The opportunity presented by virtual and augmented reality is huge, a panel of experts said at the GamesIndustry.biz Investment Summit today, but capitalising on it will take a mix of patience and a willingness to think beyond games.
Among the panelists was Mike Hayes, investment director at Mercia Technologies, which has provided millions of pounds in funding to the VR-focused UK studio nDreams. Hayes' career spans high-level roles at Sega, Nintendo and Codemasters, and yet the emergence of VR and AR are unique in his near 30-year track record.
"In all of the time that I've been in the industry... I've never seen a business with so many hardware players, with so many vested interests, and then if you start including the Chinese investment in the sector," he said. "VR and AR will happen, but we need to be patient, and we need to make sure that, as investors, we continue to support that category."
Hayes admitted to feeling frustrated at the degree to which the potential of VR and AR is doubted based on its present state. "We're changing the entire way we're going to consume media," he continued. "This doesn't happen in two years. Ten years, fifteen years, twenty years, and it will happen."
He warned the audience away from this pessimistic thinking, describing the tendency to go cold on emerging opportunities as a "bit of a UK investment community habit" - one that the US investment community doesn't display to nearly the same degree.
"This is just the foothills of something that will be quite revolutionary"
Mike Hayes, Mercia Technologies
"I fear that we're in danger of talking ourselves out of VR and AR, which is going to be a fundamental category in all walks of life over the next few years. Yeah, okay, maybe we're not downloading as much on PlayStation VR as we would have liked, but this is just the foothills of something that will be quite revolutionary."
Hayes described Mercia's approach to investing in VR as "patient capital," which means that it would be willing to wait for "15 years" for nDreams to succeed if the larger VR opportunity still remained.
Miniclip's Saad Choudri recalled the way that companies like Glu Mobile and Gameloft started, attempting to build businesses before Apple and the iPhone revolutionised the mobile sector.
"Those are now two of the biggest companies with this [sector]," he said. "There are going to be VR companies that started in today's adoption cycle that, once it becomes more mass market, will have a decade - or hopefully shorter - to get used to that experience."
Saad's comments echoed those made by Force Field VR's Martin de Ronde in an interview earlier this year. The "cooling" of the hype around VR was positive, he said, and no different from the way that the mobile market was viewed before the boom in smartphones.
"I was in talks at GDC in 2004 roughly, where people were talking about the future of mobile gaming," de Ronde said. "There would be portals, and you would download Tetris via your Vodafone provider, and it was all about feature phones, and it was going to be a billion dollar market for bite-size entertainment.
"If you go down the VR route you have to expect that your projects are not going to make any or much money"
"I was there and I thought, 'Wow, I don't buy into this.' Within a year I felt - wrongly - vindicated, because the market didn't really take off. But those companies rebounded the moment Steve Jobs announced the iPhone. It was the second coming, and it proved exactly what those companies had already been focusing on"
According to game developer and industry analyst Ella Romanos, another of the Investment Summit's panellists, a big issue is that VR developers don't always understand how long it could be before their bets pay off. A great many, she said, are entering the market now and expecting to make profit.
"If you go down the VR route at the moment you have to expect that your projects are not going to make any or much money," she said. "If you're going to go down that route, that's got to be part of your plan.
"You need something behind you, or you need to fund yourself... My concern is all the people focusing on it because it's such an exciting area, but don't realise those implications. I think that's making some investors nervous, because developers aren't being realistic"
Or they may be focusing all of their resources on games, instead of grasping the full breadth of the opportunity before them. Green Man Gaming's Paul Sulyok highlighted that around a third of Valve's engineers are now working on VR projects, and a "significant portion" of those projects have nothing to do with games.
"Valve is backing and doubling down on the medium of VR as an entertainment platform," he said, placing specific emphasis on the word "entertainment."
Hayes also expressed his belief that games would ultimately be a minority portion of the VR market, showing one graph that estimated games would be less than a third of the total by 2025. More to the point, Mercia Technologies is seeking to invest in VR companies willing to apply their skills outside of games right now.
"My hunch is that a lot those problems will be solve by talented people like you, in this room, thinking about how games can be used to solve training problems, how to help the services, how to help education, and all of those other things," he said.
"What we're looking to do is put significant amounts of money into businesses that can think of solutions in [serious games]... and I've been slightly frustrated in my ambition to find companies in that field at the moment."