On The Future of Entertainment

“The goal of film has always been immersion… [to] get lost in the show.” – Mike Schroepfer, CTO at Facebook.

We spent time this week at the Cannes Film Festival talking with industry leaders about the future of film. We explored virtual reality, storytelling, empathy, and new ways to immerse audiences. Here are the takeaways from our conversations at the festival:

  • Storytellers Love VR. Filmmakers know that VR will enable new ways to engage audiences. VR will expand storytelling on three levels: First, the 360 degree experience increases the viewers sense of presence. Second, immersion promotes empathy as it puts the audience in another world – in someone else’s shoes. Third, allowing a viewer to control spatial movement in a scene opens the door for a choose-your-own-adventure framework. Any one of these three warrants a paradigm shift in film, but all three will happen in time.
  • Established Filmmakers Will Supplement with VR. Established filmmakers see VR as a tool to supplement traditional content. Content creators are increasing the availability of free 36o-degree smartphone VR experiences to, for example, dive deeper into one scene of a film. Next, free VR experiences will begin to appear in the lobbies of theaters to promote films. Last, paid branded VR experiences will command $10-$30 for a 15 minute experience; e.g., the VOID and Ghostbusters. It’s important to note that today established filmmakers are steering clear of producing VR films. Steven Spielberg’s Ready Player One would have been the ideal first VR film but several factors prevented that including cost and the time it takes to retrofit theaters.
  • Aspiring Filmmakers Will Take an All-In Approach. Cannes was filled with startup storytellers going all-in on VR, inspired by the success of once-unknowns like Pixar and Netflix that changed the film industry 15 years ago; e.g., Penrose Studios (Arden’s Wake). Separately, Facebook’s recent closure of Oculus Story Studio (launched in January of 2015) bodes well for startup studios. Facebook’s efforts will now be focused on supporting external VR content creators.
  • Gaming Will Lead The Way. The gaming segment will be a leading indicator for the ramp in VR film adoption. Gamers will be early adopters given they are the largest segment of Rift and Vive users. Many of the tools that game developers use to build VR environments will be used by VR storytellers.
  • Hardware Is The Hold Up. Loup Ventures estimates there are about 2 million high immersion VR headsets in use globally today, including game console-powered VR headsets and  computer-powered VR headsets. We expect that number to increase to 146 million in five years (2022), including game console-powered VR headsets, computer-powered VR headsets and standalone VR headsets. We see hardware as the gating factor to VR film adoption. Hardware today is: 1. Expensive – $1000 plus for Rift & Vive. Daydream from Google headset and phone is $700. 2. Uncomfortable – screen resolution causes sickness and headsets are heavy and can only be worn for 15 minutes or less. 3. Clumsy – given Rift & Vive are both tethered experiences.

Today, consumer VR behavior is marked by a try-it-and-forget-it reality. Over the next 5 years, hardware will improve and costs will come down opening the door for daily VR usage and a new paradigm in film.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

What Google I/O Means for Immersive Computing

This week Google hosted it’s annual I/O developer conference. On day one, the company focused on their innovation in the artificial intelligence space. On day two, they talked about new VR products. Here’s our take on what the latest out of Mountain View means for the future of AI and VR.

  • Day One: AI. At Google I/O, Google lived up to it’s commitment to be an AI-first company. The company announced a slew of AI innovations focused on making their platform easier to use with more natural interfaces including voice (Google Assistant) and vision (Google Lens). For example, Google Assistant now includes support for calendars, phone communication, and proactive alerts, closing a gap we identified in our work on home assistants. Proactive alerts for voice-based assistants is a big step towards a screenless future. Google Home now flashes when it has relevant and timely information. For example: [*Google Home flashes*] “Traffic is heavier than usual. Leave in the next five minutes to be sure you make it to Anna’s soccer game on time.” In the screenless future, friction-less information push represents the future of search technology. Google is still in the best position to own the category given its organization of the world’s information. Google’s progress in the fields of computer vision (Google Lens) and cloud-based supercomputing/machine learning (Google Compute Engine) positions the company for success as we transition to more natural and immersive computing. It’s no coincidence that day one ended with a tease for a standalone VR headset, untethered to a PC or a smartphone. For more, see the 10 min condensed version of all the day one announcements here.
  • Day Two: VR. The big news on day two was the announcement of a standalone VR headset untethered to a PC or smartphone for computing power. Google is partnering with Qualcomm to build a reference headset and announced partnerships with HTC and Lenovo to bring standalone VR headsets to market later this year. Google also addressed a common knock on VR: given the full enclosure of VR headsets, VR experiences are hard to share with others. Google is making VR more social with shared rooms and voice chat as replacements for the text-based comments familiar to PC users. These advancements will help make VR mainstream faster. The transition from PC- and smartphone-driven VR to standalone VR will take 3-5 years (we don’t expect real traction – 1m units – until 2019), but the transition has clearly begun.

Bottom line: Google’s investments in AI and VR will accelerate the transition from computing on PCs and touchscreen devices into the future marked by immersive computing.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Facebook Planting A Flag In AR

Facebook reported Q1 earnings last night and briefly discussed its augmented reality and virtual reality efforts on the call. Following the trend of F8 last month, CEO Mark Zuckerberg spent more time talking about augmented reality than virtual reality. Zuckerberg reiterated that the camera is the focal point of near-term AR and made it sound like Facebook is unashamedly taking a page out of Snapchat’s playbook as a “camera company.” Facebook’s opening up of the camera to third-party developers is a play to establish the company as the platform where AR developers go to create applications, although we believe that Apple and Google’s ownership at the OS layer will enable the richest application development.

Zuckerberg also highlighted computer vision applications beyond the type of facial manipulation that is so popular in social now. He mentioned the ability of the camera in Facebook to recognize objects in the real world and then give the user the ability to interact with them to receive information or even make a purchase. Facebook, like Google and Apple, should have a real play in object recognition, but the interesting thing about this concept is that it expands the use cases of Facebook beyond communication.

The reason that filters and facial masks work well in social is because they’re meant to be shared. Using the camera within Facebook or Instagram to get product information or make purchases is a departure from the core use case of the platform. It will be interesting to see how Facebook’s vision differs from Google’s given their natural play on organizing the world’s information.

While we expect Facebook to keep investing in both platforms, the slight tone shift says that Facebook intends to be a major player in AR despite being late to the game.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Google Earnings Reiterates AI, VR, AR Ambitions

Google CEO Sundar Pichai used tonight’s Q1 call to double-down on his “AI-first” mantra.  Several areas were highlighted, where Google will lead and define its mission to organize the world’s information with machine learning.  Beyond AI initiatives to enhance core consumer products like search, mail, maps, and Google Play, increased machine learning investment was highlighted in at least two segments of Google’s ad model.  These include ‘Smart Bidding’ where machines predict in real-time how an ad should perform in front of a particular target and adjust advertiser bids to maximize ROI.  Separately, in Google’s highly profitable app install ad business, namely Universal App Campaigns, machine learning is being used to best promote developer apps across Google properties including Search, YouTube, and the Display Network.

Management also made a couple of callouts on VR.  Google’s VR platform Daydream is seeing more than half its usage consuming video, with YouTube VR being its #1 app by time spent.  At a recent event, we heard from Google that people are using the Daydream headset to “hold the phone” for them as they watch video laying down.  While not an exciting VR use case, we heard that users are spending multiple hours in VR this way, so it is getting users comfortable with the experience.  VR investment near-term still appears focused on mainstream products like Daydream and accompanied VR produced content such as YouTube VR, Google Earth VR, and Tilt Brush.  We suspect Google is also experimenting with advanced VR and AR hardware, although no mention was made on the earnings call.  We continue to believe Google is the best positioned player to provide the AR operating system of the future, and the company’s leadership position in machine learning and AI only reinforces that view.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Facebook Pushes Further Into AR

In an interview with Recode following Facebook’s F8 conference, Mark Zuckerberg laid out his rationale for Facebook’s big bet on augmented reality:

“Think about how many of the things you use [that] don’t actually need to be physical. You want to play a board game? You snap your fingers, and here’s the board game. You want to watch TV? You don’t need a physical hardware TV, you buy a one-dollar app ‘TV’ and put it on the wall.” – Mark Zuckerberg

To push towards this future – and in an attempt to own the underlying technology – Facebook launched its “Camera Effects Platform,” an open platform for developers to build AR-features and lenses for the Facebook in-app camera. Zuckerberg also confirmed to Recode that Facebook is building “AR hardware” and shared his thoughts on the future of AR and VR; among them:

  • There will be demand for separate VR and AR products in the future.
  • The technology doesn’t yet exist to create the AR glasses that industry leaders are envisioning.
  • Building VR products today will help build the AR products of the future.
  • AR will be a bigger business than VR.

Our take: AR will enhance the smartphone, then replace it. It’s consensus that AR will be bigger than VR over at least the next 10 years — and we agree. AR will enhance the smartphone, then replace it in that time frame. But if you look out further than that, perhaps 30+ years, the immersiveness of VR has the potential to be so good that it rivals base reality. This will require advances in both artificial intelligence and neuroscience, not just digital enhancement. If VR can create alternate worlds as rich as the real one, we think the opportunity would surpass anything humans have created to date.

Facebook gets it, and they are investing accordingly. In fact, the biggest players in the space will collectively spend over $51B on R&D in 2017, of which we estimate $4B will be AR-related spend.

From Google’s work on Glass (2013) and Tango (2014) to Microsoft’s investment in Hololens to Apple’s uncharacteristically vocal pursuit of AR as a core technology, the biggest players are determined not to miss out on the next dominant computing platform and the AR technology underneath it. In fact, in our assessment, Facebook lags behind other incumbents including Google, Apple and Microsoft. But they’ve got a foothold in social and, today, AR is expanding through social – the most forward-thinking AR application is Snapchat. Everyone else is following fast and F8 is a clear indicator that Facebook is doubling down on AR in the race to own the OS of the future.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.