Canada’s VR industry is nascent, but set for growth

Though virtual reality is still in its early days, it holds promise for Canada’s media industry — including for broadcasters as a new way to draw eyes to live events, such as sports, according to Nordicity’s Kristian Roberts. For example, it could be used to allow a viewer to watch the National Hockey League’s Stanley Cup finals from some of the best seats in the house, he suggested. “That’s a better experience than watching it on TV, and you get that immersive experience,” Roberts, a partner at Nordicity’s Toronto office, said in a phone interview. “That’s where I’d put my money.” Some of Canada’s media companies have made inroads in this direction over the past year. CBC/Radio Canada, for example, incorporated VR content in its coverage of the 2016 Olympic games. A year ago, Rogers Communications Inc. made coverage of two NHL games — the 2016 Winter Classic and its All-Star game — available in VR, and in February 2017 did the same for six regular-season games. Meanwhile, last June, BCE Inc. used 360-degree video to promote its TSN channel. But although it’s been more than a year that VR has been making headway as a medium, the industry is still in its infancy, and it’s too early to answer many questions about where it’s heading. For instance, moves into sports broadcasting aren’t “quite developed” yet, Roberts said, adding “they don’t quite have that ‘I’m in the crowd feel’.” Roberts, who is currently working on a report on Canada’s VR industry, has been surveying Canada’s VR companies, and said that only about a quarter have products in the market right now. “The clear majority of companies are still developing prototypes or getting investments for those products, and that’s true of both content and that tool layer,” he said, noting that “as always, investors are more interested in the technology platform than they are in either the hardware play or content play.” The industry is at the point where it still hasn’t found a breakthrough or killer app for VR, he said. In the entertainment sector, “there really hasn’t been a single title or group of titles that have really stimulated demand for VR systems,” he said. “So you’ve had a year of early adopters buying, particularly the high-end VR devices… they’ve done reasonably well, but there hasn’t been any particular title that has sold a lot.” Dan Cryan, California-based senior director of broadband media at research company HIS Inc., agreed that implementation of VR is still a ways away. “What we’re seeing as consumer offers today are probably thought of as being the kind of Windows 1 of consumer VR,” he said in a phone interview in reference to the operating system Microsoft Corp. released three decades ago. “A lot of the basic ideas are there — headsets, adaptive ways of adapting and transforming phones… but the implementation is still an awfully long way away from where we will be in five, 10, 15 years time.” He noted that it’s not unusual to talk to people in the industry and have them talk about inventing a new shot, for example. “And that happens … with comparative regularity” compared to TV or film,he said. “That gives you a sense of just how early these media are.” Cryan also noted that the merging of TV and VR won’t happen overnight. “It’s a little bit of a chicken and the egg problem, because if you’re going to start investing money in premium VR content production, you need an installed base to be there. But it’s often the premium content production that will help drive adoption, he said, adding that “we are definitely seeing interest from the more progressive broadcasters and pay TV operators from around the world.” One of the major use cases right now is to promote TV and movies, he said, noting that Twenty-First Century Fox Inc. has formed a division that includes a focus on VR. “But it’s a relatively small division within one studio. So again, we come back to this idea … about it’s early days and it’s a small division, because the installed base is not fully there yet to justify major investment.” And while most content companies are focused on making entertainment products, which is the most common current use for VR, that doesn’t necessarily mean it will stay that way. Roberts said that when he asked companies what the future of VR is, the answers, in addition to live events, include uses like education, tourism or real estate. The VR companies he surveyed think “the time horizon for the mainstream VR is still” between three and five years out. “This notion of kind of immediate adoption of VR is not something that the companies themselves think is going to happen. They think it’s going to take some time for the market to mature, for users to get used to the experience, because it’s a new medium,” Roberts noted. It’s also still too early to “make a definitive judgement” about how VR will be linked with traditional media, he said. “The kind of VR experiences that somebody might create for a television show are those the story is happening around you,” he said, noting that’s what linear media producers are used to. “And there’s a fair number of folks doing that in Canada… but I think they haven’t quite figured out the secret sauce. How do you engage an audience in that type of experience?” Another question is how you monetize it. And while “there’s a robust funding environment for the linear media, there’s only a few places where you can get funding for that interactive piece. And broadcasters aren’t going to pay for it beyond what they have to pay for as part of their envelope, and CMF is not going to pay for it unless it’s in the experimental stream,” Roberts said. “It’s a tough sell, right now, I think. The narrative isn’t quite figured out, the business model isn’t quite figured out, and the funding is limited.” He added: “there really hasn’t been any successful monetization of VR to a huge degree yet anywhere in the world. Some things have done reasonably well, but nothing has done super well. There’s no breakout hits yet.” However, Lucie Lalumière, founder and principal of interactive-media-focused consulting company Lalumiere Media and vice-chair of the board at Interactive Ontario, pointed to Canada’s funding mechanisms for original content, including the CMF and tax credits, as one of the reasons Canada is a strong competitor globally when it comes to VR. “I do believe Canada has what it takes to become the leader of VR content,” she said in a phone interview. “Over the last years, we have built a very strong ecosystem of interactive digital media production, talent and companies, as well as media, television and film.” Canada also has strong post-secondary institutions that deliver talent and a strong start-up ecosystem, she added. In terms of funding, things may be changing. Quebec’s most recent budget, for example, confirmed that virtual and augmented reality projects would become eligible for tax credits available for film production services. As part of Heritage Minister Mélanie Joly’s review of Canadian content, Rogers suggested that VR should be eligible for CanCon funding. “There’s a variety of companies in Canada, and I would say the most important segment is content-based, including the creation of tools to be able to facilitate the production of VR/360,” she said. “And then following that, you have the analytics and the hardware companies,” such companies making haptic gloves, for example. “There’s a lot of activity going on,” Lalumière said, noting it’s centered mostly in Quebec, Ontario and B.C. She said there was an acceleration in the growth of the Canadian VR industry in the past year, even though “there was a lot of hype in terms of consumer adoption of the VR headset and many people … had expectations that were not aligned with the market.” The industry will grow in 2017, she said. “The level of investment in capital worldwide VR and AR keeps increasing, because the technology is ready. It’s not perfect yet, but it’s ready for prime time and it’s getting there.” It’s an international market and Asian countries are driving much of the investment, she said. “Chinese distributors are coming to Canada to licence content for their platforms,” she said. “The industry is growing very quickly, and that’s why you see the capital investment worldwide increasing.” Canada’s “multicultural know-how” positions the country well to take advantage of that, she said, noting that at least 80 per cent of the revenue of Ontario’s interactive digital media industry comes from exports. A pool of talent that comes from all over the world, Lalumière said, “helps us in terms of producing content that is consumed worldwide.” — With reporting Anja Karadeglija at akarad@thewirereport.ca and editing by Ahmad Hathout at ahathout@thewirereport.ca

Canada’s VR industry is nascent, but set for growth

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