More Reality than Virtual: How VR is Disrupting Licensing, Rights and Royalties

Posted by on August 15, 2016

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The massive and immediate success of Pokémon Go caught many industry observers on the hop. The smartphone app proved that the right augmented reality (AR) or virtual reality (VR) content can generate real revenue—and far-reaching demand.

It highlights the need for licensees to be ready to respond fast to surprise consumer hits: the Pokémon sensation drove Character World to do a fast-turnaround licensing deal to launch a new bedding and accessory range this fall.

The number of VR devices in consumers’ hands climbed to four million in 2015, and IHS forecasts the global install base will reach 17 million by the end of 2016 and in excess of 50 million by 2020. The market, already worth €500 million and expected to grow to €1.5 billion next year, is currently controlled by hardware vendors, and gaming is the biggest driver of paid-for AR and VR content. But VR is beginning to attract more short-form content like movie trailers, and the potential for major live event streaming is round the corner.

It’s still hard to predict exactly where VR is heading – but analysts are confident that it’s not another flash in the pan. VR should now be part of any content business’s strategy and a critical component of content rights and licensing. In fact, VR impacts every aspect of the IP rights and licensing business:

  • To future-proof content, VR needs to be part of new content creation, acquisition and licensing deals today.
  • VR devices create new platforms and formats for content that need to be part of a windowing strategy. Should the low-end vs. high-end devices represent different tiers in content license deals? Is VR content on a smartphone covered by existing deals for mobile devices – or is it a completely new category?
  • The close link with entertainment gaming adds rights complexity. Do talent agreements include rights to use likenesses in immersive, VR, interactive formats? Will talent expect a premium level of participations for this new and very different format?
  • Merchandise licensing is impacted as gaming and short-form promotional content dominate VR. This provides new opportunities to grow brands and license character properties for innovative applications.
  • The technology itself is novel and highly innovative, already creating technology licensing opportunities around the hardware and software components.

The business models around VR and AR hardware and content remain largely untested, however content and IP owners ready and able to license for the new format will be the positioned to reap huge benefits. That requires the right licensing strategy, the right business processes, and tools sufficiently flexible to adapt and accommodate emerging platforms.

Robert Ambrose (@rambrose) is Director of Strategy and Business Development at FADEL, a global provider of enterprise-class intellectual property rights and royalty management software. He works with media, entertainment, publishing and high tech companies to transform their approach to exploiting content, brands and IP. Previously, Robert worked as a broadcast journalist, media technology consultant, and industry analyst.