13 leaders in augmented and virtual reality from Nintendo, Microsoft, Goldman, and more speak to massive opportunities and challenges ahead.
Augmented and virtual reality (AR/VR) is on pace for a record year in terms of venture deals. Funding in 2016 has already surpassed last year’s total by 85%. Much of the boom in 2016 can be attributed to stealth AR developer and headset maker Magic Leap, which raised a massive $793M Series C in February.
Deals to VR, in particular, are driving much of that growth in funding, as we highlighted in an analysis of funding trends to AR vs. VR. On the corporate side, we’ve witnessed a ramp-up in corporate-driven M&A in the space as tech giants like Google and Apple scoop up companies working on what is expected to be the next visual computing platform.
To understand sentiment around the AR/VR ecosystem, we looked at perspectives from a variety of investors and industry leaders, ranging from Silicon Valley gaming executives to Hollywood filmmakers.
Video games have been targeted as a main application of virtual reality since the first stirrings of the VR industry, and Microsoft, an industry leader in both spaces, is rumored to be working on a new VR headset for their latest console offering, the Xbox One. Here, a key Microsoft executive speaks to the need for a big VR-powered gaming hit before large video game developers get on board.
For VR, the big publishers have a chicken or egg problem. They tend to not make big bets on any platform until it has traction. So I think with VR you’re going to see a lot more indie developers make games to start out with until the concept is more proven. I think it’s ultimately going to take a real deep in-game experience to launch the VR industry to where it needs to be and draw in the large video game publishers.
Virtually unknown just a few weeks ago, Google spinoff Niantic quickly took the world by storm following the smash success of Pokémon Go, their location-based augmented reality game produced in collaboration with Nintendo, which owns the Pokémon franchise.
There’s of course this fantastical Pokémon element, but really it’s enhancing your experience of going out for walk or doing something with friends … I think AR is something that can be with us all the time, that we can use during the day and in everything, from commerce to entertainment to social interactions. Even dating. Those are all things where AR experiences are going to evolve from the ones we have on mobile phones today, just to be more integrated with our behaviors, if you will, and make the things that we do as human beings better.
The acclaimed filmmaker of “Lord of the Rings” fame sits on an advisory panel at secretive AR startup Magic Leap and is set to produce content for the medium.
This mixed reality is not an extension of 3-D movies. It’s something completely different. Once you can create the illusion of solid objects anywhere you want, you create new entertainment opportunities.
Comcast’s corporate venture arm has recently invested in VR startups AltSpaceVR, NextVR, and Baobab Studios.
The big guys like Google, Facebook, Microsoft, Samsung and Sony entering gives confidence about the market, and that talent will flow in. That makes people and deal flow possible.
One of Hollywood’s Big Six movie studios, Warner Bros. partnered with content creator OTOY to create a VR-enabled Batman experience.
It certainly by no means is unrealistic to talk about there being tens of millions of units of AR and VR hardware in the marketplace over the next few years. That’s a significant market footprint of real consumers all around the world who have the ability to experience new kinds of content.
Legendary Pictures once teamed up with Google to help produce Google Cardboard clips of Warcraft and Crimson Peak. Tull personally backed Magic Leap alongside Legendary Entertainment in its Series B.
What gets me excited about VR isn’t so much playing video games or watching movies in a virtual environment; it’s a completely different way to experience things from storytellers and it delivers on a wish fulfillment experience whether that’s piloting a Jaeger from Pacific Rim or flying a Gryphon over Azeroth.
7. Shigeru Miyamoto, creative fellow at Nintendo and creator of “Donkey Kong,” “Super Mario Bros.”, and “The Legend of Zelda”
For the past decade or so before Pokémon Go, Nintendo has been extremely cautious about expanding their gaming franchises into new technologies such as smartphones and tablets, fearing that such a move will dilute the quality of their games. Rumors abound that their upcoming console offering will feature proprietary VR technology tailored specifically for younger audiences, but according to Nintendo’s creative force Shigeru Miyamoto the company is taking into account many of the concerns surrounding VR use among young people.
For VR in particular, we [Nintendo] are continuing our research, and looking into development with a mind to how our current core products are meant to be played for a relatively long period of time. We are looking into the possibilities of providing an experience that gives value when played for a short time, and how to eliminate the concerns of long-duration use. We are also looking into how to make sure that a parent doesn’t need to worry when their child puts on a VR device in their living room.
Presence Capital was launched in late 2015 as the first AR/VR-focused venture capital firm, raising a first fund of $10M and investing part of it into Harmonix Music Systems, Baobab Studios, and Translate Abroad/Waygo.
We believe there’s a gap in funding at the early-stage level mostly, given the VR and AR markets haven’t been clearly defined yet. Now the market is becoming primed [and] it’s important that the startups entering the market are proving value.
Heather Bellini, a Managing Director at Goldman Sachs, predicts that the VR/AR market will be worth $80B in 2025.
While today virtual reality is primarily thought of as a place for hardcore gamers to spend their spare time, it’s increasingly impacting sectors that people touch every day. For example, in real-state: instead of having to go see 50 homes with an agent over the weekend, you might be able to put on a pair of virtual reality glasses or a head mounted display at your realtors office and be able to do a virtual walk-through of what those properties look like and therefore maybe you could eliminate 30 out of 50 on your list and be much more efficient with your time.
Nintendo’s main spokesperson in the United States believes that current VR offerings in the video game industry focus too much on the technology and not the experience of playing.
We have knowledge of the technical space, and we’ve been experimenting with this for a long, long time. … What we believe is that, in order for this technology to move forward, you need to make it fun and you need to make it social … [at E3] based on what I’ve seen to date, it’s not fun, and it’s not social. It’s just tech.
The company has listed AR/VR, together with artificial intelligence and global internet connectivity, as key areas of focus in their latest 10-year development plan.
When we get to this world [everyone owning AR/VR glasses], a lot of the things that we think about as physical objects today — like a TV for displaying an image — will just be dollar apps in an app store. It’s going to take a long time but this is the vision and what we’re trying to get to.
According to Mr. Dhillon, the technical quality of currently available AR/VR applications such as Pokémon Go will look crude compared to what will be available a few years down the road.
I think it does a disservice in labeling Pokémon Go as AR, however, as it sets the bar too low for the public’s initial intro to AR (which is likely to be 5 years away at meaningful scale). True AR applications, gaming or otherwise, will come with the HoloLens, Magic Leap, and Tango … not a location-based game that’s part of an industry too impatient for the advanced AR headsets (or even depth-sensing enabled smartphones) that we know are coming. Truly immersive and interactive AR/VR is still in development and I’m personally willing to wait for the good stuff, rather than embrace half-finished charlatans along the way.
The gaming chief at Magic Leap offered an optimistic view of mixed reality’s potential power as a social connection tool, pointing to the sad state of engagement with smartphones. Devine also envisions the first successful AR product will pass the “Five Mile Rule” for our lives:
“It only will work if it works socially” …
[Devine] also describes successful products as things that pass the five mile rule: Things that you would go back for at home if you forgot them, but only realized five miles away.Smartphones he says, often pass this rule; Apple Watches do not. Magic Leap wants us to never feel like we should be separated from our augmented reality headsets.
“I think about engagement in the world today,” says Devine, “and how messed up it is that people are no longer living in the moment — in the present.” In his keynote, Devine shows a slide of a rock concert, with everyone in the crowd holding up their smartphones to take a photo. This, he thinks, is terrible, “They’re looking at a four inch screen when they’re at a concert.”
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