the emerging virtual reality landscape: a primer
TRANSCRIPT
Virtual Reality Introduction & Market Overview
by Brian Radmin ©BDMI,Nov2015 1
Virtual Reality (VR)
Experience that simulates immersive physical presence
in a real or imagined environment.
What is Virtual Reality?
Augmented Reality (AR)
Experience that supplements the view of a live, physical
environment with digital assets.
©BDMI,Nov2015 2
Beginnings of VR
1962!
1966!
1968!
1977!
1982!
1990!
1994!
Morton Heilig created the Sensorama, a 3D display, vibrating seat, and scent producer.
Ivan Sutherland created the Sword of Damocles, widely considered to be the first VR headset.
Atari Sunnyvale Research Laboratory, led by Alan Kay, founded to explore VR.
Sega introduced the Sega VR-1, a head-tracking VR device.
Thomas A. Furness III introduced Super Cockpit, a visual flight simulator for the Air Force.
Jonathan Waldern founded Virtuality, a company in the UK that produced arcade headsets.
MIT created the Aspen Movie Map, a hypermedia experience that allowed users to take a virtual tour.
©BDMI,Nov2015 3
Modern Era of VR
QUARTER1!
2011!
OCTOBER!
2012!JUNE!
2014!
MARCH!
2014!QUARTER1!
2016E!
QUARTER1!
2016E!
!
2016E!
Valve launches VR effort to create headset with truly immersive presence.
Oculus crowdfunds $2.4M, promises a $300 VR development headset.
Facebook acquires Oculus for reported $2B.
Google releases Cardboard, a do-it-yourself VR headset.
Valve and HTC plan to release Vive VR headset.
Oculus plans to release consumer Rift VR headset.
Sony plans to release PlayStation VR headset for PS4.
PRESENT
©BDMI,Nov2015 4
The Right Time for VR
$0
$5
$10
$15
$20
2011 2012 2013 2014
Billion
s
-
75
150
225
300
2008 2010 2012 2014
More content is being created.
Hours of Video Uploaded Every Minute on YouTube
Democratized content CREATION
Widely affordable DISTRIBUTION
Devices available for CONSUMPTION
$0
$350
$700
$1,050
$1,400
2000 2005 2010 2015
-
1
2
3
4
2000 2005 2010 2015
Billion
s
-
0.50
1.00
1.50
2.00
2006 2009 2012 2015
Billion
s
$0
$2
$4
$6
$8
2000 2007 2014
More money is available for creating.
Crowdfunding Investments
More people can afford cheaper bandwidth.
Bandwidth Cost (per 1000 Mbps)
More people have access to the internet.
Internet Penetration
More people can afford computing devices.
Computing Cost (per 1M transistors)
More people have smartphones.
Smartphone Penetration
Hours
Sources: eMarketer (Mobile User Forecast), Deloitte University Press (Exponential Technologies to Exponential Innovation), Crowdsourcing (Crowdfunding Industry Report)
©BDMI,Nov2015 5
The Right Time for VR New technologies are generally being adopted faster.
0 5 10 15 20 25
Virtual Reality
Tablet
Smartphone
Internet
PC
Television
Telephone
?
(1876)
(1938)
(1990)
(2005)
(2010)
(1975)
(2015)
Years
Years from consumer availability to 10% penetration in US
Sources: Technology Review (US Technology Adoption Rates), The World Bank (Internet Users), Asympco (Smartphone Penetration)
©BDMI,Nov2015 6
GAMES
ADVERTISING
FILM
“Workingongamedevelopment,wealwaystry
tocreateanewkindofexperience,andhavingVRtechnologyisalmostunfair.”
ShuheiYoshia
PresidentofSonyPSStudios
“We’rerightonthecuspofa
majorupheavaloftheentertainmentworldonce[VR]technologyreallykicksin.”
PeterJacksonDirectorofLordoftheRingsTrilogy
“[VR]isapercepConchangerforanyadverCserthatwants
toassociatewithanewfronCerinmedia.”
MitchGelmanVPofProductforGannetDigital
SOCIAL
“[VR]hasthepotenCaltobethemostsocialplaEormever.Immersive,virtualandaugmentedrealitywillbepartofpeople’sdailylives.”
MarkZuckerbergCEOofFacebook
Disruptive Potential of VR
EDUCATION
“[VR]isgoingtobereallyimportantforeducaCon.
Becausekidsdon’tlearnbestfromreadingabookorlooking
atachalkboard.”
PalmerLuckeyCreatoroftheOculusRiO
MUSIC
“Icanonlydosomanyconcerts.Sotobeabletohave
morepeopleexperiencethemthroughVR…thatwouldbeepic.”
MileyCyrus
Singer/Songwriter
©BDMI,Nov2015 7
Industry Players React to VR
PLATFORMS
purchased Oculus, VR headset producer, for
reported $2B
created Cardboard (VR headset) and Jump (rig and
software for VR video)
developing the HoloLens (AR headset)
HARDWARE
developing the PlayStation VR (VR headset for PS4)
developed the Samsung Gear VR (a mobile VR
headset)
developing the Vive (VR headset) in collaboration
with Steam
MEDIA
developing two original video series in VR
produced the VR documentary film
Millions March
created VR experiences for the 40th Anniversary
SNL Special
BRANDS
launched a campaign for Google Cardboard with a
VR app
developed VR experiences to tour tropical destinations
created a VR walk-through of their distillery
©BDMI,Nov2015 8
Games
Hardware Film
Theme Park
Other
Projected VR Market
0
20
40
60
80
100
2016E 2017E 2018E 2019E 2020E
Millions
console / PC mobile
VR Headset Sales
VR Hardware Revenues VR Software Revenues
VR Revenues by Category
$30B 2020E
nearly $7B cumulative over next 3 years more than $6.5B cumulative over next 3 years
over 200M users with headsets by 2020 $30B in projected revenue in 2020
$0
$1
$2
$3
2016E 2017E 2018E
Billion
s
$0
$1
$2
$3
2016E 2017E 2018E
Billion
s
Sources: KZero (Consumer Virtual Reality Report), Piper Jaffray (Next Mega Tech Theme is Virtual Reality), Digi-Capital (Augmented / Virtual Reality Report)
©BDMI,Nov2015 9
Games
Hardware Film
Theme Park
Other
Projected VR Market
0
20
40
60
80
100
2016E 2017E 2018E 2019E 2020E
Millions
console / PC mobile
VR Headset Sales
VR Hardware Revenues VR Software Revenues
VR Revenues by Category
$30B 2020E
more than $8B cumulative over 4 years more than $7.5B cumulative over 4 years
over 200M users with headsets by 2020 $30B in projected revenue in 2020
Sources: KZero (Consumer Virtual Reality Report), Piper Jaffray (Next Mega Tech Theme is Virtual Reality), Digi-Capital (Augmented / Virtual Reality Report)
$0
$1
$2
$3
2015E 2016E 2017E 2018E
Billion
s
$0
$1
$2
$3
2015E 2016E 2017E 2018E
Billion
s
©BDMI,Nov2015 10
Landscape of VR
©BDMI,Nov2015 11
VR Studios Jurassic World FILM | COMPUTER-GENERATED
Interact with an Apatosaurus up close and personal in this companion experience.
Watch Sir Paul McCartney in concert performing Live and Let Die in a cinematic VR experience.
Paul McCartney MUSIC | LIVE-ACTION
Volvo Reality ADVERTISING | BLENDED
Test drive the Volvo XC90 in a beautiful journey through Vancouver.
©BDMI,Nov2015 12
VR Capture 360 Degree
Stereoscopic 3D Lightfield
Multiple cameras are carefully angled to form a rig that captures 360° video.
Two cameras are placed at each viewpoint and slightly angled, capturing different video for each eye that allows viewers to infer depth.
Lenses capture the intensity and direction of light in a scene, creating a map of the environment that lets users look around with 6° of freedom.
©BDMI,Nov2015 13
VR Process & Engines Editing & Stitching
Compression Engines
Software to edit videos and stitch together footage from multiple cameras.
Frameworks for the creation of computer-generated imagery (CGI), game development, and animation.
Technology that reduces file sizes. Particularly pertinent for VR, where video sizes can reach up to 1 TB / hour footage.
©BDMI,Nov2015 14
VR Distribute
Closed Open
Companies in the distribution space provide platforms where users can access (stream or download) content. In regards to being closed / open, they can be evaluated across three dimensions:
Only available on specific devices.
Available on many devices, but only provide specific or curated pieces of
content, and can be fee-based.
Available on many devices for free, and allow open
uploading of content.
Hardware – can be a closed ecosystem tied to a specific headset (‘walled garden’) or hardware-agnostic.
Content – can provide premium content (‘Netflix of VR’) or be open to any user-generated content (‘YouTube of VR’).
Price – can be fee-based (e.g., pay-per-download, subscription) or free for consumers.
©BDMI,Nov2015 15
VR Display Mobile Low-End – Best for first, introductory VR experiences and quick demonstrations.
§ Pros – least expensive, portable, only requires smartphone § Cons – basic tracking, limited input (i.e., button)
Mobile High-End – Best for casual consumption and viewing short-form content.
§ Pros – input included, moderate tracking ability, portable, only requires smartphone
§ Cons – limited computing power, basic input, can require specific smartphone
PC / Console – Best for early adopters and hardcore gaming enthusiasts.
§ Pros – best tracking, most computing power, best content § Cons – most expensive, not very portable, requires external computer
Mobile Low-End Mobile High-End PC / Console
Name Google Cardboard Wearality MergeVR Samsung Gear VR Oculus Rift PlayStation VR
Price ~$20-30 ~$69 ~$129 $200 $350-450 $300-400
Display requires smartphone requires smartphone
requires smartphone
requires Samsung S6 or Note 4 integrated integrated
Computing requires smartphone requires smartphone
requires smartphone
requires Samsung S6 or Note 4
requires gaming PC (~$1000)
requires PS4 ($399)
Tracking requires smartphone requires smartphone
requires smartphone / integrated integrated integrated integrated
Input button on headset not included included touchpad on headset included included
©BDMI,Nov2015 16
VR Input / Output Hands
Haptic Feet
Input that uses hands to interact with VR environments.
Leap Motion $80
camera
Nod Backspin $149
controller
Virtuix Omni $599
treadmill
KOR-FX $150 vest
Tactical Haptics $160
hand controller
Perception Neuron $200
glove w/sensors
Input that uses feet to move within VR environments.
Stompz $150
foot strap w/sensors
Output that recreates the sense of touch by applying motions, forces, or vibrations.
©BDMI,Nov2015 17
VR Business Models
Integrated
The modern era of VR is still in its infancy. A majority of companies in the space are pre-product / pre-revenue, and are frequently pivoting and repositioning. This state of flux guarantees that new business models will continue to emerge in the future.
The studio model includes companies
that create VR content. Some
produce their own IP, while others work
primarily as contractors.
The hardware model includes companies
that produce physical consumer goods for VR. They can make cameras, headsets, and input / output
devices.
The middleware model includes companies that
develop software and technology for the
creation and distribution of VR.
The aggregate model includes companies
that distribute VR content. They can
take the form of apps, app stores, and web
destinations.
The integrated model includes companies that operate two or more of the business models shown above.
Pros: § many want to create VR
but lack expertise (in high demand)
Cons: § not very scalable § relatively low barrier to
entry
Pros: § potential for defensible
technology § large potential market
Cons: § capital intensive § many competitors § manufacturing risk § research & development
risk
Pros: § very scalable § potential for defensible,
differentiated offering § ‘picks and shovels’
approach
Cons: § research & development
risk § difficult to predict the
needs of content creators
Pros: § large potential market § very scalable § control relationship with
end-consumer
Cons: § difficult to differentiate § dependent on content
creators § threat of winner-take-all
market
Pros: Cons: § diversified business
§ many competitors § potentially unfocused
§ control more of the user experience and ecosystem § extremely capital intensive
©BDMI,Nov2015 18
Augmented Reality could be $120B business in 2020
$0 $20 $40 $60 $80 $100 $120
AR
VR
Billions
Hardware Commerce Data Voice Film/TV Enterprise Adspend Consumer Games ThemePark
Projected AR Market
AR vs VR Revenue (2020E)
AR is expected to dwarf the VR market by 4x in 5 years. The wholly immersive nature of VR limits its usage to seated or physically closed experiences (to prevent users from bumping into things), making it primarily suitable for gaming and video consumption. AR, however, allows users to interact within real-world environments. This functionality expands AR’s applicable reach to many other verticals, giving it the potential to disrupt the smartphone / tablet industries.
Source: Digi-Capital (Augmented / Virtual Reality Report)
©BDMI,Nov2015 19