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The VR cycle, turning virtual bulls into literal bears

At the future-forward biannual Digital Hollywood conference in Los Angeles, even some of virtual reality's biggest champions are starting to sound concerned.

Slow adoption and a lack of standards for the technology has stymied some of the early movers in the space. Nokia Corp., one of the most prominent, just killed its VR strategy, retreating from its OZO professional-grade VR camera and hardware due to "slower-than-expected development" of the VR market.

While expensive, in its short run on the market the OZO became a staple among high-quality VR content creators.

"They all used the OZO since day one," Richard Lucquet, director of business development at Verizon, said during an Oct. 10 Digital Hollywood panel. The speakers there were not sure what would become of content creators who had grown dependent on the OZO hardware and software.

Nokia's exit highlights a broader trend frustrating investors: tepid consumer adoption. "What happened?" David Bloom, a columnist at digital video news outlet Tubefilter, asked a panel of VR experts. Their answers largely indicated the hype surrounding VR had outpaced the limitations of the fledgling technology.

"I don't think right now it's a very compelling product," Sivan Iram, vice president of Business Development at VR hardware manufacturer Lumus Ltd., said.

Also impeding the technology's adoption is hardware and software standards. VR lacks a revolutionary hardware maker like Apple Inc. or a signature user interface like Microsoft Corp.'s Windows, the panelists said. Those two companies almost single-handedly launched personal computing into the mainstream, they noted.

Further, most consumers do not yet have a clear and compelling use case to buy into VR. Ben Taft, co-founder and CEO of augmented-reality, or AR, hardware company Mira Labs, said that consumers are more skeptical of new in-home technologies unless they offer a clear value proposition or compelling features. "Snapchat is the most widely adopted AR platform in the world," he noted, arguing its popularity was spurred on in part because Snap released products that consumers loved without labeling it augmented reality.

Companies like Microsoft are complicating this problem, Michael Levine, CEO of AR games developer Happy Giant, said. Microsoft calls its augmented reality experience "mixed reality," adding confusion for consumers potentially curious about the new technologies. The more familiar companies can make VR and AR experiences, the better, he said.

Mike Goslin, vice president of advanced development at Disney, pointed to proprietary AR and VR experiences that allow people to interact with Star Wars content as a model that works. "A person doesn't know why they need an augmented reality headset. They don't know why they need a virtual reality headset ... but they know they want a lightsaber," he said.

While mainstream in-home adoption remains elusive, such lightsaber-oriented experiences will increasingly be found at movie theaters, malls and other venues, as investments in location-based VR floods in from theater companies like IMAX Corp. and AMC Entertainment Holdings Inc.

However, many of those efforts are still in the experimental stages. IMAX, which has made one of the most considerable investments in VR venues, itself has not released any financials, and says it is still testing the viability of the business model. Some panelists speculated that Facebook Inc., which was set to make an Oculus VR announcement, would join the location-based market. Instead, the social networking giant launched a lower-priced version of its legacy headset, doubling down on the future of in-home VR entertainment.

Many think location-based VR will become a viable business model in itself, potentially adding a much-desired growth engine for movie-theaters. It carries a unique ability to combine promotional efforts with entertainment content, providing short-form VR spinoffs of major theatrical releases and adding another layer of monetization to the theater-going experience. However, without a proven model on the market yet, some are still skeptical.

Among them, Gene Munster, managing Partner of technology-focused venture capital firm Loup Ventures, told panelists that he is paid to find opportunities in the VR business, and he remains skeptical about mainstream adoption in the near-term, in venues or elsewhere. There are too many issues with VR, he said. Content is still sparse and unsophisticated, and it still makes some new users physically sick. However, Munster said he believes VR will come to the mainstream, perhaps just not as quickly as many technologists expected.

"I'm here to predict that the industry will get past [the problems], and 10 years from now VR is going to be everywhere," he said.