Twenty-First Century Fox Follows Facebook Into VR Filmmaking

By Leo Sun Markets Fool.com

Twenty-First Century Fox (NASDAQ: FOX) (NASDAQ: FOXA) recently formed FoxNext, a new business unit for creating next-gen storytelling formats likevirtual reality (VR) experiences and gaming. The new unit will be led by former film executive Salil Mehta, and its first big project is a VR experience for Planet of the Apes. FoxNext will also create new VR experiences for studio franchises like Alien, and handle gaming tie-ins for properties like The Simpsons.

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Image source: Getty Images.

Will this move add a new "reality" to Fox's film and TV businesses in the near future? Or is it just another premature attempt to board the VR bandwagon before it reaches more mainstream users?

Fox follows in Facebook's footsteps

FoxNext isn't Fox's first move into the virtual reality market. Over the past few years, a team called the Fox Innovation Lab produced VR projects likeThe Martian VR, an interactive VR film based on Wild, and a VR experience for Assassin's Creed in select theaters. Fox Sports also launched a VR app that allows watching sporting events through a headset.

But the creation of a dedicated business unit indicates that Fox plans to follow Facebook's (NASDAQ: FB) lead into VR filmmaking. Back in early 2015, Facebook formed its own VR film studio, Oculus Story Studio, to develop original VR films for its Oculus ecosystem. Last September, its VR film Henry won an Emmy award for outstanding original interactive program.

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Henry. Image source: Oculus VR.

Facebook is creating VR films to expand its Oculus Home ecosystem as a potential computing platform, but Fox has mainly used VR content to promote its theatrical releases.

Many studios have already adopted similar strategies -- Disney (NYSE: DIS) launched 360-degree VR videos for films likeThe Jungle BookandDoctor Strange, and Comcast's (NASDAQ: CMCSA) Gramercy Pictures launched a mobile VR experience for Insidious: Chapter 3 on iTunes and Google Play. While these efforts often make tech headlines, their overall effectiveness at boosting awareness of the films or reducing marketing costs is questionable.

Long-term market growth potential

Last October, research firm SuperData estimated thatSony (NYSE: SNE) would sell 2.6 million PlayStation VR (PSVR) headsets, Samsung would sell 2.3 million Gear VRs, but HTC and Facebook would respectively sell less than half a million of their Vive and Rift headsets.

Those numbers don't sound impressive, butPiper Jaffray estimates that 500 million VR headsets could be sold by 2025. When Facebook acquired Oculus in 2014, CEO Mark Zuckerberg estimated that it needed to sell about 50 million to 100 million headsets to establish VR asa mainstream computing platform. Meanwhile, research firm Digi-Capital estimates that the VR market will grow from nearly nothing today to about $30 billion by2020, thanks to rising sales of VR hardware, games, apps, and videos.

Those forecasts sound bullish, but the PSVR and Gear VR's strong performance last year indicates that cheaper headsets tethered to gaming consoles or smartphones could fare better than pricier ones like the Rift, which must be tethered to high-powered PCs. This means that lower-end VR experiences, like the Insidious VR app, might reach more users than higher-end ones, which require the Rift or Vive.

Fox initially launched its Martian and Assassin's Creed VR experiences for the Rift, and its Wild experience for Gear VR. The new Planet of the Apes experience will also launch for Rift headsets first. Fox is porting some of those apps toother platforms, like the PSVR and Vive, but it might need to launch lower-end Cardboard experiences for iPhones and Android devices if it truly wants to reach more users.

The key takeaway

The establishment of FoxNext won't move the needle for Fox any time soon. But if the optimistic forecasts for the VR market hold true, Fox will have a sturdy foundation for launching new VR content. Many of those VR experiences will likely be promotions and tie-ins for theatrical releases, but Fox could eventually launch original VR content like Oculus if enough mainstream consumers buy VR headsets.

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Leo Sun owns shares of Walt Disney. The Motley Fool owns shares of and recommends Facebook and Walt Disney. The Motley Fool has a disclosure policy.