VR's Two-Tiered Takeoff
From Hollywood to Isleworth, the entertainment industry is energised about the greenfield potency of virtual reality. There's been a vertiginous rush toward production of VR content and considerable investment in development across sectors as diverse as medicine, education, and entertainment. It's clear, though, that a two-tier model is developing in which VR, for the short term at least, will be dominated by low-cost headsets and arguably poorer-quality virtual experiences.
This is the difference between 360° video and what is being termed "full" or "true VR."
"True VR video is much more compelling once people see it, but many of the monoscopic 360° videos available are akin to a 2D video that has been pasted onto the inside of a fishbowl which you've put you head into," says Paul Jackson, principal analyst, Digital Media for Ovum. "It's great for landscapes and distance shots but quickly loses its magic as you get closer to objects or people. Also the resolution tends to be shocking—think a 1080p or 720p resolution, but stretched all around your head."
The installed base of VR headsets will climb to 81 million in 2020, according to IHS Markit, dominated by lower-cost models, which are basically "shells" into which people slide their smartphone—such as Google Cardboard and Samsung Gear. IHS suggests smartphone VR headsets' share of the total installed base will be 87% at the end of 2016 while Strategy Analytics puts the figure at 92% of units sold.
Strategy Analytics emphasises the big gulf between price and quality, stating that the experience of Cardboard versus HTC Vive "is as different as listening to a car stereo versus being in the front row of a concert."
Even though Google has now upgraded to Daydream View, for Android cell phones costing $79, this phone holder pales (if you believe the reviews) besides Sony Playstation 4 VR's $400 head-mounted display (HMD)—plus the PS4 machine.
"360° video is the lowest possible entry and is a not a truly virtual experience," says Technicolor entertainment technologist Mark Turner. (pictured at right) "To move you into another reality and give you a sense of presence the experience needs to be 3D and it needs an immersive audio feed. Some 360 videos are of fairly low quality production, and if done badly can done cause nausea. What we don't want to do is put people off. We need them to keep coming back for experiences so we can build the virtuous circle and hopefully step them in to VR experiences."
VR Production Challenges
He identifies production challenges for content creators who want to address as wide a market as possible without having to create content more than once. "You could have something truly interactive at the high end while producing content from the same assets down to a 360° video run on Facebook," posits Turner. "While video you easily scale to different devices, with VR the challenge is to scale the experience. Part of the the new workflow the industry needs to deliver for VR is how do this efficiently and at scale."
[To see how broadcaster Sky is creating cutting-edge VR experiences, see the companion article "Sky Launches Into VR."]
Nokia's Guido Voltolina—who has the intriguing job title "Head of Presence Capture"—describes the current state of activity in the VR market as "kinetic, innovative and exploratory."
"We are seeing two main trends: one regarding 2D 360° video, which is largely about delivering free content in order to introduce people to virtual reality, and a second regarding real immersive experiences that is already testing monetisation, although still with a limited audience."
However, if VR is to become widely adopted for media service delivery, it needs to move away from big wired headsets to a more seamless mobile experience. Smartphones have the great advantage of being ubiquitous TV consumption devices, in any format, from 2D to 360° and full VR.
"A fan may opt to wear a headset for a few minutes to engage with pre-match activity ahead of a big sports game or to enjoy the atmosphere in 360° video before beaming the match in 4K to a large TV set," suggests Fabio Murra, SVP marketing at compression specialist V-Nova.
A higher resolution of display than current VR devices is also necessary to ensure a realistic and immersive experience is offered to consumers.
"360° video and VR services need to start at least at 4K resolutions," argues Murra (pictured at right). He says V-Nova is experimenting with 8K, 12K and even 16K resolutions. "This will enable truly realistic VR experiences as well as neat features like the ability to zoom in and out of VR and 360° content. Without high quality, VR lacks life-like details and loses the core of its market proposition – its capacity to engage deeply with the consumer."
Affordable VR Headgear
All of this needs to be provided without consumers having to invest in expensive playback devices, without impacting the data bundles limit of mobile and ISP contracts, and for a reasonable fee.
"Headsets are making their way into people's homes, but it's going to take a while before a HMD is as much a part of the furniture as a remote control," says Sol Rogers, CEO/founder of VR content producer Rewind. "Great content will create demand for HMDs, driving growth, but while distribution is limited, many brands are questioning reach and return on investment, which limits the amount of content made. Even when distribution is there, many of the brands we work with may still choose to give away the content as it falls under marketing activity, which doesn't often bear a cost to the consumer."
With the exception of gaming, the audience isn't yet big enough to monetize content. Devices needs to be in millions of peoples' hands to make it a reasonable money-making opportunity. The dial on VR device sales is expected to move heading into the holiday season, driven by PS4 VR and Daydream.
While Samsung's Gear VR will have the largest installed base out of all the major branded headsets this year at 5.4 million, IHS predicts Daydream will become the most popular headset for VR by 2019 due to industry support and "a compelling $79 [€71] price point."
Consumer spending on VR entertainment is forecast to ramp from $310m this year to $3.3 billion in 2020 – however this will still represent less than 1% of overall entertainment spend worldwide.
VR Monetisation Models
To date most content providers are mainly focused on VR short-form pieces to complement their existing content, acting as a bonus feature. Syfy, for example, created a mini-series that acts as an extension to its traditional TV series Halcyon, with five VR videos that allows fans to be more interactive with the show.
Technicolor's Turner believes VR could monetized along lines akin to gaming where a viewer watches the first 5 minutes of a piece of content for free before a pay window pops up. "Or maybe you give consumers some value, such as a first episode for free, and then as they go into the content further the experience could be populated with micro transactions (similar to the in-game purchases of virtual skins, tools or weapons by which games publishers like Valve make revenue from e-sports).
"Since we can place people inside the content we do some much more contextual advertising models," continues Turner. "Billboards in the virtual environment could be linked to online media systems. It means different users will get a different experience. This can be done in much more natural, seamless way than a jarring 30-second ad break. So long as organisations are flexible enough to try new models of monetization and not just fall back into the old ones which may translate less well."
According to Futuresource Consulting analyst Michael Boreham, "News and documentaries may start as a freemium model but evolve to a subscription service. Similarly, drama is likely to evolve from free to either ad-funded or SVOD, while sports is likely to evolve to either pay-per-view, ad-funded or season-pass models."
Aside from specific pay-per-view transactions, live events are likely to be a "top-up" for pay-TV subscribers at probably $2-$4 (£1.50-£3) a month, he suggests.
This will likely be feature interviews, behind-the-scenes or locker-room recorded experiences until the technology and install base make it worthwhile to live stream a full game or concert from multiple angles.
"If you can be sat on the front row inches away from Beyoncé or Bieber, why wouldn't fans pay for that, when the technology is readily available in their homes?" says Michael Ford, founder, Infinite Wisdom Studios which is being funded by the BBC to create a VR interactive proposal around live entertainment.. "It's only a matter of time before hardware access proliferates and so too does content demand."
While gamers may spend a significant amount of money on HMDs to watch immersive video, the real proposition for the majority of media consumers may lie in short, high-value content that can enhance an existing programme for a small additional fee.
"For instance, sports fans could have unprecedented access to the team's dressing room, with the possibility of listening to the head coach's pre-match motivational team-talk," says Murra. "Music fans might have the opportunity to immerse themselves in backstage proceedings, such as their favourite band members fine tuning their instrument before a concert is broadcast on TV or accessed via an OTT service."
Interoperability is another issue holding back the market. The stitching software is very varied and post producers are performing colour grades and editorial by looking at a flat screen image. "You can't do edits or sound in VR environments because the tools don't exist," says Turner.
Publishing VR content is tricky because of the fragmented market with multiple different headsets offering very different capabilities.
"There is no platform that works across all hardware," says Sol Rogers. "This is a drawback to the development of the VR industry because any content created has a limited distribution, and it is the proliferation of quality content that is the key to the growth of the industry."
Social is considered another key aspect, but one that is likely to be solved. VR is currently an insular experience and anathema to how sports fans in particular like to share a game.
At the Oculus Connect conference in October, Facebook CEO Mark Zuckerberg lifted the wraps on software that allows people to share the same virtual space. It's a work in progress but features Oculus Touch, the firm's soon-to-be-released 3D controller, to change an avatar's emotion. Future versions with facial tracking could do this automatically.
"Ultimately you will be able to create a live show with a person in the VR game having their view broadcast live onto green screen," says Colin Parnell, a producer at live event screen hire firm Fonix. "We're working on it. It is really hard to do but it will be cracked. I'm sure there are TV game show producers working on this right now."
Technicolor has built a multi-million dollar "experience centre" in Culver City, California bringing together kit—including cameras, renderers and headsets—with creatives and researchers to collaborate on a new form of storytelling which it admits may take many years to develop.
"It's relatively simple to move the gaming experience into VR because it is already a 360° experience, but how narrative moves into VR is a much more nuanced conversation and could last a long time," says Turner.
Futuresource expects 2017 to see further experimentation across multiple genres of content and also the introduction of monetisation. "We also expect the production of longer/full-length pieces of content (including full sports matches) more frequently," says analyst Amisha Chauhan.
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