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Virtual Reality Has Its Olympic Moment

Virtual reality is making its Olympic debut during this summer’s Games, but for investors the technology may still be a few years away from prime time.

  • Kaitlin Ugolik

For this year’s Olympic Games, NBC launched a new extra for viewers with a Samsung Galaxy smartphone and Gear headset: 85 hours of virtual reality content. The network promised 360-degree immersive video experiences for the opening and closing ceremonies, plus seven sporting events, including men’s basketball, gymnastics and beach volleyball. There are a few caveats: The cost to the user is relatively high — about $180 for hardware plus a TV provider subscription — and VR hardware is still clunky by most experts’ and users’ standards. Plus, the content is released on a delay; the opening ceremony wasn’t available in virtual reality until the day after it aired live. Still, NBC’s move has been lauded by analysts as smart and strategic at a time when technology companies and content creators are working out how to make virtual reality as ubiquitous as mobile video and gaming.

NBC isn’t alone in taking advantage of the Olympics to test out VR strategies. The Financial Times created a four-minute virtual reality video about Rio de Janeiro titled “Hidden Cities,” and Kellogg Co. teamed up with U.S. Olympic swimmer Tom Shields to give viewers a 360-degree swimming experience. As technologies to transport users out of their physical realities is still evolving and no one is quite sure what type of content is best for the medium, experimentation is key.

These brands could likely learn a lot from the video game industry. Gamers tend to be early adopters and are more willing than most other demographics to spend money on consoles and content. Deloitte predicts that VR will have its first billion-dollar revenue year in 2016, thanks to gaming. In January the firm said it expected about $700 million in hardware sales of some 2.5 million headsets, with the rest coming from content — specifically, the sale of roughly 10 million games. Others had forecast several billion dollars in sales; eight months into the year, however, Duncan Stewart, director of research for technology, media and telecommunications at Deloitte Canada and co-author of the January report, says his firm’s more conservative estimate is proving to be most accurate. Investors are interested in VR, but the hard truth remains that there are few, if any, companies for which the technology could comprise more than 1 percent of revenue. That makes the sector a tough sell, at least for now.

The term “virtual reality” was popularized in 1987 by computer scientist Jaron Lanier, and there have been many fits and starts since then. Eric Galen, an attorney with Greenberg Glusker who specializes in entertainment and technology law and works with VR firms, believes the current climate is promising for creating devices that are as easy to use, and as cheap, as mobile phones. Nintendo Co. and mobile game developer Niantic may have opened many consumers’ eyes to the possibilities with the recent viral success of Pokémon Go. There’s a big difference, though, between spotting Pikachu on a park bench through your phone screen — more augmented reality than virtual reality — and feeling as though you’re completely immersed in a Pokémon world.

“Virtual reality is kind of an inevitable evolution of storytelling, and the question really is just the ecosystem,” says Galen. “Who are the winners going to be?”

That’s a question that Kensho Technologies’ new Virtual Reality Index is aiming to help investors answer. The index follows companies that have exposure to the growing industry — including Facebook, which owns the Oculus VR, maker of the Rift headset, and interactive graphics chipmaker Nvidia Corp. It was up 13.5 percent in the month following the release of Pokémon Go.

Though demand is rising as virtual reality technology evolves, analysts agree that it’s unlikely that most people will have setups in their homes in the next five years. For investors, the best course may be to focus on companies that are positioned to benefit from a coming VR boom and have businesses that can generate revenue in the meantime. These include semiconductor maker Advanced Micro Devices, which recently partnered with start-up Awesome Rocketship to create the VenueVR Gateway, a pod that incorporates both a headset and a motion-controlled platform to allow users to experience VR. The hope of companies like Awesome Rocketship, explains Galen, is that out-of-home offerings like VenueVR will be to virtual reality what nickelodeons were to film and television.

“Investments in critical parts of the ecosystem are going to be really important,” says Galen. “Whoever can come out with great stories and a device that really works and is accessible is going to win, at least for a while.”

Follow Kaitlin Ugolik on Twitter at @kaitlinugolik.