with a form of their technology,<br />
then, is that the Gear introduces VR to<br />
developers and consumers before the<br />
release of the Rift. Furthermore, Gear VR<br />
content must be released through Oculus<br />
Home, which is the proprietary storefront<br />
controlled by Oculus VR itself. A more<br />
advanced version of Samsung Gear VR<br />
is reportedly going on sale in late 2015,<br />
but it remains to be seen what impact the<br />
Rift’s own late 2015 release will have on<br />
Gear’s market viability.<br />
Oculus Rift: Dedicated VR headset<br />
with Facebook funding<br />
Oculus VR’s Oculus<br />
Rift was one of<br />
the first publicly<br />
announced modern<br />
VR devices.<br />
In August 2012, the first developer kit was<br />
made available to backers on Kickstarter in<br />
an attempt to drive content development<br />
for the Rift. After the “Crystal Cove”<br />
prototype debuted in January 2014,<br />
Facebook acquired Oculus VR for<br />
approximately $2 billion. This updated<br />
prototype included refinements such as a<br />
motion-tracking external camera, which<br />
provides a form of data measurement<br />
that likely only increased Facebook’s<br />
interest in the Rift’s economic potential.<br />
The most recently introduced version<br />
of the headset is “Crescent Bay,” and it<br />
is believed that the consumer version of<br />
Rift will become available in late 2015<br />
for between $200 and $400. Because of<br />
the Rift’s comparatively longer history in<br />
the contemporary VR space and because<br />
of Facebook’s high-profile acquisition of<br />
Oculus VR, the market performance of<br />
the Rift will determine how Hollywood<br />
studios, video game publishers, and<br />
advertisers approach VR. Facebook, then,<br />
has the potential to establish VR for the<br />
mainstream.<br />
14
S o n y P r o j e c t M o r p h e u s :<br />
D e d i c a t e d V R h e a d s e t w i t h<br />
P l a y S t a t i o n 4 i n t e g r a t i o n<br />
While other<br />
major video game<br />
publishers are<br />
taking a cautious<br />
approach to VR,<br />
Sony will use<br />
Project Morpheus<br />
to expand the<br />
user base of<br />
its PlayStation<br />
hardware, which<br />
includes the<br />
PlayStation<br />
3 and 4 home<br />
consoles and the<br />
PlayStation Vita<br />
handheld system.<br />
Whereas Oculus<br />
Rift requires a<br />
powerful and<br />
expensive PC,<br />
Morpheus works<br />
with a standard<br />
PlayStation 4.<br />
Morpheus is said to debut in early 2016.<br />
Implicitly, when introducing the product,<br />
Sony will take a similar marketing position<br />
with Project Morpheus as it did when<br />
the PlayStation 4 launched in late 2013.<br />
That is, it will focus on gaming capabilities<br />
rather than the other entertainment<br />
available through PlayStation 4, such<br />
as streaming video. However, Sony<br />
has recently introduced the PlayStation<br />
Vue SVOD television service, and, with<br />
Powers, it debuted its first scripted original<br />
program for the PlayStation’s proprietary<br />
online PlayStation Network. Therefore,<br />
Sony may also bring non-gaming content<br />
to Project Morpheus, and it is likely that<br />
the company is initially emphasizing<br />
the device’s gaming applications to<br />
differentiate it from competing hardware.<br />
In February 2015, Forbes speculated that<br />
Sony, with Morpheus, could have the<br />
upper hand in VR. First, Sony has been<br />
experimenting in VR technology for a<br />
longer period of time (as far back as the<br />
PlayStation Eye motion-tracker in the<br />
mid-2000s); second, Project Morpheus<br />
is said to be more immersive than Oculus<br />
Rift; third, Sony already has a loyal base of<br />
PlayStation consumers; fourth, Sony can<br />
leverage its intellectual property in video<br />
games - including God of War, Gran<br />
Turismo, and Uncharted - to drive mass<br />
adoption of the Morpheus.<br />
15
Valve and HTC Vive: Dedicated<br />
VR headset that solves physical<br />
and physiological issues<br />
Valve and HTC’s<br />
Vive headset is<br />
the most recently<br />
announced VR<br />
device. With<br />
hardware<br />
developed by<br />
HTC, the Vive’s<br />
software relies<br />
on Steam, Valve’s<br />
hugely popular<br />
(over 100 million<br />
active accounts<br />
as of September<br />
2014) video game<br />
distribution<br />
service. The<br />
integration<br />
of Steam will<br />
allow Vive,<br />
which is expected<br />
to become<br />
commercially<br />
available in late<br />
2015,<br />
to have a plethora of content available<br />
through a distribution platform with<br />
which many consumers are already<br />
familiar. In terms of hardware, Vive’s<br />
“Chaperone” feature allows users to<br />
walk around without bumping into<br />
other objects by using a system of laser<br />
beacons positioned throughout a room.<br />
Another advantage of Vive compared to<br />
other VR hardware is that it, according<br />
to Valve, helps to solve VR’s negative<br />
physiological effects, which have<br />
caused eye strain and motion sickness<br />
in users. These negative effects have<br />
been commonly reported with longer<br />
VR experiences; therefore, if Vive<br />
solves these issues, it will allow for longform<br />
VR content to be comfortably<br />
experienced. Therefore, the market<br />
performance of Vive will further<br />
determine how Hollywood studios,<br />
video game publishers, and brands<br />
approach VR.<br />
16
S t a k e h o l d e r<br />
I n t e r e s t i n V R<br />
17
F i l m s t u d i o s<br />
Studios have<br />
launched<br />
accelerator<br />
programs to<br />
fund startups;<br />
although these<br />
programs have<br />
been more<br />
focused on<br />
mobile and social<br />
applications than<br />
VR at this point,<br />
it is likely that VR will become a<br />
stronger focus as the technology<br />
approaches commercial availability.<br />
While studio-funded startups have<br />
failed to generate a return-oninvestment,<br />
their intangible value is in<br />
bringing innovation and fresh thinking<br />
to studios’ established, typically riskaverse<br />
units. Together with Web<br />
video and mobile apps, virtual reality<br />
represents a platform through wich<br />
studios will deliver content. Although<br />
this content has until now been<br />
limited to promotion, studios will<br />
likely use these accelerator programs<br />
to experiment in the VR space with<br />
original content. In terms of promotion,<br />
VR offers studios a way of selling films<br />
as not just films but as experiences, as<br />
they invite users to live within the world<br />
of the film. This promotional content<br />
may even be made commercially<br />
available to consumers. Original content<br />
will arrive once the market for VR has<br />
been proven viable, as studios have<br />
been burned by the promise of previous<br />
hyped technologies such as CD-ROMs<br />
and 3D televisions.<br />
V i d e o g a m e<br />
c o m p a n i e s<br />
Video games<br />
appear to<br />
be the most<br />
appropriate and<br />
most immediately<br />
adaptable content<br />
for VR.<br />
Companies are experimenting with<br />
bringing established game genres to VR,<br />
such as first-person shooters through<br />
Valve’s Half-Life 3 and platforming<br />
through independent developer Playful<br />
Corp’s Lucky’s Tale. Additionally,<br />
VR’s immersive quality allows for<br />
games that would be impossible to<br />
deliver without the technology. This<br />
is not to say, though, that VR will not<br />
be integrated with existing video game<br />
platforms, as Sony’s Project Morpheus<br />
and its connectivity to the PlayStation 4<br />
demonstrate. Therefore, VR could help<br />
drive sales of traditional game hardware<br />
and software. Finally, as physical game<br />
sales continue to decline amidst the rise<br />
of digital distribution, VR represents<br />
another venue for which games will be<br />
sold digitally.<br />
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S o c i a l m e d i a<br />
B r a n d s<br />
Facebook’s $2<br />
billion purchase<br />
of Oculus VR<br />
suggests the<br />
potential for<br />
social media in VR.<br />
At the time of the acquisition, Facebook<br />
CEO Mark Zuckerberg stated that the<br />
company expected to profit from the<br />
deal through advertising, software,<br />
and services. Facebook’s reputation<br />
for working with advertisers, however,<br />
inspired criticism about the prevalence<br />
of ads that might litter VR. While it<br />
is highly probable that advertising<br />
will be integrated within Oculus’s VR<br />
content, the best advertising in VR will<br />
be content that users actively desire to<br />
experience. For instance, a brand can<br />
target its Facebook “fans” and drive<br />
these fans to actively want to experience<br />
(and re-experience) the brand’s VR<br />
content. Facebook’s infrastructure can<br />
further drive global adoption of VR if<br />
an ecosystem for content is developed.<br />
Lastly, motion-tracking software in VR<br />
will provide Facebook with another data<br />
measurement tool of user behavior.<br />
For brands,<br />
VR encourages<br />
visceral consumer<br />
experiences that<br />
will be actively<br />
sought out by<br />
consumers rather<br />
than interrupting<br />
them.<br />
That is, VR will help make advertising<br />
attractive to consumers through<br />
advertising that works like content.<br />
For example, a consumer might<br />
seek out a brand’s VR content if it<br />
offers a new experience. While all<br />
VR content will be a new experience<br />
to consumers when VR technology<br />
first becomes commercially available,<br />
the challenge will be in keeping this<br />
content innovative in the long-term.<br />
It seems likely, though, that branded<br />
content will also be made commercially<br />
available, which will generate further<br />
revenue. Finally, VR headsets’ motiontracking<br />
capabilities will define how<br />
users act in VR environments. Based<br />
on this, content can be more efficiently<br />
designed to maximize ad exposure and<br />
engagement.<br />
19
W h a t t h e C h a l l e n g e s<br />
o f V R F o r e t e l l<br />
a b o u t E m e r g i n g F o r m a t s<br />
20
Despite the<br />
advantages that<br />
VR presents to<br />
Hollywood, video<br />
game companies,<br />
and brands,<br />
it also comes<br />
with several<br />
challenges.<br />
Second,<br />
entertainment<br />
companies<br />
and brands<br />
are waiting<br />
to see if the<br />
technology will<br />
be adopted by<br />
the mainstream.<br />
Unless<br />
First, despite<br />
Valve’s work on<br />
preventing motion<br />
sickness,<br />
not all headsets will be equipped with<br />
the same preventative technology.<br />
Because of this, VR, like 3D movies,<br />
may not be a desired format for some<br />
consumers. Unlike 3D, however,<br />
VR allows for a far more immersive<br />
experience, one in which the the content<br />
not only envelops users’ vision but<br />
other senses as well. It is this more<br />
immersive, multi-sensory dimension<br />
that makes VR more attractive than<br />
3D to both consumers and content<br />
creators. However, some consumers<br />
may not want to adopt VR because of<br />
its physiological effects.<br />
entertainment<br />
companies are<br />
already working<br />
on VR content,<br />
the headsets that launch throughout<br />
2015 will lack strong content with<br />
a mainstream appeal. This lack<br />
could delay wide adoption of VR<br />
technology, which might further<br />
dissuade entertainment companies from<br />
investing in the technology. A further<br />
deterrent to wide adoption could be an<br />
overabundance of VR headset options,<br />
which could create a “standards war.”<br />
Consumers - as well as entertainment<br />
companies and brands - might choose<br />
to wait for this war to be over and for a<br />
single or select number of headsets to<br />
remain.<br />
21
Third, there is<br />
speculation that<br />
AR will ultimately<br />
replace VR.<br />
This speculation about AR has caused<br />
companies to not only take a cautious<br />
approach to producing VR content but,<br />
for some, to also skip VR altogether<br />
in order to work on AR technology.<br />
Google, for instance, has created the<br />
budget-priced Cardboard that allows for<br />
VR viewing with existing smartphones.<br />
However, the tech giant’s investments<br />
in AR startups Jaunt and Magic Leap<br />
suggest that it is also looking ahead<br />
to AR rather than focusing solely on<br />
VR. At present, AR represents a more<br />
advanced technology than VR, although<br />
current, less advanced AR technology<br />
than either Microsoft HoloLens or<br />
Magic Leap is easy to integrate into<br />
existing smartphones.<br />
Microsoft has even bypassed VR<br />
development to work on the HoloLens.<br />
This holographic technology represents<br />
a powerful form of AR, whose Windows<br />
Holographic software will work with<br />
any Windows 10 device. Therefore, like<br />
Sony’s Project Morpheus and Google<br />
Cardboard, the HoloLens headset will<br />
work with devices that people already<br />
own. Unlike these other headsets,<br />
Microsoft has been touting that<br />
HoloLens’s application extends beyond<br />
just entertainment.<br />
The HoloLens will reportedly be<br />
commercially released in late 2015.<br />
However, it is possible that, because<br />
AR systems require significantly<br />
more processing power than VR,<br />
other AR headsets will have a longer<br />
road to release. Its early entry into<br />
the marketplace and its recognizable<br />
brand name could allow Microsoft to<br />
have a monopoly on AR hardware and<br />
software.<br />
Still, with so much work being done<br />
in VR in advance of AR’s release,<br />
it is possible that AR will not so<br />
much replace VR as converge with<br />
it. That is, currently in-development<br />
VR technologies could integrate AR<br />
capabilities and vice-versa. Therefore,<br />
it is unlikely that VR will be a passing<br />
fad, and it is wise for entertainment<br />
companies and brands to work with VR<br />
technology. Those that work with the<br />
technology in its early stages will have<br />
the power to shape the direction the<br />
technology and its market take.<br />
22
C a s e S t u d y :<br />
M i c r o s o f t H o l o L e n s<br />
23
Microsoft<br />
HoloLens<br />
represents an<br />
example of AR<br />
technology that<br />
eclipses what is<br />
being said and<br />
done in the VR<br />
space. In fact,<br />
The New York<br />
Times has quoted<br />
Microsoft’s<br />
Todd Holmdahl<br />
as saying<br />
that HoloLens<br />
represents “a new<br />
product category.”<br />
Furthermore, Forbes has called<br />
HoloLens “the most ambitious (AR)<br />
project to date.” This technology, then,<br />
illustrates that content creators need to<br />
consider not only VR but AR as well.<br />
For Microsoft, the HoloLens functions<br />
not only as a platform to maximize the<br />
value of its video games but also as a<br />
way of helping to repair its reputation<br />
among consumers and software<br />
developers. However, the company is<br />
taking a different strategy to HoloLens<br />
than it has with its Xbox video game<br />
platform, in that, unlike Xbox, the<br />
HoloLens will be fully integrated across<br />
Microsoft. In particular, it will be used<br />
with Skype, Windows, and Microsoft’s<br />
video game development teams.<br />
Although Microsoft has been clear<br />
that HoloLens will feature content<br />
and applications beyond video games<br />
(such as those relating to entertainment,<br />
business, and education), the company<br />
will use video games as a mass market<br />
product that drives consumers to the<br />
technology. The announcement of<br />
HoloLens followed the September 2014<br />
news of Microsoft paying $2.5 billion<br />
for the hit video game Minecraft and its<br />
studio Mojang. Microsoft CEO Satya<br />
Nadella has even told The New York<br />
Times that HoloLens influenced the<br />
decision behind this purchase. Tech<br />
blog The Verge, meanwhile, has argued<br />
that Minecraft will bring consumers<br />
to HoloLens: “Minecraft has a huge<br />
audience, and it’s comparably easy to<br />
develop, but here’s its big potential:<br />
Minecraft could help new users of<br />
virtual and augmented reality headsets<br />
feel comfortable in three-dimensional<br />
space. And that’s essential.”<br />
While video games might influence<br />
consumer adoption of the HoloLens,<br />
skeptics question Microsoft’s ability<br />
to succeed with the HoloLens. First,<br />
The New York Times has noted that<br />
Microsoft has had a history of releasing<br />
technology that, while innovative, fails<br />
to find commercial success, such as<br />
pre-iPhone smartphone software and<br />
an early type of smartwatch. Second,<br />
The New York Times also has quoted<br />
an unidentified Microsoft executive<br />
as saying that the HoloLens will cost<br />
“significantly more” than a video game<br />
24
console, which tend to be in the range<br />
of $300-$500. Third, a writer at CNET<br />
has said regarding the HoloLens, “I<br />
remain cautiously optimistic. The<br />
limited field of view is going to be a<br />
deal-breaker for many, but this device<br />
remains something you’ll need to<br />
see to believe.” Finally, a writer at<br />
PC World is skeptical that HoloLens<br />
will achieve mass market adoption,<br />
at least immediately: “Right now, I<br />
see HoloLens as a tool - one that’s<br />
indispensible for some applications,<br />
but not quite the Holy Grail that<br />
Microsoft’s HoloLens team wishes it<br />
could be.”<br />
In terms of the technology, the<br />
HoloLens are smart glasses that run<br />
on Windows Holographic software<br />
powered by a Windows 10 device.<br />
This makes the HoloLens particularly<br />
attractive to content creators because<br />
it, like Sony’s Project Morpheus and<br />
Google Cardboard, will work with<br />
devices that people already own. What<br />
is also attractive about the technology<br />
is that, unlike these other devices, it<br />
presents a virtual world that is overlaid<br />
on top of the physical space in which<br />
the user is situated. The user is able to<br />
interact with this virtual overlay through<br />
sight, voice, and gesturing. This level<br />
of interaction goes far beyond what is<br />
possible in VR.<br />
innovation in filmic content. However,<br />
Microsoft has even been touting<br />
that HoloLens is for more than just<br />
entertainment. For instance, the<br />
promotional video distributed at<br />
the announcement of the HoloLens<br />
presents the technology as an<br />
educational and business tool, with one<br />
application being that users can create<br />
their own holograms that can be created<br />
in the physical world with a 3D printer.<br />
Furthermore, it’s possible to imagine<br />
that Microsoft could use Minecraft -<br />
as a communication and educational<br />
tool - to introduce consumers to the<br />
broader applicability of HoloLens, such<br />
as architecture and design. Hollywood<br />
studios, video game companies, and<br />
brands will be wise to begin considering<br />
how they can develop content that<br />
works in both VR and AR, as these<br />
formats will eventually converge.<br />
Because of this, content for HoloLens<br />
(and AR more generally) will need<br />
to be unique from that developed for<br />
VR. As in VR, video games will drive<br />
25
F o r a n y f u r t h e r i n f o r m a t i o n c o n t a c t u s :<br />
18.hubs@havasmg.com