Amid Pokemon mania, Russia’s budding virtual reality market thinks big

5 августа 2016 г.

Even before Pokemon GO fever struck the world, 2016 had already been dubbed the year of virtual and augmented reality (VR/AR) by tech-watchers due to the number of new devices hitting the market this year. Then Nintendo’s Pokemon-themed AR game took the world by storm, including in Russia, despite the fact that it has not yet officially been released here. As in other areas, Russia does not intend to be left behind: it has its own steadily expanding pool of VR/AR developers and fans – and it’s not just about entertainment.

Gamers playing on simulators at Moscow's Virtuality Club. Photo: Virtuality Club.

Russia should focus on developing its VR/AR market, Yevgeny Kuznetsov, the acting head of Russian Venture Company, a state investment institute, said last month.

“Right now, the new VR/AR market is being discussed within the National Technology Initiative,” a state project that aims to create the conditions necessary for Russia to become a global tech leader by 2035, Kuznetsov told the TASS news agency.

“Russia has great chances and we need to actively develop this sphere,” he said, singling out WayRay, a resident company of the Skolkovo Foundation, as an example of a successful project.

WayRay produces a holographic navigation system for cars, using AR to project a virtual route onto the windscreen of the car, with navigation signs laid out directly on the road so that the driver does not have to look away from the road at the screen of a GPS device. The system, titled Navion, is due to be released at the end of this year.

Lose yourself

The possible applications of VR/AR technology are endless. Imagine you have a phobia. VR can help you to conquer your fear via exposure therapy, safe in the knowledge you can remove the headset showing you your most dreaded nightmare at any time. Soldiers use VR simulators in training exercises to practise entering and clearing a building and other operations before they are deployed. VR in education allows schoolkids – and adults – to visit museums on the other side of the world, or to go back in time to see and virtually experience what previous generations could only read about. Medical and rescue workers learn how to react in emergency situations by first practising in artificial scenarios.

One of the many uses of VR is in exposure therapy for people with phobias. Photo: Virtuality Club.

In Russia, VR is for now associated first and foremost with games and entertainment, experts agree. At Moscow’s Virtuality Club, visitors can play more than 100 games on devices ranging from simulators to headsets of various brands.

“When we opened 18 months ago, we had about 300 visitors a month; now we have about 600-700,” the club’s co-founder Maxim Chizhov told Sk.ru.

“At the weekends, we are completely booked out. It’s really popular to rent out the club for birthdays and corporate events,” he said, adding that there are plans to open a second club before the end of the summer.

Chizhov said that shooters are the most popular, “where you have to shoot zombies, monsters and so on,” along with drawing games like Google’s Tilt Brush, which allows users to paint 3D virtual creations, and armchair simulators for use with headsets that recreate the feeling of being on a rollercoaster or in a car race.

Russian reality

The Virtuality Club offers some of the best known headsets on the market, such as the latest version of Facebook’s Oculus Rift and Taiwan’s HTC Vive, but the club also boasts some Russian-made gadgets, said Chizhov. The team running the club develops its own VR games, and also uses scientific games made by Nival VR and headsets made by Fibrum – both residents of the Skolkovo Foundation.

“Of course it [the Russian market] is developing slowly compared to the global VR/AR market, but there are an estimated 300-400 Russian companies working in various areas of virtual reality right now,” said Chizhov.

Skolkovo's Startup Village this year had a dedicated VR/AR zone where devices could be tested. Photo: Sk.ru.

Those companies include the makers of about five to seven devices – both mobile, like Fibrum headsets, and stationary simulators – as well as digital studios, game developers, service companies that run VR amusement parks and others that create content, says Vasily Ryzhonkov, head of the mobile tech centre within Skolkovo’s IT cluster.

Ekaterina Krechetova, marketing director of Fibrum, which launched its headsets and games on international markets last year, said that if in Russia, the focus of the VR market is still on entertainment, in the U.S., other areas are just as developed, such as education.

“For example, Google Cardboard [an inexpensive VR system designed for use with a smartphone that allows users to develop their own VR content] is promoted free of charge in schools, and more than 100 education programs have been developed using it,” she said.

“In terms of other areas such as medicine and education, there are pilot projects but no sign of a mass launch [in Russia],” said Krechetova.

Think global

The global VR/AR market is worth several billion dollars, and investment in VR around the world was up 80 percent in the first half of 2016 compared to the same period last year, according to Ryzhonkov. The Florida-based Magic Leap, which is working on wearable virtual technology – its website opens with a video of a whale jumping up through the floor of a school gym – recently became the most well-financed pre-launch startup in history, raising $1.39 billion over three rounds before it has even released a product.

The number of VR companies has grown 15-fold since 2005, and revenues are growing fast and are expected to reach over $62 million by 2017 and $160 million by 2018, most of which will come from sales of head mounted displays (HMDs), according to Ryzhonkov. He expects that close to one million Samsung, HTC Vive and Oculus Rift headsets will be sold this year, without taking into account mobile devices like Fibrum that work in conjunction with the user’s smartphone.

Fibrum is an example of a Russian company that has managed to break onto the international market, having launched sales of its headsets in Germany, France, Austria and the United Arab Emirates, as well as in Russia. It also plans to launch sales in the U.S. and U.K.

The company has sold more than 15,000 headsets, produced its own VR shooter game “The Raid” and implemented about 30 B2B projects. The Fibrum app has been downloaded more than 8 million times.

The company is currently launching a new product that is at the stage of beta-testing: Fibrum Platform, a unified VR ecosystem that aims to unite software developers, hardware producers and VR users.

The most popular games among VR enthusiasts are shooters, says Maxim Chizhov. Photo: Virtuality Club.

Pokemon: boon or curse?

The VR/AR market got a very high-profile boost recently with the launch and instant success of Pokemon GO, which uses augmented reality to make Pokemon monsters – which players have to catch – appear amid the player’s real surroundings when viewed through the smartphone app.

“With VR, you need to have the headset and computer, so in that respect AR and Pokemon GO are winning, because they’re with you all the time,” said Ryzhonkov, adding that only time would show whether the game could sustain its current level of interest.

“This is a great example of marketing, when in an unbelievably short time, a huge number of users have downloaded the app and started playing, although similar apps have been around for ages,” said Ryzhonkov.

“I think [the success of Pokemon GO] will only strengthen the hype around this sector,” he said.

Fibrum’s Krechetova agreed that the popularity of Pokemon had undoubtedly fueled interest in VR/AR technology.

“A lot of people now understand what augmented reality is and how it differs from virtual reality,” she said.

“For many people, however, these innovations remain distant and mysterious, so any product that introduces people to them is useful for other market players. We hope that our VR platform will become one of those products,” she added.

Chizhov said opinion about Pokemon GO was divided.

“The aspect of AR in the game isn’t the main point here, it’s more geolocation technology, and the AR element is just an additional aspect of the game. But its popularity means more people are learning about VR and AR now, so as a way of popularizing AR and VR, it’s a very powerful tool,” he said.

A screenshot from the short film "Sight," showing an AR-enhanced date - the sinister side of AR/VR technology.

To infinity and beyond

If the current dynamic continues, VR/AR looks set to become an increasingly large part of our everyday lives – a prospect that not everyone finds entirely comforting, as expressed in the Israeli short film “Sight,” which shows a potential dark side of augmented reality. 

Fibrum’s Krechetova has a more optimistic view, and believes VR will be applied for more practical purposes in the future.

“There is great potential for its development in the spheres of medicine, education, the military, trade, architecture, communications and so on,” she said.

Chizhov said it was difficult to make market predictions, as the Russian VR/AR market is still young and changing rapidly.

“It’s hard to say how it will change even in the next six months,” he said. “But I think more and more companies working in this area will appear on the market.”

Ryzhonkov believes that VR and AR are the next “mega tech themes” through 2030, and that the market will consist of VR hardware, games, films and concerts, industrial applications, amusement parks and even “adult content.”

It will likely take a decade before mainstream adoption, he believes, as improvements in displays and applications – as well as lower pricing – are needed to drive demand, but those dynamics, he says, are already in place.

VR will go mass market first, because its devices are already more advanced, and its most popular application will be gaming, while AR will mature a little later and prove most successful in logistics, engineering and the automotive industries, Ryzhonkov predicts.

He also believes that laptops and PCs will eventually be replaced by HMDs.

“I believe that by 2020, we will be wearing consumer glasses that will enable us to get rid of smartphones altogether,” Ryzhonkov told Sk.ru.

“Phones will be replaced by miniature devices that will allow us to make calls, write and take voice commands, while for work, we will still use computers and tablets – they’re not going anywhere,” he predicted.

Skolkovo startups working in AR/VR

3DiVi makes hardware and software for 3D machine vision systems that allow enhanced gesture recognition and skeletal tracking performance for use with games consoles and similar devices.

aviAReal uses AR in a series of projects aimed at improving flight safety, such as in augmented reality tutorials.

Fibrum makes VR headsets, games and platforms.

Nival VR makes interactive VR experiences aimed at helping people learn more about the world around them.

Vizerra makes interactive 3D apps for city planning, construction projects, product design and virtual tourism.

RIT Innovacii’s Hudway product aims to enhance drivers’ safety in low visibility conditions by projecting the route onto the windshield.

EligoVision works on AR and VR programming for uses including project design and interactive 3D multimedia presentations.

Nettle develops 3D displays using its own technology.

Wayray makes both a navigation system that is projected onto the windscreen, and a system to help drivers analyse their own driving patterns and habits.