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Neville Spiteri has been dreaming about VR for a long time, and his company Wevr was early with the high-end underwater exploration game, The Blu, for virtual reality fans.
Released in episodic form, the Blu and its wonderful imagery of sea creatures helped consumers understand just how immersive VR could be. Spiteri is also creating Transport, a VR content creation and sharing network. That plan enabled the company to raise $25 million in funding earlier this year.
Spiteri has advice to offer developers on the content creation and economic choices that they will face when choosing a platform for VR. Will they target the high end of performance, or the lowest common denominator? PC or mobile VR? Those questions were among the biggest at our AR/VR day for GamesBeat 2016, where Spiteri was interviewed by Michael Metzger, partner at merger and acquisitions adviser Houlihan Lokey, in a fireside chat.
Above all, Spiteri says developers have to pick their targets early and be realistic about how much capital it will take to deliver a game or app that meets those targets.
Three top investment pros open up about what it takes to get your video game funded.
Here’s an edited transcript of our interview. You can also watch the video embedded below.
GamesBeat: You’ve been in the interactive storytelling space for a long time, working at EA, Square Enix, Digital Domain. You’ve been a pioneer in virtual reality. You were on the first Oculus demo platform, the first company to use the HTC Vive. You generated amazing content. What are some of the best VR experiences you’ve developed, and what have you learned in that process?
Neville Spiteri: The title we’re probably most known for is The Blu. The Blu has an interesting history in terms of how we came to decide to use an underwater theme as our first experience, our first foray into VR. A lot of it had to do with realizing early on that there’s an opportunity in VR to make you the participator. You’re a protagonist in the story, in the event, in the unfolding experience. Out of that we centered on this theme of how you can have an interaction with an underwater species and fulfill, a little bit, the promise of VR that allows you transport yourself to different places and have a visceral experience of being somewhere else.
As a company — I’m the cofounder and CEO of Wevr, a VR content studio. We’re in the business of creating original VR content. We’re also building a distribution platform, a distribution network to make it easy to get that content out to users. For the last three years we’ve been fortunate to be early in the space. Being early in an early market is very challenging. There are lots of bruises and pains and very difficult learning experiences that go with being brave and trying stuff out. But we’ve been experimenting on the spectrum from 360 video all the way to full interactive experiences.
There’s a number of titles we can talk about in more detail. But we’ve seen a lot of interesting work happening even happening in the last six months. Not a week goes by where we’re not approached by a team or talent to explore new ideas, pushing the boundaries of what’s possible in the medium.
GamesBeat: You develop content in-house, but you also work with third parties?
Spiteri: We’re primarily in the craft of making VR. We feel like we need to always have our sleeves rolled up and understand what the capabilities of the various devices are. The hardware is evolving quickly. It’s changing twice a year. You have a broad spectrum of capabilities, from Cardboard to Vive. So yes, primarily we’re in the business of working with artists and designers and making VR ourselves.
In an early market we’ve found that probably what’s highest in value is having as much exposure as possible to people who want to take a shot at figuring out how to create VR. We spend a lot of time talking to developers, talking to independents as well as incumbents, game studios, movie studios, established directors and writers. We’re trying to think through what is the vision that they want to create, and help out in whichever way we can. In some cases we help out by providing some co-financing. In other cases we’re just providing equipment, and everything in between.
GamesBeat: You mentioned Wevr Transport. I guess it’s a kind of Netflix for VR? What’s the vision behind that? What content are you focusing on? How is it differentiated to all the other app stores or distribution platforms?
Spiteri: Transport is not intended to be a replacement for any of the stores. We’re thinking about two things that are most important to us. One is the consumer, the person who’s going to bother to get a headset and consume media. Second, the creator. What’s important to the creator who wants to showcase their work in some way?
We basically felt that alongside the various stores, which obviously is the ultimate end point where people are going to acquire premium content, there’s an opportunity to think about how you build a network, a community of creators that want to showcase their work together and build a direct-to-consumer relationship. We spent a lot of time thinking about the dynamics of the creative community and the audience around it.
In the early days, we felt and saw that most of the people who consume VR today, at least that we talk to, have some desire to make VR as well. There’s a very high overlap between VR consumption and VR creation, from a segmentation of the audience that we’re looking to address. And so Transport is really in its early days. It’s ultimately about learning right now. The software lags behind a lot of our thinking today as far as where we see Transport going. To say that Transport is the Netflix of VR is premature to say the least. It’s very early days. No vision is complete, I think.
The terms Netflix or HBO we associate with premium content. We associate them with user and consumer choice, which we think are important as well in VR. But it’s too early to pick an analogy for Transport.
GamesBeat: Talking about premium content, what type of content do you think will drive VR adoption? As you mentioned, we’re still in early phases. Everyone’s looking to see what will be the key driver for the whole range.
Spiteri: There are several key drivers. That’s a big question. We’ve been surprised by the range and breadth of different kinds of experiences that are compelling people in VR. Whether it’s the obvious categories of scaring people, anything that drives high levels of emotion, education, travel, a very broad range of different kinds of experiences that lend themselves well, where there’s clearly a high audience response. The consumer puts the headset on and they can immediately see the applicability.
I’ll use this term a lot, but it’s too early to define what the key drivers are in terms of different content categories that will be winners versus losers. You look at the Oculus store today and there’s already the beginnings of a well-curated slate of content, some of which is proving to be very compelling. You look at Steam and there’s 200-plus different titles there. You look at Vive Port, at the Google Play store, the Gear store, there’s a lot of different experiences. We’re just learning by looking at the data, combining our sense of what’s viscerally — we have a hunch that it might be compelling, and then we look at as much data as we can to find out what the drivers are.
The cop-out answer is — even with VR, humans are humans. Our patterns for consumption in media and entertainment don’t necessarily change just because it’s VR. People like their favorite bands. They like sports. They like to be entertained by good performers. A good game is a good game. Addictive compulsion loops that apply in gaming apply in VR. I don’t think we’ll necessarily be shocked by the set of drivers that will work.
More specifically, there are some characteristics of VR, especially room-scale VR, where the invitation to actively participate in an experience is very high. This has been said before. I’m not saying anything very new. It seems like any category of content where you have some affordance, where you can impact the world in some way and have it respond to you, is obviously a key driver.
The length and format of the content is also worth considering. We’ve done projects which are 100 minutes long, 10 episodes of 10 minutes each. That’s the project we did with Samsung, which was very informative in terms of the kind of content we’ll see people resonate with. But it’s early to set those assumptions.
GamesBeat: Are there any upcoming titles you’re specifically excited about?
Spiteri: Yes, but most of them unfortunately I can’t talk about yet. There two titles coming that we’re involved with, which I’ll share very quickly. One is a series of meditation simulations we’re working on with Deepak Chopra. In that case, it was an example of someone who — he came to the studio and put a headset on, and within seconds he took the headset off and said, “This is the new medium. This is a medium that’s going to allow people to get in touch with a whole range of emotions and inner experiences that were not possible with previous screens.”
I thought his insights were profound, and we immediately got into a phase of experimentation. That’s opened up a whole area of academic research around the potential benefits in terms of stress reduction associated with being in a VR experience, where the coupling to your mind is much higher than with regular screens. We’re super passionate about that, because I can see where that’s going.
We’re also working with Jon Favreau, probably best known as the director of Iron Man and Chef. He recently did The Jungle Book. He’s also an avid gamer. He’s been very insightful in terms of thinking about the medium. Same thing. He came over and saw The Blu and immediately felt that this was a transformative medium that was worth paying attention to, despite all of the real dynamics of how this becomes a large-scale market, which we’ll get to. Today, there’s some really interesting work we’re doing with him, and we’ll be able to share more about that soon.
GamesBeat: A lot of different platforms are out there. What would you recommend to developers? Should they distribute and develop on all of them? What are some of the advantages or shortcomings of some of them?
Spiteri: In that respect, either as a game developer or any sort of content creator, there are patterns from previous hardware cycles to learn from as far as the dynamics around various console or mobile platforms. Do you go deep on one? Do you pick the lowest common denominator experience and drive more distribution of your content that way?
We’re finding that 360 video, even interactive 360 video, there is an opportunity to fairly easily create an experience that can run across devices agnostically. There’s a fairly nice ramp from a plain, linear video you can put up on YouTube 360 or Facebook 360 all the way to the higher-end mobile devices. Once you’re moving over into game engine territory, the technology today is phenomenal. Unreal, Unity, and Crytek have a lot of capability around cross-platform support.
It’s really a creator choice. It’s an economic choice. You factor in the addressable market, how many headsets are out there. There’s the opportunity to launch a title early, where your attach rate can be pretty high. What are your goals? Do you want to drive revenue? Do you want to create something that’s more broadly adopted? There’s a number of factors to take into consideration. I don’t think there’s any standard advice I’d give to ourselves, let alone anybody else.
We think that there’s definitely a tremendous value to the fact that the mobile VR wave and the high-end desktop, room-scale wave are happening at the same time. Even though they seem totally different, and the market dynamics are different between those two for a variety of reasons — the consumption pattern and so on — there is an opportunity for an independent dev or a startup to leverage both. You can have much more accessible, immediately available content on the mobile headsets, and then have a version that’s more high-end on room-scale PC. A lot of developers today are looking at that interplay, how you leverage the various devices and their capabilities.
GamesBeat: If you compare the three high-end platforms, does any one have a specific strength or weakness in certain areas?
Spiteri: Certainly. I don’t think I’ll say anything too controversial here. The Sony PS4 headset, the form factor is wonderful. I personally like it very much, and the team does as well. From a display perspective, from a comfort level perspective, there are advantages we see there.
From an input perspective and tracking perspective, the power of the Lighthouse technology from Valve, developed by HTC, is quite profound in terms of the degree of freedom of movement and agency it provides. It’s a markedly different approach for tracking than vision camera-based systems, which is what the Rift uses. That said, we’re seeing, a lot of statistics that say the advantage of having a very large room tapers off at some point. There’s only so many people who will be willing to move their furniture around. There are trade-offs. But clearly, from a pure tech perspective, the Lighthouse technology is super interesting.
Then, from a display perspective, the OLED technology — Samsung is one of the main drivers there — is clearly still ahead of the curve. But things are changing rapidly there too, if you look at some of the things happening with HoloLens and Magic Leap in the AR category. There’s some very interesting technology differentiation happening there that will impact everything else we’re talking about.
GamesBeat: What should we expect from the next generations?
Spiteri: It’s a hard question to answer, because we’ve been really surprised just since 2013, when we got started with the Oculus DK1. We’ve been blown away with the rate at which the hardware is evolving. If we said that the Samsung Gear is 1.0 mobile, and the Oculus Rift is 1.0 PC, then the primary areas of innovation, the key transformations, will be around input. From a display perspective, you can have a higher resolution and a wider field of view. But we’re already at a point where that’s pretty good.
Input will see a lot of rapid evolution. The touch controls coming out, there will be a lot of learning around that. Devs are already working with it. That will create another wave of developer activity, which will in turn inspire the hardware developers to continue to advance.
The tether is an issue, obviously. Again, not saying anything particularly surprising here. You could see how — outside mobile CPUs and GPUs improving — if you still want to leverage a non-mobile architecture, then at some point you want to deal with the tether to increase freedom and flexibility and safety.
GamesBeat: We just learned about Google’s Daydream. What do you think Samsung’s response to that will be?
Spiteri: I love the fact — we often hear a lot of complaints about how these consoles are shipping late or there are issues with hardware manufacturers. I’ll give a lot of credit to the various hardware players about one thing. They’re making moves. In the same way we were surprised by Cardboard, which was a wonderful addition to the ecosystem, with Daydream there’s a lot of things to be excited about. It addresses issues at the OS level, which means that a whole network of OEMs can participate. It’s great for the consumer because it will drive a lot more standardization. Maybe that’s too strong a word, but at least consistency in terms of input. As a developer, as a creator, whether you’re into gaming or more linear content, there’s a lot to be excited about.
Samsung continues to be in a terrifically strong position with their hardware capability across the board. I would have no doubt that there will continue to be, year on year, competition that will continue to drive benefits for the consumer.
GamesBeat: What should we expect from Apple?
Spiteri: If we looked at what Apple has done in the past, one can expect that they’ll provide innovation around design and simplicity and accessibility, which is badly needed. One of the biggest hurdles with mass adoption, especially of the higher-end headsets, is the complexity. It’s quite complex to set up a PC and get everything working, even for a techie person, let alone a mass consumer. Even dealing with some of these mobile headsets is tricky. Taking your phone in and out — the simple things are not exactly smooth and easy. They don’t quite have the elegance of swiping across a screen that — it wasn’t necessarily pioneered by Apple, but that’s what they’re known for. I certainly hope they’ll up the ante on simplicity and accessibility.
GamesBeat: What are the real VR opportunities this year? How will that change over the next two to three years?
Spiteri: I’m actually super stoked about the fact that even though it’s this early in the market, there are tremendous opportunities in 2016. If you’re not a hardware manufacturer, if you’re a startup looking to create services for the ecosystem or create titles that you can actually sell and make money from, there’s a clear and present opportunity to do that. Looking at some of our titles, we’ll be making our money back and then some.
There’s a set of parameters you can look at today where you can take advantage of the fact that it’s early and have a high tie ratio with the number of devices in the market. Be thoughtful about what you’re creating. Pick your audience. You can make stuff that sells and does well.
If opportunity is defined by “Is there a way to make money in 2016?” I think the answer is yes. Now, is that significant enough revenues for a well-established incumbent game studio or movie studio to really pay attention to? Well, it’s not going to turn your head today. But 2016 we’ll look back at as year one, where some of the early pioneering work was done. Just like any other change in the hardware cycle, it’s an opportunity for new companies to come along and bite a big chunk out of what’s available.
GamesBeat: If it’s hard to make money at the moment in 2016, getting financing is a requirement for a lot of VR companies who want to survive. You raised about $20 million from a mix of strategics, financial investors, and individuals. For companies out there raising money, what would you advise them?
Spiteri: Being realistic about the dynamics of an early market is important. By that I mean being thoughtful about how much capital you really need. There’s a lot of devs that we work with that are super scrappy and are able to create interesting content without raising $20 million. We did that because we felt like there was an opportunity to bring some value to the ecosystem by being thoughtful about some software systems and some content. In our case, we found that the strategic investors were very responsive to what we were doing. By strategic I mean they’re investors that are invested in making this VR ecosystem work and profit over the long term.
Last week there was a comment that Mitch Lasky from Benchmark made. He said something like, “Maybe the Facebook acquisition of Oculus was not good for the VR investment industry. It was so much so soon.” You can certainly look back at that and say that’s maybe the case. But Facebook has deep enough pockets to do that. That was a form of injection into a market that is actually exactly what the market needs. You look at that move by Mark [Zuckerberg], and what Cher Wang did with immediately seeing the opportunity in the Vive and running with that. You see Samsung betting early on, and what Google is doing. These strategics are invested in making this work.
My advice would be very much to pick your targets clearly and determine how much capital you really need to achieve your goals. Spend a lot of time talking to people and learning. There’s a very healthy investment community out there, in my opinion, but it’s important to be realistic.
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