Manatt Digital Media - April 2016

by Manatt, Phelps & Phillips, LLP
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In This Issue:

  • Impressions From GDC
  • 5 Things I Learned From SXSW About VR/AR

In this newsletter we highlight two recent events MDM attended that are often a focal point for organizations operating in the world of digital media. First, Jacob Carlson details his experience at San Francisco's Game Developers Conference, followed by Mary Ermitanio, who breaks down her takeaways from Austin's South by Southwest.

Impressions From GDC

By Jacob Carlson

This year's Game Developers Conference in San Francisco featured numerous panels, exhibits, presentations, and demos for the 27,000+ gaming industry professionals who attended in March. However, there was no mistaking the overwhelming focus on Virtual Reality. GDC week kicked off with a Virtual Reality Developers Conference so packed that all of the second day's events had to be moved to another hall of the convention center to accommodate the thousands of desperate professionals trying to squeeze into intriguing sessions. As the week wore on, it became a demanding cycle of sprinting from session to session in order to stand in line for at least 30 minutes for the chance to actually sit in on the desired panel or presentation. By the end of the week, there was no doubt that VR is for real and gaming will be a major reason why it will succeed.

The whirlwind atmosphere of the conference provided a sense of palpable excitement around the new VR landscape. The gaming industry was always going to be a key foothold for VR development and adoption, but reality is finally catching up with perception. VR developers and publishers have spent years studying and experimenting with technology, content, and psychology as they have worked to create immersive environments for gameplay that seamlessly integrates and takes advantage of the human mind. Much of the conference was devoted to sharing best practices and insights around this new medium and to showcase finished or in-development work that will be featured on the new head-mounted displays that are shipping in 2016. Games such as CCP Games' Eve: Valkyrie and fictional content such as Baobab Studios' Invasion! gave attendees the ability to really experience where VR is heading and to drum up enthusiasm for what's to come.

Two of the biggest names to make their presence known were Oculus and PlayStation. Their tech was present in many of the presentations and exhibits throughout the conference. Both companies showcased easy-to-wear HMDs with games that really took advantage of the environments. While demos lasted only a few minutes, it was evident that this was an experience that any gamer would want to play for extended periods of time. However, it will be interesting to see how longer game-play sessions affect people and whether there is any associated fatigue. I preferred the PlayStation VR headset slightly, but its price point is the real winner. While the Oculus Rift is $599, it does not include the necessary Windows PC to power the system. The PlayStation VR is only $399 and requires the $349 PlayStation 4.

The third major VR company was HTC, showcasing their Vive technology alongside a slew of Valve-partnered games. The Vive continues to wow consumers with its room-scale interactivity environment, but the cost is significantly higher at $799, not including the necessary PC to run it. In the end, each company has announced tons of games that will be available as these begin to ship this year, but it will come down to the wallet size of the consumers as to how many devices are sold. I expect the volume of entry-level PSVRs sold to be higher as people begin to see what VR gaming is all about.

In addition to VR, there was plenty of traditional gaming to go around. Games such as Hellblade and Paragon were demoed as examples of amazing near-real-time rendering technology from Unreal Engine. Games are utilizing the phenomenal technology advancements to create epic storytelling and experiences that provide transformative worlds for users. You have to see and play some of these games to understand the complexity and beauty that these games are able to achieve.

The eSports community also had a presence throughout the week, discussing the growth of the industry and talking about what's next. One of the key takeaways from the week was that publishers are not able to push their games as "the next eSport." Rather, the gaming communities are the ones that decide what games are going to be bought into and promoted in the eSports world. This is a difficult proposition for game developers that want to get in on the quickly growing industry but do not have the ability to christen their games as attractive eSports without organic adoption from the gamers themselves. eSports franchises are also becoming more and more like traditional sports teams, in that they have exclusive player contracts, merchandise, and rabid fans who are willing to pay to be a part of their community. The industry is still growing, but the global nature of eSports makes it an attractive business opportunity for those that are able to get in now.

In the end, GDC 2016 was an event that highlighted how much potential the gaming industry still has yet to realize. While other media industries such as feature films and television are fighting hard against new technology, the gaming industry is fueled by it. Consumers continue to show a willingness to spend major cash on transformative experiences, and by the look of what was exhibited at GDC this year, the opportunity has never been better.

5 Things I Learned From SXSW About VR/AR

By Mary Ermitanio

For the first time, SXSW launched a new track focused on VR/AR this year in Austin. The now 30-year-old festival had at least 100 sessions, lounges, events and exhibitions dedicated to VR/AR. These experiences ranged from brand activations, such as McDonald's immersive Happy Meal VR experience, to numerous panels discussing VR/AR's impact on storytelling, travel, music, sports and fashion. Replete with VR/AR experiences, SXSW and events like it play a large role in bringing VR/AR to the mass market. In this post, I lay out the top 5 things I learned about VR/AR at SXSW.

1. Consumer brands will be the biggest drivers of VR/AR mass market awareness

VR/AR has been surrounded by so much hype in the last two years. With the imminent launch of major VR headsets, the buzz has grown even more in the last few months. While VR/AR is a hot topic in many industry circles, and gamers are eager to get their hands on it, the majority of consumers have little awareness of VR (and presumably, much less of AR). In a survey conducted by Greenlight VR in October 2015, 68% of U.S. consumers said they know a little about or have never heard of VR. This number has probably gone down since then, especially as consumer-facing brands have embraced (and are racing toward) VR/AR as the next medium for consumer engagement. At SXSW, I tried the VR experience at the McDonald's lounge. With the Vive headset on, I was transported to inside a Happy Meal box and was given a palette of patterns and colors, tools (including a laser pointer) and the creative freedom to design my Happy Meal box. My masterpiece was then sent to me as a GIF, ready to share with my social network. Activations such as this get people excited and encourage word of mouth. With experiences done well, marketing dollars and association with popular consumer brands will continue to help drive the mass market awareness the industry needs.

2. Location-based or out-of-home entertainment experiences will be the second

With many of the major headsets launching with steep prices and low levels of consumer awareness, location-based entertainment (LBE) can help bring VR experiences to consumers. LBEs, in this context, include theme parks and pop-up installations. A number of VR theme parks have been announced or are already in development, including The Void in Salt Lake City and a VR arcade in Los Angeles. Samsung and Six Flags recently partnered to put the Gear VR headset on the first VR roller coaster. While SXSW is an event and not so much an LBE, there were dozens of pop-up installations that gave many attendees their first taste of VR/AR. For example, in the photo below at VNTANA's augmented reality installation, my colleague is projected in real time as a hologram as she controls the hologram of the new DJI Phantom 4 Drone.

3. 360-degree videos are cool, but more will be needed to take the industry beyond this phase of sampling

360-degree videos are now available to the masses via Facebook, YouTube and other platforms. When I skim through the comments on a Facebook 360-degree video, or show somebody a 360-degree video for the first time, the response is almost always that of fascination and wonder. The first 360-degree videos released (such as this one from Discovery) and the brand activations and LBEs mentioned above, all provide the mass market with opportunities to "sample" VR. These are usually one-off experiences that wow the audience and that drive awareness. But, awareness alone will not lead to purchase. Consumers need a reason to purchase VR headsets and experiences for themselves, and to keep coming back to them. Consumers will need to have an emotional connection or a clear understanding of the value proposition. In addition to affordability, accessibility and comfort, this will require ongoing development and experimentation of storytelling techniques in 360, and, more importantly in my opinion, development of more and better interactive experiences in VR/AR—whether for entertainment, communication or productivity.

4. VR/AR is the new frontier for advertising

At SXSW, you didn't have to look very hard to find VR/AR experiences. Many were brought to you by brands, including McDonald's, Gillette, Dell and Samsung. Gillette partnered with DiscoverVR to take users on a virtual ride through the mountains, while Samsung (promoting its new Six Flags experience) allowed users to experience Six Flags' popular Tatsu roller-coaster ride in the Samsung Studio. Many of the VR experiences available to consumers today on YouTube or VR app stores are productions paid for by brand advertisers. VR advertising currently uses models similar to online video (pre-rolls, product placement and branded content or native advertising), but there are key differences in the consumer experiences and in tracking. With online ads, brands struggle with viewability and ad-blocking concerns. In VR, eye-tracking technology can tell us where a user is looking and for how long. While VR provides a more immersive and experiential means of marketing, this same immersive nature increases the risk of highly disruptive or intrusive advertising that can turn consumers off to a brand. Today's AR advertising consists of superimposing digital information on real-world items that you point your phone's camera to (the QR code is an example of an AR application). Due to practical limitations, this has not garnered wide popularity. However, the future of AR could have broad applications for advertisers as it enables brands to augment all their marketing channels, especially the physical (brick-and-mortar, print, billboards, etc.), with additional content, improving engagement and measurability.

5. In the future, display will no longer be limited to screens

In the last 50 years, our interaction with all things digital has been via 2D screens, the screens on our TVs, computers and, most recently, mobile phones and watches. VR/AR eliminates the need for these rectangular screens and enables us to work with digital information and functions in the real world (or for the closed VR experience, in a 360-degree virtual world). With AR, imagine watching a sporting event live in person and being able to pull up player stats, not on your phone, but in your field of vision as you watch the player in action. Face time and Skype sessions will also be transformed, with holographic projections of your meeting attendees or loved ones from your smart device. VNTANA's technology on display at SXSW, mentioned above, demonstrates the early stages of this type of exchange.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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