Innovation and Industries: Virtual Reality

Note: This article originally appeared in Rule Breakers on Feb 18, 2015, as part of its ongoing "Innovation and Industries" feature.

Our fascination with alternate realities -- different worlds within our world, created by other humans -- has taken many different forms over the years.

Panoramic murals such as Peruzzi's Sala delle Prospettive engulf the viewer, giving them the perspective of a continuous landscape. Literary works from Pygmalion's Spectacles in 1935 to Neuromancer in 1984 have explored the potential of artificial worlds. And Hollywood blockbusters like The Matrix in 1999 or Inception in 2010 have amazed us with the complexity of their alternate existences.

 A boy wearing the Oculus Rift. 2013. By Skydeas (Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

But now, what used to be only science fiction is virtually becoming a reality. Facebook's (META -0.52%) acquisition of Oculus has opened the floodgates for virtual reality to come mainstream. Developers now have a platform to work with that reaches more than 1.4 billion people. The possibilities are as vast as our imaginations.

In this month's innovation feature, we'll take a look at three areas where we expect virtual reality to have a very real impact.  

Prepare to be virtually entertained
Gaming is one industry where virtual reality seems a natural fit. Tech-savvy developers are often the earliest adopters of the latest and greatest new technologies, and the open-source nature of the business makes it even easier to accelerate adoption.

As an example, Oculus itself raised more than $2.5 million of initial funding through a Kickstarter crowdfunding campaign in 2012. The company offered an early Rift headset prototype to any early backers who contributed at least $300. The campaign was a huge success, raising 10 times the initial campaign goal, and immediately establishing a captive community of developers. 

Big-name developers can use virtual reality as a next-gen medium to hook gamers into new virtual worlds. And successful role-playing franchises can churn out some serious cash. Activision Blizzard's (ATVI) World of Warcraft is the best-selling video game of all time, with $10 billion of sales, and more than 10 million global subscribers. The combined sales of the 11 titles in the Call of Duty franchise have also sold more than $10 billion during the past decade. Rule Breakers recommendation Take-Two Interactive (TTWO 0.78%) achieved similar success with its Grand Theft Auto series.

Just imagine what each of those companies can do now with virtual reality headsets at their disposal. I expect we'll see even more dedicated gamers who contribute years (or decades) of high-margin subscription revenue, and a new trend of in-game purchases. Don't forget, as well, that online streaming makes it even easier for users to download content directly, making distribution even easier, and boosting margins for developers.

But the fun and games don't stop there. The entertainment industry offers plenty of other virtual reality opportunities.

According to research company IBISWorld, movie and video production in the United States is a $34 billion industry, TV show production is another $33 billion, and music production is more than $8 billion. Production studios can now dream up bigger and better ideas than ever before.

Zero Point, a documentary about virtual reality that includes several 360-degree panoramic views, was released in October as the first film shot expressly for viewing with the Oculus Rift. NextVR, a company focused on broadcasting virtual reality video, is releasing Coldplay concert footage. 

Content is still king in this industry, and now we have a new way to be entertained. Discovery Communications (DISCK) can now bring you into the Animal Planet, and Universal Pictures can reopen the doors to Jurassic Park. Watch for big-screen movies to be rereleased in a new format, and for the action to be even more realistic.

Face-to-face communication?
In addition to the entertainment industry, corporations could use virtual reality as a new communication tool. Billions of dollars and countless hours are spent each year on flights and accommodations for corporate business travel (as a former sales guy, I know this all too well). Being there is important, as body language communicates far more to others than spoken words do. But what if those face-to-face meetings could be conducted almost as realistically by using a VR device?

Facebook seems to have ambitions of building a more in-depth communications platform. Mark Zuckerberg offered his perspective shortly after making the Oculus acquisition:

This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.

We've seen Facebook at Work as an attempt for the social network to enter the workplace. But Microsoft (MSFT 0.37%) is an early leader here, as well. Skype is already connected in meeting rooms worldwide -- Fool HQ included -- and the company's HoloLens project is bringing things to the next level with holography.

We have to expect that the future of corporate communications will be increasingly mobile. Research and advisory company Forrester expects that 43% of the U.S. workforce -- some 63 million people -- will work remotely by the end of next year. Samsung (NASDAQOTH: SSNLF) is also appealing to customers on the go, launching its $199 Gear headset, which will pair with a Galaxy smartphone.

Watch for corporate communications to take a giant leap, from speakerphones and conference rooms to mobilized virtual meetings.

Augmented reality
Others are trying to augment our existing world with additional context. Google (GOOGL 0.55%) is refining its Glass project, which would supplement the world with additional digital information (i.e. displaying street names that you look at, or giving directions to nearby locations). MagicLeap, in which Google made a private investment, is developing its own headsets to merge the physical and digital worlds together. And haptic technology is working on allowing us to actually feel digital objects that we come in contact with.

Melding worlds together and digitally augmenting our sensations: It sounds crazy, right? But for advertisers, augmented reality could be another gold mine in the making. Rather than simply interacting with you through a computer or a smartphone, companies like Google and Facebook could now experience your daily habits! Headsets or wearables could recognize the stores you pass on your morning drive to work and offer special deals. Or based on your daily routine, they could recommend products that would make your life easier or efficient.

Pilots and military personnel have used simulators for decades as job-training tools. But augmented reality could greatly improve the training (and outcomes!) of safety engineers, surgeons, and a variety of other highly specialized occupations. We'll watch for the adoption of augmented reality to catch on in niche applications.

• In the entertainment industry, content is key. Virtual reality offers studios the ability to create better content and have access to wider distribution -- boosting sales of games, movies, or tickets.
• In the corporate world, efficiency is key. More cost-effective communication tools could save on SG&A, but still preserve the meeting-room feel.
• In advertising, data is key. Augmented reality could make life easier for consumers or skilled workers, but also provide feedback on their habits or needs.

We think the adoption of virtual reality can have a big impact on many industries all over the world(s).