Gaming The Investing Angles Of Virtual Reality

In the tech world, it’s all about finding that next big thing that will drive growth and shape an industry for years to come. If you ask Google or Apple they’d probably say the next big thing is driverless electric car technology. Behind the scenes, the firms are pouring significant resources into this project and, reportedly, it’s starting to bear fruit. Together, these moves signal the experimental phase of this project is perhaps winding down and these companies actually envision driverless automobiles as the new way forward. The Wall Street Journal says Apple will soon invest billions and ramp up hiring in hopes to deliver an Apple branded electric car by the end of this decade.

This focus on cars brings up far more questions than answers. Specifically, will regulators approve driverless cars? Are they safe? And, most importantly, will they ever be commercially viable? Right now, there’s nothing to suggest that consumers are eager to abandon traditional cars for an unfamiliar and largely unproven alternative – especially if it’s more expensive.

In part, that’s why if you ask Facebook what the next big thing in tech will be, you’re likely to get a very different – and perhaps more accurate – answer: virtual reality. Mark Zuckerberg said as much last year when the company shelled out $2 billion to buy Oculus, which is working to bring virtual reality head mounted displays to a commercial audience. He said at the time of the deal that virtual reality would change the world, and he’s probably right.

This movement will start with video games and immersive experiences. Then, further down the road, we will likely see virtual reality seep into movies, sporting events and perhaps more practical applications, like medical research and skill instruction.

Facebook is well positioned to take the lead, since it has access to the hardware and a perfect distribution platform. Then companies such as Activision and Electronic Arts will take over, creating games and perhaps other virtual reality experiences that conform to the technology. Given how realistic today’s games already are, it’s the next natural evolution. Can you imagine playing FIFA or Call of Duty in VR, it will be awesome.

Meanwhile, the other possibilities are endless. Think about watching a movie from the inside, as one of the characters. That could soon happen. Netflix and IMAX could be big winners here. There is much the entertainment business can do with VR. Ever sit courtside and watch LeBron James or stood on the sidelines at an NFL game? Virtual reality will probably bring these experiences to life in the coming years.

Major League Baseball’s digital arm, MLB Advanced Media, is one of the best content delivery systems across the entire industry. It has partnered with HBO, Disney (via ESPN) and World Wrestling Entertainment, among others, and would be a logical distribution network for immersive, live sports VR experiences. MLBAM has a valuation of approximately $10 billion and has considered an IPO, according to one news report.

Also, let’s say a doctor in the United States wants to consult a top brain surgeon living in Europe about a complicated procedure. It’s possible they would be able observe and guide the process from half way across the world in VR. This would be a huge benefit for medical device makers that could use VR to train doctors to do procedures in places where there is limited resources, like a war zone.

Of course, virtual reality has plenty of hurdles, too. The hardware, software and distribution systems will all have to be in alignment for this technology to make an impact. There will be significant trial and error, as the various companies attempt to create an ecosystem of products that will complement each other and deliver unique, immersive experiences to consumers. Most importantly the networks will need even more bandwidth to deliver such data intensive content.

Importantly, the price point of such products will have to be affordable to make them commercially viable. On the hardware side, Samsung announced recently will release a VR headset in November to pair with its line of smart phones. At under $100, the price is certainly right. But will it be immersive enough to create long-term interest? Time will tell.

The first real test for virtual reality will come when the widely anticipated Oculus Rift finally hits the market, reportedly sometime in early 2016. While there is no word about how much it will cost, gamers routinely shell out over $500 for Microsoft’s Xbox consoles, complementary accessories and games. If the experience proves worthwhile, they won’t hesitate to snatch up VR headsets at a comparable cost. And that could set the VR universe in motion, potentially changing forever the way we consume entertainment and communicate with others. Oculus and Microsoft Xbox looks like the standard for gaming VR coming out next year.

To some, virtual reality is almost like science-fiction. Putting on a pair of goggles and entering what is ostensibly a new world is not something they can comprehend, much less visualize gaining mass adoption. But what might be strange to older generations, will be quite natural to millennials and other younger demographics.

Younger people have a fundamentally different way of social interaction and won’t think it’s so weird to immerse themselves in a virtual headset. They’ve grown up communicating via text or social media messenger services. That likely means they won’t think twice about putting some goggles to experience something new. To them, it won’t be virtual at all. It will simply be a new reality. Now I just need an operating system to fall in love with.

Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an independent investment advisory and wealth management firm with approximately $390 million in assets under advisement. Gerber Kawasaki clients and employees may own positions in various companies mentioned in the article.

By Ross Gerber
http://www.forbes.com/sites/greatspeculations/2015/09/29/gaming-the-investing-angles-of-virtual-reality/2/


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

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