VR wave to leave Japan awash in business opportunities

Japan Times – Nov 21, 2016 – New technological innovations have a tendency to create new business opportunities, and the latest craze, virtual reality, is no exception.

With the debut of cutting-edge VR headsets this year, many firms from video game makers, 360-degree-video distributorsarcade operators and cellphone carriers are gearing up to position themselves ahead of the curve so they can grab their slice of the VR pie.

One of the pioneering firms in Japan is Tokyo-based Gree Inc., originally a maker of cellphone games.

“When the wave of a platform shift is building, it will be too late to prepare once the wave has come,” said Eiji Araki, a vice president at Gree, which missed the arrival of the smartphone wave in Japan several years ago.

Founded in 2004, Gree grew rapidly thanks to the popularity of its social network and gaming platform based on conventional cellphones. But it was slow to enter the market for smartphone apps.

“The VR market is still in a very early stage, but we are already preparing to accumulate the know-how,” said Araki, who spearheaded a VR project at Gree in April 2015. The purpose was to showcase its new maze game at the Tokyo Game Show that September.

“The reaction from people who tried the game was very positive, with media outlets praising our display,” he said. “The experience made me realize VR could really become a viable business and that we should get on with it.”

Gree is making VR games for both smartphones and high-end video game consoles. Among the few finished titles are “Tomb of the Golems,” a game where players explore the ruins of an ancient temple.

Since the VR video game market is in its infancy, it will probably take two to three years for game makers to earn sizable profits, Araki said.

Gree also sees the potential for using VR in arcades.

“It will still take another year or two for the headsets to spread throughout the general public. Until then, facilities that provide VR attractions will be the most likely venues to provide the first opportunity for many to enjoy and experience the new medium,” he said, adding that arcades are perfect for that.

Gree is teaming up with Adores Inc., a Tokyo-based arcade operator, to open a Tokyo VR Park in Tokyo’s Shibuya district.

Others are jumping on the bandwagon.

Capcom Co. is about to launch the latest in its popular “Resident Evil” series, which will be VR-ready, and Square Enix Co., maker of “Final Fantasy,” will release the latest iteration of the series this month that will include a version in VR.

According to a report by Goldman Sachs, the VR software market is expected to be worth $45.4 billion by 2025, with 46 percent of the sales coming from video games.

VR, however, won’t be limited to gamers.

To take advantage of VR’s immersive features, mobile carrier KDDI Corp. launched a live experiment this month to simulate overseas travel using the technology.

The carrier dispatched tour guides in Bangkok, London and Sydney who, through the use of 360-degree video cameras, live-streamed their experiences to headset wearers back in Tokyo. The guides walked around various spots while the viewers in Tokyo spoke with them, even asking them to buy things to ship back to Japan.

“If we were to choose between being just a communication infrastructure firm or make the best of our infrastructure to provide something valuable, we choose the latter,” said Yoichi Tsukamoto, general manager of KDDI’s digital marketing department.

While KDDI has yet to decide if it will actually launch a VR travel service, Tsukamoto said a real-time VR system could become a key communication platform in the future that his company would be in position to take advantage of.

VR video, a new medium that provides 360-degree views, is another field that has emerged from the technology.

Sony Music Entertainment Inc. announced in August that it had invested in Little Star Media Inc., a U.S.-based 360-degree video platform, with the aim of starting a VR video service in Japan. It did not disclose the size of its investment.

Little Star has more than 7,000 360-degree video titles, with many made by ABC News, Disney and National Geographic.

Tony Mugavero, founder and CEO of Little Star, said 360-degree videos are already taking off in fields such as journalism and education. The company expects VR content to surge next year and hopes it will be able to run a subscription-based business model in the coming years, Mugavero said.

The VR market is a big opportunity for startups, too. But while newcomers in the field are flourishing in the United States, Japanese startups have been so slow to catch on, according to some investors.

“This is a problem,” said Yoshihiko Kinoshita, head of Skyland Ventures, a Tokyo-based venture capital firm. “The VR market is only going to grow and it’s really important for startups to enter and compete in the growing market.”

Developing VR games requires a know-how and experience, so it may be difficult for startups to just jump in, he said.

“There is a clear need for 360-degree or VR video production from now on, and startups might have a better chance in this field,” Kinoshita added.

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