Table Of ContentGrowing VR/AR
companies in
the UK
A business and legal handbook
In association with
CONTENTS
1 Foreword
3 Executive summary
9 Overview of the market
13 Business models
55 Legal
This report was produced by PwC for Digital Catapult and funded by Innovate UK.
Digital Catapult, Immerse UK and the High Value Manufacturing Catapult have been
working together on a large-scale programme of business support, funded by Innovate
UK, for the UK’s immersive technology industries since September 2017.
This report forms part of that work along with the following complimentary reports:
– The Immersive Economy in the UK
(Innovate UK, Immerse UK & Nesta)
– Immersive Content Formats for Future Audiences
(Digital Catapult and Limina Immersive)
– Evaluating Immersive User Experience and Audience Impact
(Digital Catapult, Nesta and i2Media Research)
– Immersive technologies in manufacturing – the adoption and use of immersive technologies
in manufacturing and a report covering the feasibility of the use of immersion in a digital twin
(High Value Manufacturing Catapult).
Innovate UK is part of UK Research and Innovation, a non-departmental public body
funded by a grant-in-aid from the UK government. We drive productivity and economic
growth by supporting businesses to develop and realise the potential of new ideas,
including those from the UK’s world-class research base.
Contact us
[email protected]
www.digicatapult.org.uk
2 Title of report goes here Document type here 2018
FOREWORD
Digital Catapult, in collaboration with PwC, has produced this
handbook for the benefit of VR/AR companies in the UK, and
those new to the industry planning to build such companies.
Insight and recommendations will be offered from both a
business and legal perspective. Organisations seeking to
adopt VR/AR solutions may also find this information useful.
Whether these groups are currently developing VR/AR
solutions or considering it in the future, they will be collectively
referred to as VR/AR companies in this handbook.
OBJECTIVES AND METHODOLOGY
The purpose of this handbook is to encourage The handbook has been designed so that key
the creation of more, high quality, VR and AR points are quick to access and easy to digest.
content. It has been written primarily for Each topic area begins with some example
current and potential content creators but questions to help VR/AR companies determine
it also draws out relevant points for service the relevance of each section to their own
and technology companies. circumstances and quickly review the issues
and possible solutions.
It aims to analyse the VR/AR industry, mainly
from a business and legal perspective, to A wide range of topics are discussed at
examine its current and likely future in the short a high level rather than a deep dive into one
term (1-2 years), medium term (2-5 years) and particular area with the aim of consolidating
long term (5-10 years). areas of interest in a methodical and intuitive
way. The aim is to promote a quick high level
As a result, the handbook: understanding of the industry that will allow the
reader to assess which topics are relevant for
• Provides guidance on current challenges. further investigation.
• Raises concerns to be aware of and
understand, now and in the future. Note that a lot of the information provided
• Makes recommendations to leverage is based on current knowledge as of Q1
opportunities and mitigate concerns. 2018 and is likely to change as the industry
and associated stakeholders (including the UK
Government) develop and adapt in the future.
Growing VR/AR companies in the UK | A business and legal handbook 1
Foreword cont.
The hope is that organisations and individuals with
a stake in the VR/AR industry are able to make use
of the knowledge, foresight, and recommendations
here to achieve their objectives, grow their business,
and ultimately push the VR/AR industry forward here
in the UK.
CHOICE OF TAXONOMY: VR AND AR
Despite the growing number of acronyms in the
VR/AR industry, the terms VR and AR have been
used as these terms are simpler and well-known
amongst users and the public. VR and AR are
spectrums (rather than singular points) containing
different types of content, some of which are more
immersive or powerful than others. The term immersive
technology is also used to refer to both VR and AR.
Formal definitions are below:
Virtual reality (VR) refers to a completely immersive
virtual and aural world that a user experiences, usually
through a head-mounted display (HMD). The research
considers 360 degree media to be a form of content
within the spectrum of VR.
Augmented reality (AR) refers to a real-world
environment on which digital objects and/or information
is overlaid either through a head-mounted display or via a
handheld device with a camera such as a smartphone or
tablet. Devices and applications that simply layer digital
elements on top of the real world and those that are able
to place such objects in context with the environment
(e.g. on top of tables) are both considered within the
spectrum of AR.
22 Growing VR/AR companies inT itthlee o Uf Kre p | o rAt gbouesisn heessr ea n Ddo lceugmal ehnatn tdypbeo ohkere 2018
EXECUTIVE SUMMARY
OVERVIEW OF THE MARKET There are currently relatively few VR/AR
companies with a sole focus on VR/AR activity.
VR/AR DEVICE TYPES
This is due to the higher risk involved but is
Users can consume VR/AR experiences in a expected to improve as the market develops and
number of ways. From a VR perspective, these the business case becomes more attractive.
range from smartphone-based devices made
CHALLENGES
of cardboard to tethered devices and headsets
that use a powerful computer to run the There are four main challenges facing mainstream
experiences. AR applications can run on adoption of VR/AR technology:
handheld devices or through a headset that is
either tethered or standalone. All of these device • Content: the lack of quality content
types offer different qualities of immersion and limits consumer interest which hinders
user experience at a variety of price ranges. the business case for more VR/AR
Portability and durability levels also differ. content development and so the
vicious cycle continues.
VR/AR COMPANY TYPES • Education: few members of the
The VR/AR industry extends beyond the obvious public have an accurate understanding
businesses involved in headset manufacturing of the technology due to a lack of
and content development. first-hand experience.
• Cost: the cost of high-end VR/AR systems is
At a high level, there are three main types of still out of reach for the average consumer.
VR/AR companies: This is less of a concern for enterprise.
• User experience: from both a software and
• Content companies that develop VR/AR hardware perspective, setting up and running
content to sell to enterprise or directly to the high-end VR/AR systems and experiences
consumer market. is not a simple task.
• Service companies that use their time and
expertise to provide a valuable outcome to
VR/AR customers.
• Technology companies that create the
platforms, tools, plugins and other solutions that
provide value to the VR/AR industry.
Growing VR/AR companies in the UK | A business and legal handbook 3
Executive summary cont.
STAKEHOLDERS
There are many stakeholders in the There are multiple funding alternatives to venture
VR/AR industry, not just the VR/AR capital including government support. Generally,
companies themselves. It is important access to funding becomes easier with more
to understand who else is involved, how mature products. A range of revenue opportunities
they influence each other and how to is available, including advertising, depending on
engage with them. the type of VR/AR business and the timeframe
being considered.
For example, immersive companies
need to connect with government agencies
OPERATIONS
to keep updated with legislation, establish
feedback loops with customers, and engage Identifying team roles, where to find the
with academic researchers to offer input corresponding talent, and whether significant
and access the latest research. VR/AR specific experience is required are key
issues discussed for VR/AR companies. Beyond
BUSINESS MODELS experienced hires, this talent pool extends to
school leavers, university graduates and self-
A company's business model is critical
taught individuals, both in the UK and abroad.
to its success. This section provides a high-level
Costs can be reduced by analysing alternative
overview of the areas which need to be considered
options regarding equipment, space, talent,
when conceptualising, building and selling ideas in
software and professional services. Additionally,
addition to the operational aspects of running an
there are numerous tax benefits available to many
immersive company.
VR/AR companies who are involved in research,
Divided into sections about strategy, operations, development and intellectual property creation.
development, and marketing and sales, this
section examines the end-to-end journey DEVELOPMENT
for taking an idea through every stage to a
Developers should maximise user comfort by
commercialised product for sale.
applying a user-centric design focus. Alternative
STRATEGY input systems such as gaze control should be
considered to increase user accessibility. To
The VR/AR industry represents a relatively high
introduce advertising, consider a number of
risk venture with the potential for large rewards.
ethical guidelines. Cyber security protocols
The exact approach of VR/AR companies will
and safeguards should be built in to products
depend on their appetite for risk but a cautious
from the start.
approach is advised for most. Start by targeting
businesses, prove that a market exists for any
MARKETING AND SALES
product ideas and check that it would deliver more
value than traditional alternatives. Be mindful To successfully market products, a community
of the fallacy of the single ‘killer application’ of early adopters should be built and maintained.
and concentrate instead on use cases across
industries. When considering which device or
system to build content for consider all the
factors relating to the product objectives
and its target audience.
4 Growing VR/AR companies in the UK | A business and legal handbook
Growing VR/AR companies in the UK | A business and legal handbook 5
Executive summary cont.
LEGAL
As VR/AR applications and technology are The legal issues in this review focus on the
relatively new, there is not a great deal of related following areas:
legislation or case law. Applying the existing laws
• Intellectual property issues such as the
to new scenarios experienced through a new
development and exploitation of intellectual
medium poses numerous challenges. Over time
property rights, enabling value protection in
it is expected that more specific regulations may
the chosen VR/AR system, content or platform;
be introduced or laws updated to address some of
licensing rights, to maximise exploitation of
the issues raised by VR/AR, but in the meantime
rights and avoid infringement of third party
courts and regulators will seek to apply existing
rights; and intellectual property issues arising
laws to new situations.
from creative activities within the
VR/AR environment.
• Property issues such as use of money, virtual
currencies and payments, and ownership of
property in a virtual environment, as well as
risks arising from counterfeiting, impersonation
and fraud.
6 Growing VR/AR companies in the UK | A business and legal handbook
• Liability and regulation such as health and The review and recommendations contained are
safety and product liability issues arising based on English law, but companies should bear
from the risks of deploying or using VR/AR; in mind the potential for other laws to apply where
regulation of content standards and services; VR/AR services are deployed or made available
criminal activities in a VR environment; liability in other countries. Recommendations will also
of VR/AR platform and service providers for depend on the facts and specific legal advice
illegal activities by users; and jurisdiction and should always be sought in particular cases.
applicable laws in a VR/AR environment.
The issues flagged will be relevant when drafting
or negotiating commercial contracts such as
licences with third parties, drafting terms of use,
end user licences or user instructions as relevant
for VR/AR systems, content or platforms. These
will also be relevant when understanding the type
of laws, regulations and liabilities that should be
considered when developing and exploiting a
VR/AR system, content or platform.
Description:handbook for the benefit of VR/AR companies in the UK, and those new to the industry .. when conceptualising, building and selling ideas in addition.
