A Music Ally Primer Music and Virtual Reality in 2017 1 Introduction When Facebook agreed to pay $2bn for for it; and which devices will emerge as the virtual reality startup Oculus VR in March most popular way to get that content to 2014, it was the start of a new wave of the audience of music fans. investment in a technology that stretched back decades: virtual reality. Not everyone is a VR evangelist. There are plenty of sceptics within the industry Since then, we have seen Samsung, questioning whether this technology will Google, Sony and HTC launch their own ever become mainstream, pointing to VR headsets, while Facebook and lower-than-expected sales of the current YouTube have upped their commitment to wave of headsets, and older cycles of 360-degree and VR content; prominent hype and disappointment with VR. firms in the TV, filmmaking and gaming worlds have entered the market; and We hope this primer will help you form China’s big tech companies have made your own opinions. Music Ally has put their first VR bets. together some data on the current state of the VR market; explored the main And music? The music industry is headsets that are on sale; profiled some of increasingly excited about the potential of the music-focused VR startups; and virtual reality too. Since the start of 2016, examined some of the VR music when Music Ally published our first VR experiences that have launched since the primer, we have seen lots of activity from beginning of 2016. We have also outlined labels, artists and startups. Many of them our thoughts on how music companies think VR has considerable potential, even and artists can experiment in this new if they aren’t sure quite what that will look medium, finding partnerships and learning like; whether people will be willing to pay lessons without wasting their money. 1 2 Early sales of the current generation Market Data and of VR headsets have been slower Forecasts than expected, but don’t despair yet Are current sales of VR headsets around VR before those headsets went on disappointing, or were the analyst sale in 2016 has turned to fretfulness, and expectations for those sales overblown? in some cases disillusionment. What’s Music Ally’s view: a little of both. What’s really going on in the market? Here are undeniable is that some of the hype some stats showing its current status. 2 Headset sales so far said in late February that it had sold 915k PlayStation VRs since that device’s launch In February 2017, research firm SuperData in October 2016. published its estimates for VR headset SuperData appears to have not counted sales in 2016, claiming that 6.3m were Google Cardboard viewers in its research, shipped that year. It also suggested that though. Google announced in January Samsung’s Gear VR headset accounted 2016 that 5m Cardboard viewers had for 71.4% of those shipments: 4.5m units. shipped, then in February 2017 updated It claimed that Sony had shipped 0.8m that figure to 10m, which suggests that PlayStation VR headsets; with 0.4m HTC they may have at least matched the Gear Vive shipments, nearly 0.3m for Google’s VR’s shipments in 2016, taking the total Daydream View, and more than 0.2m for market closer to 11m units that year. Facebook’s Oculus Rift. These figures are certainly below the The few official stats we have appear to expectations of some analysts. Juniper back up SuperData’s analysis. In January Research suggested in November 2016 2017, Samsung announced that it had that 16.8m mobile VR headsets – those shipped more than 5m Gear VRs since its designed to be used with smartphones, original launch in 2015. Meanwhile, Sony like the Gear VR, Daydream View and 3 Google Cardboard – would ship in 2016 alone. Others had been more restrained with their predictions. In April 2016, IDC claimed that 9.6m VR headsets would ship in 2016, including 2m shipments for “tethered” headsets like the combine this with robust shipments of Oculus Rift, HTC Vive and PlayStation VR. screenless viewers from Samsung and IDC also left Google Cardboard out of its other vendors launching later this year, you predictions for the market. start to see the beginning of a reasonable installed base for content creators to Meanwhile, at the end of 2016 Canalys target,” he said. predicted 2m VR headset shipments for the year, but it left both the Gear VR and From the gloom camp, in December 2016, Cardboard out of its numbers. Edison Research published a report warning that the market had seen “HTC’s Analyst hopes and gloom Vive, Oculus Rift and Samsung’s Gear VR all undershoot expectations with no When looking at the VR space in 2016, immediate improvement on the horizon”. analysts ranged from ‘it’s still early days’ Analyst Richard Windsor was blunt. “VR is caution to gloom. “The VR market has clearly not ready for the prime time and barely begun, and Canalys believes it will there remains a lot of work to do before take several years to ramp up,” said volumes will really take off,” he said. “We analyst Jason Low. “There are do not see this happening in 2017 encouraging signs of consumer adoption meaning that the outlook for next year and positive customer satisfaction, remains pretty grim.” however, especially among gamers.” IDC’s Tom Mainelli offered a similar view in Plans to buy... or not April 2016, when talking about his One challenge for the VR industry is company’s prediction for 2m shipments of persuading people that they should buy a tethered VR headsets. “When you 4 headset in the first place. In October 2016, research firm Strategy Analytics surveyed Brits on how likely they were to do that. Just 3% said they would. Another firm, Newzoo, interviewed people across 12 analysed figures published by digital countries in North America and Europe to games store Steam, which tracks usage of find out their buying intentions. games released for the HTC Vive and Oculus Rift. “We see that 11% of the online population (aged 10-65) intend to buy a VR product in “The number of new HTC Vive owners on the next six months,” it reported. Steam grew only 0.3 percent in July and “Interestingly, 7% of this group, or 4.4 was flat in August,” claimed the report. million people, are non-gamers. This proves the technology’s appeal and reach “The Oculus Rift headset from the is already extending beyond gaming.” Facebook subsidiary saw similar stagnation of 0.3 percent in July and 0.1 More encouragingly, a US study published percent in August. At this point, only 0.18 by Nielsen in October 2016 based on a percent of Steam users own the Vive and survey of 8,000 Americans found that only 0.10 percent own the Rift.” around 24% of 18-54 year-olds were ‘more likely’ to buy a VR headset in the next year. This was particularly notable because those two months were the first without The key will be reaching beyond the early supply constraints for either device. adopters of this generation of VR. In September 2016, tech site VentureBeat 5 Funding and investment According to investment site Index by TNW, in the first quarter of 2017 alone There may be debate about how popular there has been nearly $80m of institutional VR headsets are, but there is no doubt funding in VR startups – a figure that does about the investment dollars flowing into not include seed rounds where the total this industry. In January 2017, research was undisclosed. Facebook, Samsung and firm Greenlight Insights claimed that there HTC have all announced funds for was $1.8bn of investment in VR and AR promising VR startups, meanwhile. (augmented reality) combined in 2016, for All this funding comes off the hopes that example. there will be a thriving market for VR The number of funding deals increasing by content in the years ahead. Research firm 30%, and the average deal size by 58%. IHS Markit predicts that consumer More than 85% of the deals were seed or spending on VR entertainment will grow Series A rounds, representing the relative more than tenfold from $310m in 2016 to youth of the market. Although the caveat $3.3bn by 2020, at which point it expects here is that $793.5m of that total was a there to be 81 million people who own a single round of funding for one AR VR headset. However, the company told company, Magic Leap, in February 2016. Music Ally that it expects 86% of that $3.3bn of spending to be on games, 6 leaving only around $462m for other types of VR content, including music. Separately, Deloitte predicted that VR would enjoy its “first billion dollar year” in 2016, but with $700m from hardware sales, leaving $300m from content – a near-match for IHS Markit’s prediction. Deloitte, too, expected the majority of The video theme also came through in content revenues to come from games. Samsung’s announcement in January 2017 that Gear VR owners had watched SuperData has been notably bullish with more than 10m hours of 360-degree video its VR content predictions. It claims that using their devices: although with 5m VR consumer software and services will headsets shipped so far, that’s an average grow from $300m in 2016 to $19.9bn in of just two hours per user. 2020: overtaking revenues from VR hardware for the first time that year.