VR 101: Lesson 1 -- DISTRIBUTION (& Its Challenges) -- #1 In a Series

[The following is the first in a series of posts about the burgeoning world of Virtual Reality (VR) by guest blogger Omar Noureldin of Manatt Digital Media.  He previously wrote a VR-focused "Cheat Sheet" overview of the VR space (and key players in it).]

To understand what the virtual reality (VR) distribution pipeline will look like, a stroll down memory lane vis-à-vis online video will be instructive. It took time for the online video ecosystem to develop into what it is today -- and that was largely because of disjointed and competing distribution platforms in its early years. Anyone with a smartphone, tablet or computer knows that YouTube -- despite new "real" significant challengers like Facebook -- continues to dominate this space with over 1 billion users.  But, this took time (and an acquisition by Google, which merged Google’s less than stellar Google Video platform). Still, the vast majority of YouTube’s content is user-generated.

Then there are the premium content platforms like Netflix, Hulu and Amazon, all of which have turned the prime-time TV model on its head. First, by reusing content, and now by creating original content. Vimeo is a growing player in this space (among numerous others) and has laid its stake in the ground by focusing on high-quality, high-resolution content and on content creators -- and it is now dabbling in VOD and SVOD models.

So, what does this mean for VR? What is the opportunity?

Well, the opportunity is for new digital distribution platforms to emerge that focus solely on VR content. The reason some believe nnovation will happen with these new distribution platforms, rather than from giants like YouTube, is because VR distribution will require advancements in packaging and transferring vast amounts of data across existing networks that are not necessarily ready to handle that kind of traffic.

Herein lies a massive challenge. High-quality VR content is not mobile friend ... at least not yet ... for a couple of fundamental reasons. First, current bandwidth capacities limit the amount of data that can be transferred, and mobile devices are limited in their storage capabilities. Second, mobile processors literally overheat and melt when trying to play high-quality VR content that is more than five minutes long.

Today, the big online video distributors are all about mobile, which creates a disconnect in strategy and focus if they want to move full force into VR. Moreover, YouTube is still trying to figure out how to be profitable in the traditional online video space, so many pundits believe that makes little sense for them to spend a lot of time, money and effort to develop new distribution channels for VR (especially when YouTube is now focused on developing its own premium original content, as original premium VR content is a ways away).

Instead, many predict a proliferation of VR-focused distribution platforms and companies experimenting with different ways to deliver the content—Vrideo is one of them. The company recently hosted a VR Meetup and panel discussion on this very topic in Santa Monica. As discussed earlier, there will need to be technological innovation at every level of distribution—packing, transfer, storage and processing.

Do not get me wrong, there is already talk of the big media and online video companies (Google, Amazon, Netflix, Disney, etc.) and telecoms (AT&T, Verizon, etc.) eventually going to war to acquire these smaller VR distribution companies.  But, it is likely to be an M&A war, not a technological advancement war.  Google has already invested a whopping $500 million into MagicLeap, which is developing VR technology that merges the real and virtual worlds -- so-called augmented reality.

Massive sums of money are being poured into VR right now -- and distribution is one of the keys to unlocking its potential.

[NEXT IN OMAR'S CONTINUING VR SERIES WILL BE LESSON 2 -- SOCIAL, followed by Lesson 3 -- Hardware, Lesson 4 -- Advertising, and Lesson 5 -- VR Rights.  Stay tuned ...].