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Orange launches own-brand virtual reality headset in bold strategic move October 2016 Enrique Velasco-Castillo Orange launched its own-brand virtual reality (VR) headset on 20 October 2016, becoming the first operator to do so.1 The device will be available to consumers in five of its European markets in time for Christmas. The significance of this announcement goes beyond the launch of another VR headset, of which more than a dozen alternatives already exist. The move in fact signals the first step in Orange’s strategy to become involved throughout the VR value chain. This is a bold move by Orange – the operator is stimulating a nascent market beyond mere connectivity revenues by providing early-adopters with an affordable entry-level VR experience. This initiative may help Orange gain a better understanding of consumer demands around VR and iterate accordingly, even if it is not ultimately successful. The VR1 headset aims to democratise access to VR content The Orange VR1 has been tentatively priced at EUR49.99 and is designed to provide a good entry-level VR user experience. This represents a more-affordable price point than those of competing headsets, such as Google’s Daydream View (EUR69) or Samsung’s Gear VR (EUR99). The VR1 is similar to these devices, in that it requires users to insert their smartphones into the headset to act as the device’s screen. However, the VR1 comes with integrated earphones, in contrast to Google and Samsung’s headsets, and is also compatible with Apple’s iPhone handsets, which neither Google nor Samsung’s headsets support. Orange has either developed the capabilities to provide solutions or acquired them throughout the VR value chain The VR1 headset is only one of the VR value chain activities in which Orange is involved (see Figure 1). The operator has either developed solutions internally or has invested in companies that provide capabilities across the entire VR content creation, distribution, and consumption value chain. 1 See http://www.orange.com/en/Press-and-medias/press-releases-2016/Orange-expands-virtual-reality-offering-launching-mid- range-universal-VR-headset-in-Europe © Analysys Mason Limited 2016 October 2016 Orange launches own-brand virtual reality headset in bold strategic move | 2 Figure 1: Orange’s role in the VR content value chain Orange aims to monetise both professionally-produced and user-generated VR content through some of its consumer and enterprise divisions. The operator has identified the potential of VR to strengthen the value proposition posed by its combination of network, cloud, TV, DRM, and live events solutions (see Figure 2). Content aggregation, management, and distribution: transmission and storage of 360-degree video and VR content as part of connectivity or TV/video packages2 – use cases include user-generated content and immersive event video (such as sport or concerts). VR communications services: telepresence and teleconferencing, B2B and industrial applications (for example, in architecture, medicine or engineering). Hardware bundling/subsidies: VR-ready hardware (headsets, cameras and VR-ready smartphones) together with content or access subscriptions. 2 For a discussion of VR video as a tool for operators to increase consumer engagement, see Analysys Mason’s Article Virtual reality video may be everywhere or nowhere by 2025. © Analysys Mason Limited 2016 October 2016 Orange launches own-brand virtual reality headset in bold strategic move | 3 Figure 2: Orange’s VR activities [Source: Orange and Analysys Mason, 2016] Orange’s VR activities Initiatives . VR1 own-branded consumer VR headset and VR 360-degree content discovery application. and . The OCS VR service, which is Orange’s first commercial VR service, allows users to experience OCS’ TV- opportunities VOD content as a ‘virtual screen’ in VR. Exploratory projects around VOD, TV, and Native VR content distribution . Orange is developing solutions to facilitate the production (VR and 360-degree video), management (on- device and cloud-based storage), and sharing (either through third-party OTT platforms such as Facebook or YouTube or person-to-person) of professional and user-generated VR content and 360- degree video. Enterprise subsidiary Orange Business Service is also considering industrial B2B/B2B2C solutions for healthcare, education, architecture, tourism, and sports events. Selected . Orange Digital Ventures invested in VR content production and distribution platform WEVR with the aim investments, of accessing the company’s curated catalogue of VR content. partnerships . Discussions for the development of an end-to-end VR content creation, management and live-streaming and solution are in progress with potential partners. This aims to leverage internal divisions, including customers Orange Event Solutions and digital rights management (DRM) solutions provider Viaccess-Orca. Samsung’s Gear VR headset is distributed through Orange’s retail shops, and other third-party headsets may be added soon. Business . Orange views VR as enhancing the value propositions of its networks, cloud storage, and hosting models platforms. It aims to monetise its next-generation high-bandwidth and low-latency fibre and wireless networks (5G), as well as consumer cloud-storage solutions, such as Cloud d’Orange. Use cases include live-streaming of sports events or music concerts in VR and social media sharing of user-generated and 360-degree video content. Status . Orange has been exploring VR since early 2015 and augmented reality (AR) since 2009. OCS VR will be available in France in summer 2016. Sharing of user-generated content could accelerate VR’s mainstream consumer adoption We expect sharing of user-generated VR and 360-degree videos on social media to become a major driver for consumer adoption of VR content, despite the significant adoption barriers still facing the medium. The extent of this opportunity is underlined by the significant commitments that have already been made by technology giants. Facebook acquired headset manufacturer Oculus VR for USD2 billion in March 2014, Google is expected to release its Daydream mobile VR platform in November 2016, and Tencent has invested in both VR chat room developer AltspaceVR (July 2015) and Epic Games (June 2012), the studio behind the Unreal game and VR development engine. We have discussed the consumer and enterprise opportunities that VR presents to telecoms operators in more detail in our recent report.3 3 See Analysys Mason’s Report Virtual reality: opportunities for operators. © Analysys Mason Limited 2016 October 2016 .