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DEBORAH WEINSWIGMANAGING DIRECTOR

FUNG GLOBAL RETAIL & TECHNOLOGYOctober 20, 2016

AR/VR—At an Inflection Point

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• About Fung Global Retail & Technology

• AR/VR Technology

• AR/VR—At an Inflection Point

• AR/VR—An $80 Billion Market

• AR Applications

• VR Hardware

• VR Applications

Agenda

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About Fung Global Retail & Tech

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• Established in 2014

• The knowledge bank for the Fung Group

• Consultancy for clients within and outside the Fung Group

• Focuses on emerging retail and technology trends

• Based in New York, with research teams in London and Hong Kong

• 20 + analysts specializing in retail and technology

• Publishes thematic and global market research on topics such as the Internet of Things (IoT), digital payments, omni-channel retail, fashion retail trends and disruptive technologies

Fung Global Retail & Technology

HONG KONG NEW YORK LONDON

RETAILTECH

MICRO MACRO

RETAIL REAL

ESTATE

THEMATIC RESEARCHVR

AI

IOT

DIGITALDIGITALDIGITALDIGITAL

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AR/VR—At an Inflection Point

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Summary• AR/VR applications are becoming more

commonplace, for example in virtual catalogs and Pokémon Go

• Goggles such as Google Cardboard and $79 Google Daydream View put the price of AR within reach

• One forecast calls for a $80 billion market in 2025, and VC funding is increasing rapidly

• AR has seen broad acceptance; will VR overcome the “nerd factor”?

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What Is VR?• Virtual Reality uses computer graphics

technology to create an immersive real environment that seems real, via:

­ Sight—Head-mounted displays/goggles

­ Sound—Headphones

­ Touch—Haptic feedback

­ Smell—Smell-O-Vision, “4D” movies

VR Image of Venice Canal

Source: Google

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What Is AR?• Augmented Reality combines computer

graphics with real-world images.

• Examples:

­ Graphic images or video on still images

­ Graphic images on live video

­ Live video on still images

Charmander from Pokémon Go

Source: USA Today

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The Nerd Factor

Source: Google Source: NY Times

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Explosion in VC Funding• Deal value already up 85% in 1H16 versus

2015, expected nearly 4x

• Deal volume expected to increase 11% this year

• Magic Leap’s Series C was $793M in February

• Full-year estimated to be twice 1H, i.e., 152 deals values at $2,606 million

• Magic Leap’s Series B raised $542M in 4Q14 12 13 14 15 1H16$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

0

20

40

60

80

100

120

140

160

$86 $238 $787 $703

$1,303 23

41

60

137

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AR/VR Annual Funding

Investment Estimate Deals

Inve

stm

ent (

$ M

il.) N

umber of Deals

152

Source: CB Insights

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AR/VR: An $80 Billion Market

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An $80 Billion Market in 2025

Source: Goldman Sachs

Hardware$45 Billion

Software$35 Billion

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2025 AR/VR Hardware Market : $45 Billion• 125 million HMDs @ $360 = $45 billion (source:

Goldman)

• Chips

• Processors

• Memory

• Cameras

• Haptics

• Display

• Trackers and Sensors

Source: Goldman Sachs

Head-Mounted Display

Source: vrealities.com

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VR Hardware Market Forecast• Market is estimated at $20 million this year

• Estimated to grow at 48% CAGR through 2020E

• HMDs are largest segment (about 75% this year)

• Followed by gamepads and hand-tracking devices

2014 2015 2016E 2017E 2018E 2019E 2020E$0

$10$20$30$40$50$60$70$80$90

$100Vests and Suits

Locomotion Devices

Hand Tracking Devices

Gamepads and VR-Specific Controllers

Head-Mounted Displays

Annual VR Hardware Shipments (USD Mil.)

Source: Tractica

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2025 AR/VR Software Market: $35 Billion• Videogames the largest segment by far

• New AR/VR entertainment forms

• Live events

• Video entertainment

• Healthcare/engineering (industrial) segments also substantial

Videogames

Healthcar

e

Engineerin

g

Live Eve

nts

Video Entertainment

Real Esta

teRetai

l

Military

Education

$0 $2 $4 $6 $8

$10 $12 $14

$11.6

$5.1 $4.7 $4.1 $3.2 $2.6 $1.6 $1.4 $0.7

VR/AR Software Market (USD Bil.)

Source: Goldman Sachs

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AR Applications

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The $1 Billion Pokéconomy• Pokémon Go Available in more than 90

countries

• Downloaded more than 500 times

• #1 app in Apple’s US app store for 74 days

• Generated $500 million of revenue through early September

• Total of $1 billion revenue expected by end of the year

Clash of Clans

Candy Crush Saga

Pokémon Go

Dragonvale

Clash Royale

CSR Racing

Game of War

Pandora

Spotify

Simpsons: Tapped Out

347

109

74

32

32

22

21

20

18

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Number of Days at No. 1 in Apple US App Store

Source: sensortower.com

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Pokéconomy—Implications for Retail• Opportunities for retailers to create Pokéstops

and Gyms to attract traffic

• Partnerships with McDonald’s and 3,700 Softbank stores in Japan

• Opportunities for sequels, add-ons

• Holiday and plush toys

• Coming for Nintendo 3DS handheld in November and for new NX gaming system in March 2017

Source: twitter.com

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Automotive Heads-Up Displays (HUD)• Heads-up displays keep the drivers’ eyes on

the road and provide information

• Automakers—BMW, Ford, GM, Jaguar, Lexus, Mazda, Mercedes, MINI, Toyota, Volvo, etc.

• Automotive equipment vendors—Continental, Garmin

• Chipmakers—Intel, Nvidia, TI, Taiwanese vendors

Automotive Heads-Up Display

Source: Texas Instruments

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AR/Wearable Tech for Sports• Intel acquired Recon Instruments for $175+

million in 2015

• Glasses provide speed, distance, heart rate, etc.

• Jet—On-screen display, POV camera

• Snow2—GPS heads-up display for Alpine sports

• Developed enterprise eyewear with APX LabsSource: GPS Business News

Recon Jet for Cyclists

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Furniture Shopping with AR• Cimagine AR platform for brands and retailers

• Ikea app can place selected furniture in room with 3D modeling and VR

• Lowe’s and Wayfair using Google’s Tango technology

• Pair shows how thousands of name brand furnishings look in you’re the home or office, in real time using only an iPhone or iPad

Source: Ikea

Fun with the Ikea App

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Beauty Apps• Sephora Virtual Artist

­ Lip & Lash Try-On

• L’Oréal Makeup Genius

­ Uses facial-mapping technology to turn a smartphone into a magic mirror

• Vogue Makeup Simulation

­ Uses ModiFace facial-simulation technology

• Madison Reed

­ App for hair colorSource: Altavia

Sephora Virtual Artist

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Magic Mirrors• Combine large-panel displays, 3D motion

detection and/or RFID technologies

• LEGO display in Chicago using Microsoft Kinect to track passersby

• Bloomingdale’s display let shoppers try on designer sunglasses

• BMW display in which passing vehicles were transformed into BMWs

• Rebecca Minkoff—digital changing room and interactive mirrors

Source: retail-innovation.com

Rebecca Minkoff Store

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Google Glass, 2013–2015• Prototypes available in April 2013 for $1,500

• Available to the public in May 2014

• Withdrawn in January 2015 due to criticism regarding privacy and safety concerns

• Applications

­ Healthcare

­ Journalism

­ Military

Source: YouTube

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VR Hardware

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Oculus Rift: $599• Facebook acquired Oculus for $2 billion in July

2014

• Requires high-performance PC

­ 3 USB 3.0 ports

­ HDMI socket on high-performance graphics card

• Initial batch sold out in Jan.; AMZN batch sold out in two minutes

• “Not material” to 2016 financials—FB

Source: Ars Technica

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HTC Vive: $799• Uses PC

• Uses DisplayPort/HDMI

• SteamVR 1.0 tracking system

• Best for room-scale games

Source: Ars Technica

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Sony PlayStation VR: $500• Requires Playstation 4 console

• DualShock 4 controllers / PlayStation Move controllers (for some games)

• US bundle with required camera, two PlayStation Move controllers, and a game for $500

Source: Ars Technica

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Google Cardboard: free–$15• Cardboard headset works with most

smartphones, including iPhone

• Nov. 2015 and Apr. 2016—free to NY Times print subscribers (total: 1.5M)

• Available online for <$15

• Content: demos, games, movies, YouTube, viewers, 360 degree camera apps

Google Cardboard

Source: Google

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Samsung Gear VR (Oculus): $99• Works with Samsung Galaxy smartphones,

like Google cardboard

• Take video with Gear360 camera

• Not as powerful as PC-based platforms

• USB-C connector

Source: Wired

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Google Daydream View: $79• Available in Nov. 2016

• Combines fashion and technology

• Three colors — slate, snow and crimson

• 30% lighter than similar devices

• Designed to work with Google’s new Pixel smartphones

• Will offer YouTube, Netflix and HBO

• Comes with external controller

Google Daydream

Source: WWD

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Zeiss VR One: $129• Similar to Google Cardboard

• Zeiss optics

• Works with iPhone, Samsung Galaxy, Nexus 5 and LG smartphones

• Uses smartphone sensors for internal tracking

Source: Tumblr

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Oculus Touch: $199• Taking pre-orders; ships Dec. 6

• Comes with a second sensor and a Rock Band VR connector

• Launches with 35 made-for-VR titles

• Bundled with The Unspoken and VR Sports Challenge

• Oculus Rift Earphones available for $49 on Dec. 6

Oculus Touch

Source: Oculus

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VR Applications

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Video Games

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VR Video Games• $5.1 billion this year (SuperData Research)

• Initial launch of 30 games for Oculus Rift in March 2016

• Over 100 to launch for Oculus Rift in 2016 (Fortune)

• Sony planning 50 games for PlayStation VR in 2016

• Also for consoles: experiences, real-time, and filmed 360-degree movie content

ROVR Treadmill

Source: Wizdish

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Sample VR Game Titles

Source: Oculus

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VR Motion Sickness• Motion sickness has long been the bane of

virtual reality

• Lone Echo uses zero-gravity to overcome issues with in-game motion

• Wireless VR headsets are possible—can move around the room

• Teleportation replaces motion

• HTV Vive’s room-scale VR

Robo Recall

Source: theverge.com

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Live Events

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VR Live Events• Coachella VR live stream

• Google I/O Keynote

• Digital Domain to partner with Gyro AS and Warner Bros. in VR live-streaming partnership

• NextVR—VR programming and events

­ International Champions Cup Soccer Match

• VOKE VR—Live Virtual Reality SportsSource: virtualrealityreporter.com

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Video Entertainment

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YouTube Offering 360-Degree Movies• YouTube announced 360-degree videos at CES

2016

• YouTube 360 offers VR videos

• NYT VR—New York Times app with movies for Google Cardboard

• Netflix VR app

• Many emerging VR movie streaming sites

YouTube 360 Movie

Source: geekdashboard.com

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VR Movies• The Martian

• The Hunger Games

• The Lion King

• Wild

• Batman: the Animated Series

• School of Rock

• Star WarsSource: observer.com

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Real Estate

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VR for Real Estate• VR ideal for views/walkthrough of homes

• Used in LA and NYC

• Los Angeles: difficult to visit many homes due to traffic

• Cost to scan a home: $300–$700

• No Zillow of VR yet

• Could replace realtors in 10–15 years

• Facebook + Oculus? Source: gearbrain.com

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Retail

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Tommy Hilfiger In-Store Virtual Reality Catwalk Experience• Autumn 2015 catwalk show available to see in

Tommy Hilfiger stores

• View of the runway and sneak peek backstage

• Dedicated areas in stores

• New York and major European cities

• Clothes available immediately

Source: mashable.com

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Rebecca Minkoff at New York Fashion Week• Live-streamed runway show in 360 virtual

reality

• Also live-streamed at NASDAQ in Times Square

• Show took place on street outside SoHo shop

• Partner with Zeekit app—consumers can visualize clothing on body

• “See now, buy now” Source: LA Times

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eBay—World’s First Virtual Dept. Store• eBay and Australian retailer launched world’s

largest virtual department store in May

• iOS or Android eBay Virtual Reality Department Store app

• 100 of the top products are viewable in 3D, with the remaining 12,500 in 2D

• "eBay Sight Search" allows items to be chosen by holding gaze on them for several seconds

Source: Mashable

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Alibaba VR Store• Launched Buy+ AR/VR technology at Taobao

Maker Festival

• Shoppers view products such as clothing and fashion accessories on a model with a 360-degree view

• VR research laboratory GnomeMagic Lab, which was working on VR and AR technologies

• Working with Alibaba Pictures and Alibaba Music to develop VR content

Source: CNBC

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Industrial

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Industrial Applications • Automobile design

• 3D modeling

• Construction

• Oil and gas

• Rail design

• Scientific visualization

• Space

• Welding simulators

Source: hypergridbusiness.com

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Education

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VR in Education• Sciences

­ Anatomy

­ Astronomy

­ Biology

­ Geology

• Architecture

• History

• Exploration

• Geography

Source: Touchtone Research

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Summary• AR/VR applications are becoming more

commonplace, for example in virtual catalogs and Pokémon Go

• Goggles such as Google Cardboard and $79 Google Daydream View put the price of AR within reach

• One forecast calls for a $80 billion market in 2025, and VC funding is increasing rapidly

• AR has seen broad acceptance; will VR overcome the “nerd factor”?

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Q&A

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Thank You!