Exploring Future Reality
Business Models and Core Competencies
Although many head-mounted displays (HMDs) are not yet publicly available and consumer usage is limited, some media companies have already found ways to bring in revenue from virtual and augmented reality content.
Advertising and Cross-platform Marketing
The most common way to advertise with virtual reality has been through sponsorships. For example, Refinery29 worked with Samsung as the brand partner in creating its travel series content. It’s an arrangement that benefits both parties. The media company gets to experiment with different methods of storytelling in virtual reality. The company that is advertising gains association with the innovation and excitement of virtual reality. “Immersive advertising is going to be huge,” said Alex Rosenfeld, founder and CEO of virtual reality streaming platform Vrideo. “If you’re a life long brand marketer, it’s a dream come true to be able to immerse viewers in the world of your product or service.”
Many media companies have been very successful at creating media ecosystems across multiple channels that spread from television, to websites, social media, and, in the case of companies like NBCUniversal, theme parks. These companies have been able to make deals with advertisers based on these ecosystems. Now media companies will be able to add virtual reality to the advertising platforms they offer.
So far, in-experience advertising and commerce has been limited, but there are opportunities for product placement. “What will be important is to bridge the experience to how it can impact commerce,” said Ray Velez, chief technology officer at Razorfish. “Better resolution is going to help drive more sales. You don’t get much better resolution than these types of devices.”
Sales to consumers
The next way to monetize virtual reality is by selling the content directly. Because the devices are expensive and consumers are investing in them, there is an expectation that consumers may spend more money on content.Producers are afraid of the low-price trend in the iOS and Android mobile app stores. The low barriers of entry for app development and the app market for smartphones led to small prices being paid and the most typical monetization strategy being in-app purchases.
In-experience purchases, like shoppable fashion virtual reality content, could be a good option for virtual reality. One comparable business is the virtual economy in the Second Life metaverse, which is worth more than $22 million dollars according to Re/Code. That money is spent on things like virtual clothing and real estate for the online avatars of Second Life users.
The other possibility for selling the content directly is through subscriptions. Just as Hulu, Netflix, Amazon and HBO have grown their over-the-top video subscription offerings, there could be similar offerings for virtual reality as well. Valve offers the Steam game store that will offer content for the Vive when it is released. Once head-mounted displays are connected to these devices, usage for streaming could increase significantly.
Narrative
Media companies know how to make engaging narratives. They have the talent and experience in making compelling content on their own and in partnership with other companies. Narrative is very important to virtual reality content. People still need a reason to keep their headsets on and to find out where to look in an immersive environment.
Skill in producing engaging narratives can be offered to other companies as well. Just as many media companies like the New York Times and Vice have built creative services business, that model can be applied to virtual and augmented reality content production as well.
Existing brands
Fiction and Non-fiction
Virtual reality experiences tend to gain the most traction when a user can engage with familiar content in a new way. For example, Sixense has developed a virtual reality experience where people can use lightsabers. “The demos with the biggest lines and the most excitement are the ones that allow people to go into an environment that they are already familiar with in some way,” said Karl Krantz, who runs the Silicon Valley Virtual Reality meetup. “Letting people go into the Millenium Falcon, Star Trek, or Game of Thrones — I think a lot of people will buy into virtual reality in order to do that.”
Live Events
Coverage of live events presents a valuable asset for existing brands. Offering a front-row view of a sporting event or a fashion show is lucrative. “If you’re comparing this to a $300 dollar ticket, there’s probably some price point you would be willing to pay to virtually sit in that seat. It makes sense to charge much less to many more people,” noted Matt Hartman, director of seed investments at betaworks.
NextVR is developing a pipeline to stream events live to virtual reality displays. The company has experimented with on-site streaming of events from the NHL, NASCAR, a European league exhibition soccer game, and more. These events were then viewed remotely in New York, Los Angeles and Vancouver. Helen Situ, product lead at NextVR, noted that the emotional connection between fans and their favorite players and teams could lead to more ticket purchases and merchandise sales. “For rights owners, the thing they are most excited about is a deeper sense of connection,” said Situ. “Already we see that people feel much more engaged, which could lead to more action in commerce.”
Consumer Trust
Virtual reality offers the possibility of transporting people into places with a greater degree of verisimilitude than ever before. It also offers the possibility of deceiving people in a way that has never before been seen. This means that there will be an even greater need for trustworthiness and ethics in virtual reality production. Brands that are established as trustworthy and that can offer their experience in making ethical calls about media production will be able to gain an edge in consumer trust and will avoid the fallout of making the wrong decision during production in this complicated new medium.
Exploring Future Reality is a report brought to you by NYC Media Lab. Download a PDF of the full report here.
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