svvr 2016 - the business of vr (4.28.16)

THE BUSINESS OF VRAPRIL 2016Sivan I ram

s i van @r i ve r. co@s ivan i r am

“…a new computing platform always

emerges every 10 or 15 years…”—Mark Zuckerberg, 2/28/16

Internet1995

Mobile2006

VR2016

APPLICATIONS

Music Social Live Sports Games Journalism Real Estate

Entertainment Training Retail Health Education Productivity

Virtual Reality Market Forecast

$150Bnmarket

Augmented and Virtual Reality market to hit $150 billion revenue by 2020. [Digi=Capital Report]

13,000%growth

Virtual Reality Market Expected to Grow by Over 13,000% in next 3 Years, Nearly 5 Times faster than the iPhone. [Kzero.co.uk]

12.2mheadsets

12.2 million VR headset devices to be sold in 2016. [Piper Jaffray] 7.7bn

software

Cumulative VR software revenue from 2014 to 2018 estimated at 7.7bn. [Kzero Report]

References: www.digi-capital.com piper2.bluematrix.com www.kzero.co.uk

INVESTORS ARE MOVING IN

AR/VR Investment ActivityQ1’12-Q4-15

Stock Changes In Last 3 Months

17%

30%

13%

16%

42%

$2B $56M $35.5M

$100M $38M $22M

BIGGEST Deal

TECHNOLOGY ADOPTION RATE

Electricity Telephone Radio TV PC Mobile Phones

Internet Smart Phones0

5

10

15

20

25

30

35

40

45

50Time To 25% Market Adoption (US)

1900 1950 2000

• First mobile phone invented

in 1983, it took 13 (!) years to

become commercially available.

• It took smartphones 6 years to reach the early majority.

• If we begin the count with the

release of the Oculus DK1 (3/13), it

early majority adoption will occur in

2019.

• We believe VR would be sooner.

SMARTPHONES ADOPTION RATE

CONSUMER PRICE POINTSHeadsets Content

$800

$400

$99

$30

$10

Free

Vive

Rift

PSVR

Gear VR, Merge VRSmart VR

Cardboard, Go4D

Magic Window

ViveViveRift, ViveRift, Gear VR

Cardboard, All

“The High Cost Of Pricing Low”• Don’t only think about device cost, think Customer

Lifetime Value

• Consumer $ supports content development

• Apple users spend on content 4x compared to Android users - $200 vs. $50 (Fortune 2014)

• Premium prices on devices preserved on content and accessories

Pricing headsets low democratizes access, but also anchors low perceived value.

VR ENTERTAINMENT DISTRIBUTION

• Free for users• Maximum exposure

• Ad-rev model• Requires user volume

User Generated Content (UGC)Marketing

Free Content For Consumers

• Paid by consumers• VOD/Subscription

Film, Music, Sports

Premium Content (Paid)

SUMMARY• Every major tech company is investing in VR, and the

market values it. Early consumer signals are STRONG

• The fact that mass consumer adoption is “4-5” years away, doesn’t mean we can’t build great valuable businesses TODAY

• Not all content is equal. Some content should NOT be free.

• Don’t be pressured to eliminate margins to “force” adoption

• Build KILLER apps. Think 10x experiences

Q&A1. Reach out: sivan@river.co, @sivaniram2. Download our app: RiverStudios (Available via AppStore & Google Play)

3. Visit our website: www.river.co4. Tweet about us: @RiverVR