XR Development, Financing and Distribution Strategies

Photo Credit: Stella Jacob via Unsplash

In a young market such as extended reality (XR), development, financing and distribution need to be considered as forming a whole. Here is an overview of the strategies that producers seeking to bring their projects to completion need to adopt.

Multiplying the sources of financing

If it was once possible to find a single source of funding to finance the first virtual reality projects, the realities of today’s market instead force producers to count on multiple private and public sources.

Several private sources out there are quite generous. For example, the Epic MegaGrants fund will be distributing US$100 million over the next five years to projects that use technologies developed by Epic, the studio behind the Unreal game engine and Fortnite game. And the money is distributed as donations rather than in the form of loans or investments.

Oculus (with Launch Pad) and Magic Leap (with the Independent Creator Program) also offer financial support programs to studios.

“Several countries also offer public subsidies and broadcaster funds,” recently explained Antoine Cayrol, cofounder of the Atlas V production company, during a MUTEK 2019 panel discussion.

For example, in France, the Centre national du cinéma et de l’image animée (CNC) proposes the Fonds d’aide aux Expériences Numériques (digital experience assistance fund) that supports development, scripting and production operations. In Canada, the Canada Media Fund (CMF) also finances extended reality productions.

Finding co-producers makes it possible to not only more easily obtain this public funding, but also divide up the risk between several partners. It’s the strategy that Atlas V usually adopts.

For example, its film titled Battlescar boasts four different producers, three private sources of financing (YouTube, Ryot, Arte) and two public sources of financing, for a total budget of €1 million.

Deploying one’s work beyond virtual reality

Content produced for virtual reality can often be reused on other platforms, for example on augmented reality platforms. For major producers, reusing content has become a necessity.

“If a creator approaches us and is only interested in virtual reality, we will not take on his project,” admits Antoine Cayrol.

In Canada, Felix & Paul Studios arrived at the same conclusion. The studio’s next project, a space walk in virtual reality, will be distributed online, but that will probably not be all. “There are also domes, educational materials, museums and physical spaces that could be interesting. That is what we have in mind at the moment,” explains Stéphane Rituit, the studio’s cofounder.

Also, the market’s small size encourages creators to get the most out of their intellectual property, namely by deploying it in a more traditional manner. “We are trying to create a TV series from our film titled Traveling While Black,” provides as an example Felix & Paul’s cofounder.

It is also possible to sell certain creations in separate pieces, for example, by monetizing 3D objects on a platform like Unreal Engine Marketplace. A 3D modeled apple used for a film can be resold for a few dozen dollars to a video game studio, which will in turn use it as it sees fit. It will not be enough to cover the production costs, but it will nevertheless ensure small sources of recurrent revenue thereafter if the object becomes more popular with developers.

Knocking on all doors (while waiting for the distributors)

The role of the traditional distributor does not exist in extended reality. Not until further notice at least… In the meantime, creation, financing and distribution are independent activities for studios, which must consider all three activities as forming a whole from the onset of their project.

Also, because of the absence of distribution, producers need to knock on many doors to distribute their creations if they hope to reach the largest possible audiences.

In Montréal, resorting to a venue like the Phi Centre, for example, enables you to exhibit your work for several months. “The artist is paid a royalty and we take care of all the costs relating to the exhibition, including space design and technology,” explains Myriam Achard, Phi Centre’s Chief, New Media Partnerships. The Phi Centre has also recently begun organizing exhibits abroad which provide additional opportunities to creators.

Unfortunately, centres like the Phi Centre are rare. “However, I try to create partnerships with centres such as ours. A work could be presented at the Phi Centre and then showcased by other centres as part of a tour,” suggests Myriam Achard.

In certain sectors, agents can also promote producers’ content to specialized players. Jimmy Cheng, Director of Content at Iconic Engine, represents creators with telecommunication companies that operate virtual reality platforms such as Orange, Deutsche Telekom and SK Telecom.

“An operator cannot contact 100 studios to acquire the rights for one or two projects. It would be too much work,” explains he who has managed to monetize US$400,000 to date.

And there are other specialized markets. For example, virtual reality arcades, virtual reality platforms for pilots, festivals, etc.

Adapting to evolving financing strategies

Each source of financing has its own objectives that need to be taken into consideration when a project is presented. “A well-known company like Oculus or Google will want to showcase the innovations of its next headset that is usually scheduled for release within the next few months,” points out Stéphane Rituit of Felix & Paul Studios. Others will want to showcase a related technology, such as 5G, or instead focus on the artistic side.

“It’s a little like quicksand. The strategies of those who provide financing evolve constantly,” adds Atlas V’s Antoine Cayrol. For him, it is also important to stay in contact with all of one’s potential partners. “You need to always ask if there is something new regardless of whether the answer is yes or no. They are going to evolve […] Personally, I knock on their doors every six months. I want to be the first person [who comes to mind] the next time they change their mind.”

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