By Daniel Frankel
With trade show floor and executive panel presentations over-indexing with hype about virtual reality (VR) at CES 2016 in Las Vegas, questions emerged as to whether VR will go the way of 3D TV, another former CES uber-trend that never caught on with consumers.
A consensus quickly evolved that VR is not that technology. While home 3D is now viewed, in hindsight, as a solution to a problem the video industry didn't have, analysts see virtual reality as having too many practical applications -- everything from education to health care to real estate -- to fail.
With big technology companies like Facebook making $2 billion investments into VR headset makers like Oculus VR, the investments being made are simply too big to be minimized.
The Oculus 4 headset
"I'm a converted skeptic -- there's just too many big companies involved in it now spending real money for it to be hype," said Brett Sappington, senior analyst for Parks Associates.
In fact, Goldman Sachs predicts that the VR market will be worth $80 billion by 2025, with video entertainment encompassing about $3.2 billion of that pie.
Pay-TV wants a slice
For their part, pay-TV companies have already started experimenting with VR. Through its venture capital arm, for example, Comcast (NASDAQ: CMCSA) recently joined Time Warner Inc. in generating a $30.5 million funding round for NextVR, a Laguna Beach, Calif., startup that broadcasts events in virtual reality.
CableLabs CEO Phil McKinney described consumer interest in VR field tests conducted by his cable industry tech consortium last year as being "off the charts." The non-profit research and development consortium is fervently studying the role promising new technologies like VR will play in the future of the cable business.
And in October, DirecTV (NYSE: T) announced the launch of a smartphone app that lets customers see highlights from a BKB fighting event that was captured in the VR format in Las Vegas earlier in 2015.
Of course, at least as far as the video industry is concerned, there are still skeptics. "VR may be relevant [to the video business] in five years or more," said Alan Wolk, senior analyst for the Diffusion Group. "There's still a lot to be figured out. Gaming and porn will come before TV."
Ramping up fast
Yet there's also too much heat in the market right now to ignore. Buzz about VR is accentuated by the fact that the market is on the cusp of the biggest consumer technology introductions to date.
On March 28, for example, Oculus VR will finally debut its much anticipated Oculus Rift headset, delivering consumers a rich 360-degree video experience, with a resolution of 1080 × 1200 per eye, and a 90 Hz refresh rate. The Oculus Rift will be followed into the market by HTC's Vive headset, for which HTC will start taking pre-orders on Feb. 29.
Neither device will be cheap. Speculation on the Vive has the price tag as high as $1,500. But analysts expect aggressive consumer interest just the same.
The conventional wisdom to date is that the devices will be used primarily for video gaming. But companies like Comcast aren't so sure.
"Everyone a year ago would have said it's all about video games, but games are costly and take time to produce," Michael Yang, who serves as managing director of the Silicon Valley office for Comcast Ventures, told FierceCable. "Frankly, I see video content leading the charge. I think the other applications will come downstream."
Comcast Ventures already has made a number of notable investments into VR companies. These investments include Redwood City, Calif.-based Baobab Studios, a VR animation studio founded by Maureen Fan, who was most recently served as VP of games at Zynga, and Eric Darnell, director of DreamWorks Animation's hit Madagascar film series.
Comcast Ventures also backs AltspaceVR, operator of an avatar-based VR experience akin to the virtual phenomenon Second Life, as well as NextVR, a company that specializes in broadcasting live events in VR -- everything from presidential debates to NBA basketball games.
VR as DVD bonus, audience engagement
While the mission of Comcast Ventures is to invest in a broad array of emerging technologies with big upside, 82 percent of the 80-plus companies the VC backs have some involvement with either Comcast proper or its NBCUniversal division. And for his part, Yang sees huge potential in a relatively quick timeframe for VR in realms like cable TV and theatrical distribution.
VR could be used to supplement blockbuster titles
Among potential applications, VR could be used by Universal Pictures as a kind of next-generation DVD bonus feature, supplementing blockbuster film titles like Jurassic World and Minions with a rich, super-engaging media experience in places like the movie theater lobby. NBCU's broadcast and cable networks, meanwhile, could augment their live sports and news events with VR, Yang adds.
And, of course, Comcast's cable TV operations could develop a powerful weapon in the battle against cord cutting and OTT insurgents, perhaps building a brand-new immersive experience into the X1 video platform.
"Pay-TV companies don't yet have a direct play in virtual reality," said Joel Espelien, a Diffusion Group senior analyst. "But they could play a significant role in monetization if they extend authenticated TV Everywhere services to VR experiences as an additional screen. This could be a good additional way to retain potential cord-cutters with things like VR experiences around sports and the premium content."
For pay-TV companies and cable networks alike, VR promises a new way to tell stories and engage viewers. Technology-wise, delivering a VR experience is more complicated than having a video services customer plug a headset USB cable into a set-top box. Just for starters, as Sappington pointed out, VR requires powerful hardware for image processing, with multiple image angles being stitched together to form a high-resolution, 360-degree tapestry.
Challenges aside, Yang sees an immediate opening in the market for media companies like Comcast. "The hardware manufacturers are scared to ship headsets without a full library of content," he noted.
Meanwhile, content producers will have to think of innovative ways to tell stories to viewers who are all looking at different image angles in this 360-degree sphere.