Is Virtual Reality A Real Business?

If you follow entertainment business news, you know that investments in Virtual Reality (VR) have been extremely popular for the past couple of years. However, when I talk to friends and clients in that sector about the business models for this new media platform, most of them admit that it is still somewhat unclear. Are VR investors going to make a lot of money? What is the pot of gold at the end of this rainbow? My clients count on me to have insight and ideas about their potential deals and investments, so I spend a fair amount of time thinking about this stuff.

​This morning I was reading an interesting article in USA Today. It talks about a new venture between IMAX and AMC theaters that is putting VR "pods" in theater lobbies to allow consumers to play a game or have some other VR experience before or after their movie. This is a separate revenue stream for the theater (and potentially cross-promotion of the films being shown). So, it is basically just a high tech addition to their existing assortment of arcade games. Interesting idea, but is that what we're heading towards? Is the endgame for all of this investment simply better arcade games? Let's look deeper and try to understand this burgeoning media platform.

​There are two important things to understand about VR. First, it is by definition, done in isolation from others. In order to create an immersive experience, the user must be separated from their physical environment. This means that the technology takes control of your senses by completely covering your eyes and ears. (I suppose true VR will eventually take control of your other three senses as well.)

However, much of our current entertainment experience includes a social component. We enjoy watching films and programs with family and friends. We ride on amusement park rides together. We sit in a theater full of people and the reaction of the crowd enhances our experience. Even when we play arcade games or video games at home, the people around us can participate as active spectators and root us on. We can throw each other looks and hear each other laugh. VR is the opposite of this.

The other important aspect of VR that we need to understand is that it is inherently a 3D environment. The user needs to be able to look up and down and around in order to have the sense of true immersion. Again this is the opposite of film and other programming where the view of the audience is carefully framed so that the experience can be crafted through a controlled series of images. VR does not allow the storyteller to have that kind of control.

VR truly is more like a multiplayer game. A 3D environment is created within which users create an individualized experience. It is World of Warcraft or Second Life with more of the noise filtered out so users feel that they are "really there." It does trick your mind to remove you from your physical environment and thus enhance the experience. But at the end of the day, it would seem that it is simply an incremental improvement to a model that has existed for years. It's perhaps not much different than closing the door and turning out the lights while you watch a movie. It is headphones for your eyes. It is a great experience, but is it really a whole new medium or just better technology for doing what we already do?

I want to explore this further, look at the business possibilities and share some of your ideas on VR in a Part II (and perhaps III and IV) of this post. I welcome your comments. What is the real future potential for this business where so much money is being invested? Let's figure this out together.