A New Frontier: ‘Wild West’ of VR Could Uncover Gold in Them Thar Hills

With virtual reality, the medium of television stands roughly where cinema did when audiences got their first glimpse of the Lumiere Brothers’ short film of a train rushing toward the camera—and seemingly straight at them. The scene completely reordered their perspective and created a sensation. Before long they were lining up to pay a nickel in the first nickelodeons to have that same sensation again and again. The year was 1895. “It’s the Wild West right now,” said Maureen Fan, CEO of Baobab Studios, a producer of popular VR experiences like Invasion! and Asteroid! “Most things right now are geared toward hardcore gamers whose VR experiences are on the Oculus Rift, PlayStation and so on. Then you have documentaries about Syria. So in between, there is a huge opportunity to attract people with other stories. But there is no set structure yet. So there is still a lot of experimentation going on.” Hulu is one of the companies committed to being part of the VR vanguard. “We’re still in such early days with this medium,” said Noah Heller, the company’s vp, business development, emerging technology and virtual reality, a speaker at Cablefax’s TV Innovation Summit on June 8 in NYC (www.cfxtvsummit.com). “That’s what’s exciting. The rules are being written now and we’re able to be out in front helping to write them. And yet the sense of uncertainty and trial and error is not stopping companies from pouring many millions into the effort to crack VR and its many cousins—360 video and augmented reality. They know that consumers have started gravitating to VR systems at a time when traditional video subscriptions are eroding along with live ratings.

One recent report from CCS Insights projects $14.5 billion in spending on VR gear and content by 2020. Many programmers (among them ESPN, Discovery Communications and Warner Bros.) have been placing bets on VR. Fan’s company, Baobab, drew $31 million in initial funding from investors such as Peter Chernin, Elisabeth Murdoch and Shari Redstone. The trick, many in the VR game say, is not to just be a “me-too” player. “Every single idea that comes in the door here,” Hulu’s Heller says, “we ask a single test question: Could it be made in traditional 2D television? If the answer is yes, we don’t do it.” Fan describes many VR efforts as “tech demos that show off the sexiness of VR, but not a lot of story… Technology is there to service the art, not the other way around.” In terms of how to structure and finance all of this blue-sky development, different companies have hit on different models. While Hulu does a range of projects, many initial VR outings have been co-productions with the likes of LiveNation and National Geographic. Discovery Communications sees potential in VR ads. The company was early to market with its VR app in 2015. Now featuring some 150 unique experiences, it has now been downloaded 3.6 million times, generating 127 million views. In this spring’s upfront media buying marketplace, Discovery is seeing signs of a return on investment. Brands such as Gillette, Toyota, Marriott and Dunkin’ Donuts have partnered with Discovery on branded VR content. Enough of those blue-chip advertisers in recent weeks have expressed support for the new platform that the company expects “TV-style” ads to be rotated into VR app programming by the fourth quarter. Technology enabling the same spots to play in VR and also on two-dimensional platforms will help companies tap that new revenue stream. “More and more clients are asking about VR, wanting to use VR in their campaigns. What we tell them is, ‘We were early to this, and we feel we know what we’re doing,’” says Paul Guyardo, the company’s chief commercial officer. “We see it in the data. Purchase intent is growing after a consumer views our clients’ content in VR content.” – Dade Hayes