China’s Virtual Reality Investment is Moving its Focus to Content

With the market for virtual reality hardware becoming increasingly crowded, investors are now turning their attention to developing compelling content for the new technology.

Photo courtesy Technode

Photo courtesy Technode

Chinese investors are now increasingly seeking quality virtual reality (VR) content rather than hardware.

In China, hardware accounted for 78 percent of total VR investment made in 2015 and 2016. However, the hardware deals decreased to 30 percent by August 2016, and more capital was put into content, found 87870, a VR content platform based in Beijing.

“VR hardware investment is overheated,” Junhan Ahn, COO of 87870 says. “Investors are moving fast towards VR content investment. In China, there are about 3,000 offline VR arcades, and they need more quality content.”

Total VR investment in 2015 and 2016 reached RMB 4 billion (US$593 million). Investment in Q1 2016  reached its peak, up 20 percent from the previous quarter.

“Just as the lack of GooglePlay in China brought in so many Chinese companies wanting to provide an Android market, there will be many VR platforms vying to dominate VR content,” he says. “Most investment is made in hardware and content, but there are opportunities for other sectors such as software, industry applications, and platforms,” Ahn said.

There have been a handful of VR headset providers in China, such as HTCVive, Deepoon, 3Glasses, and Baofeng, and Ahn believes that VR hardware companies will try hard to cut down their manufacturing costs to make their headsets more affordable.

“Currently VR headsets are not a must-have, but rather a good-to-have. So it’s likely that big companies with abundant capital will provide high-quality VR headsets and soon dominate the market. Small-size hardware companies in China have limited chances of winning over big hardware companies,” Mr. Ahn says.

87870 is a VR platform that creates, distributes and provides continued service for VR content for both games and video. Backed by an affluent parent company, 87870 provides salons and after-parties in global game shows, such as ChinaJoy, ES, and G-Star, to provide an offline network to bring in top VR players from around the world. At the ChinaJoy conference held in June, 87870’s after-party featured global VR players like Japan’s Gumi, Silicon Valley’s Immersv, Sidekick, India’s Semblance, and Finland-based Reforged Studios.

“VR needs a lot of collaboration and co-work with other industries, so we are trying to find opportunities in other industries,” Ahn said.

Under its “VR Plus” plan, the VR media company looks to collaborate with companies in traditional markets. The ones who can take advantage of VR are ones in traditional industries such as entertainment, education, driving, travel, real estate, and fashion. Currently, 87870 is creating a joint venture with the biggest furniture company in China.

— A version of this article originally appeared on Technode.