#602: Funding Landscape for Cinematic VR with Kaleidoscope VR

rine-pinnellAfter talking to a lot of independent VR storytellers, Kaleidoscope VR’s René Pinnell identified that funding was one of the biggest blockers for continued experimentation. Cinematic VR pieces do not have many established distribution channels yet, and so a lot of the funding has come from larger HMD manufacturers like Oculus and select brands like Intel.

After traveling around to 30 cities around the world with Kaleidoscope VR’s festival, Pinnell decided to try to hold the First Look VR market in September in order to match the most promising independent VR creators with funders, producers, and distributors. I caught up with Pinnell at the end of the inaugural First Look market to talk about the funding landscape for independent creators, his journey from festival producer to executive producer to market organizer, and what he sees are the keys to innovation for immersive storytelling.


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[00:00:05.452] Kent Bye: The Voices of VR Podcast. Hello, my name is Kent Bye, and welcome to the Voices of VR Podcast. So the Sundance New Frontier lineup has been announced, and there are a lot of really great storytelling experiences that are going to be out at Sundance this year. And one of the people that has a couple of projects that he's helped executive produce is Rene Pinnell of Kaleidoscope VR. So Kaleidoscope started as a film festival where they traveled around to 30 different cities around the world, both showing cinematic VR experiences and meeting a lot of the creators from around the world. And so Rene has transitioned from doing a film festival with Kaleidoscope and then getting into more of a connecting of the creators with the funders. And they realized that the funding for these projects is the biggest open question for how to actually get funding for these creative projects. that are trying to push for virtuality as a storytelling medium. So Kaleidoscope VR held the first VR market back in September, which was bringing together a lot of these independent creators and trying to match them up with either funders or other people who could be able to help produce and distribute their VR projects. So it would cover all that and more on today's episode of the Voices of VR podcast. So this interview with Renee happened at the First Look Market on Thursday, September 21st, 2017 in Los Angeles, California. So with that, let's go ahead and dive right in.

[00:01:37.325] Rene Pinnell: Hello Kent, this is Rene Pinnell, founder of Kaleidoscope. And we're here at First Look, which is an event that we are holding in beautiful Los Angeles. The idea behind First Look was to bring together all of our favorite artists and studios that were making work in immersive art and entertainment. and also bring together all of the industry leaders that we thought were really innovative and in a position to materially support these artists and their projects. So it was a two-day event and we curated 24 projects that were in development looking for funding and strategic partnerships and we also curated about the same number of projects that were completed and looking for distribution. and exposure and festival curation. So we spent the last six months selecting not only these artists and these projects, but we spent probably more time curating the attendees. It was really, really important for us to make this an event that was selective and thoughtful about the people here. so that no matter who you were talking to or what element of the event you chose to engage with, that you'd be connecting with people that could push you and your work to the next level.

[00:02:54.238] Kent Bye: Great, yeah. So it sounds like that for the process of doing the Kaleidoscope VR, cinematic VR showings, you're doing, you know, upwards of like 20, 30 events around the world that you had an opportunity to discover some of the local talent in all these different regions. And then through that process of curating those film festivals, you kind of became a mediator or almost like a talent scout of the latest, you know, immersive cinematic VR storytellers, but also having connections to the other parts of the industry, you're kind of, doing a little bit of a matchmaking of creating a context under which that they can do a pitch and show off their latest demos of what they're trying to create and either they're finished and they need funding to finish it or to distribution and publication or just money to even make the project happen in the first place. That was kind of like a role that I see that Kaleidoscope's been taking on is that usually there's a curatorial process that happens with like Sundance and South by Southwest and Tribeca and these various film festivals that are kind of the tastemakers, but this is sort of the tastemakers before those tastemakers make the decisions for what their tastemaking is going to be.

[00:03:58.847] Rene Pinnell: Yeah, that's a really good way of putting it. Yeah, we spent a lot of time when we first started Kaleidoscope in like 2014, early 2015, was just a mapping exercise. Mapping who's making what and where. And the best and only way that we could think of to do that was to travel around the world. We've been to every continent besides Antarctica looking for talented artists that were making work that we thought pushed the medium forward creatively and technically. And in the process of doing that, we met with hundreds and hundreds of artists and had tons of conversations with them. And the thing that kept coming up over and over again when we asked them, you know, what are the biggest challenges that you face? It always came back to funding. You know, if you're an independent artist or running an independent studio, you are always worried about going out of business, running out of money. How do you raise enough money to make the thing that you want to see created? And so if we were going to focus on anything, we thought we might as well take on the thing that is the biggest concern and figure out what we can do to help solve that problem. And it's a long-term problem to solve, but what we think we can do is push the industry in a direction that is more supportive to independent artists. we can reimagine business models and ways of financing projects that allow for smaller teams to sustain themselves. One of the things that we find troubling about the current media landscape is that it's very binary. You're either not able to support yourself and you're having to do work for free basically because you love it and you play at festivals maybe, but it's like taking a vow of poverty. Or you're mega successful, right? There's a small number of people that are tremendously successful. and we want to reimagine the entertainment industry and we think with VR, because the whole thing is more or less getting rebuilt from the ground up, we have a chance to try to rebuild it in a way that supports a fatter middle. where artists can build a fan base, leverage that fan base to support their projects so that they can build something, release it, people can buy it, and then that will fund their next project. And that'll be a positive feedback loop that enables them to sustain their work in themselves and to live a reasonable middle-class life instead of living at these extremes.

[00:06:28.183] Kent Bye: Yeah, and when I look at the virtual reality ecosystem, I often kind of compare it to a three-legged stool where there's the technology that's enabling all sorts of new mechanisms for storytelling and experiences. And then the creators have to understand what this new technology can do to then, from there, kind of create either an interactive experience or a story that is using the extent of this, the new affordances of this technology. And then from there you have the audiences that have to learn how to watch this new content and that the technology's always on the bleeding edge, the creators are always trying to keep up with the technology and the audience is still kind of figuring out how to experience all of this. And then maybe between the creators and the audience are these different distribution platforms and financial mechanisms for it to be viable for them to even do this exploration in the first place. And so I think the biggest unknown that I have is like, Who are these funders? Who are the people that are enabling these investments into these explorations from taking a bet onto these creators and everything from these different institutions to nonprofits, to venture funds, to content funds, to other government institutions? Who are the types of funders that are making this happen?

[00:07:42.878] Rene Pinnell: So the funding that we've seen falls into a bunch of different buckets, and those buckets are shifting very quickly. The ones that we see the most activity in are the players that have the most to lose and gain from the industry taking off or failing, and that's the HMD manufacturers. They're writing the biggest checks and the most frequent checks. The other player that we see investing real dollar bills is the traditional media companies. They are investing some dollars as experiments to learn, to see what this new medium is, because they realize that if it takes off, it could be beneficial or harmful to their current business. So they're investing. But it's tentative. It's not with both feet with the exception of a few Studios that are leading that pack, but even those you know, they're still not investing heavily It's experimental dollars and then you have brands brands are investing but it's very hard to get brands to invest in original content with the exception of a few companies like Intel and that are putting money into projects out of their marketing budgets. You have mostly branded content in the brand space, which makes sense. But I'm hopeful that we can start to get brands to create experiences that are artistically rich and satisfying, but are also brand aligned. And that can be, if not a method of getting original projects off the ground, at least a method for keeping these studios and these artists fed. And having their creativity and their experiments paid for by someone else. You also have, especially in Europe, government funding, and especially in France. Arte, CNC, organizations like that are writing checks of meaningful size and supporting a lot of the projects that you see at festivals. And then another bucket of funding that we think is the most interesting, but is also the smallest, is people who are investing in projects because they want a financial return. There are literally two players of importance that I know of that are writing checks because they want to get money back. Maybe three. And there's a lot of other people that are writing very small checks, but in terms of people that are writing sizable checks, there's literally like three people that are doing that. And that's because the audience size is so small, it's incredibly hard to do that and have that be really where your money ought to be invested. There's a million places you can put your money that has a safer bet on return than a VR content play. But as audiences grow, and we think that the time horizon for this is the next 24 months, get one more generation of hardware out, get one more... big cycle of content out, we think that projects will be able to make a sizable return. And even now, we're seeing studios make money on their projects. If you can finance a project for a couple hundred thousand dollars, and you can sell it for, you know, somewhere in the twenty to thirty dollar range, and it's compelling, gives people a couple hours of gameplay, or, you know, an hour plus of linear experience, You can make money on that, but it's not huge. You know, you're looking at like a 2, 3x, you know, maybe 10x if you're one of the big, big hits. But that's still not nothing. That's, you know, more money than it takes to make. But you have to know the numbers well enough to make that play work. And, you know, it's very hard to make a project profitable if it's in the million dollars range. That's very difficult. But if it's in the couple hundred thousand dollar range, and you can make an engaging experience for that amount. If you're a lean, small studio, you can create something in the $250,000 to $500,000 range that gives people hours worth of an experience and make it at a quality level that is commensurate to the $20,000 to $40,000 price tag that you'd want a consumer to pay for.

[00:11:17.403] Kent Bye: And yeah, I've noticed that in the first day, there was a number of different pitches and people that were basically just trying to, just in a few minutes, give an overview of their project and what they're asking for from this crowd. And that I noticed in a number of the projects that you were listed as one of the executive producers or producers. So you're in the auspices of Kaleidoscope doing a curation of the entire event, but there's also some projects that you've decided to go to the next level and actually become more explicitly involved with and helping produce and make happen. Maybe you could just talk about taking on that role, and if you want to mention any of those projects that you're especially excited about and connected to in that way.

[00:11:52.701] Rene Pinnell: Yeah. So we have two different processes when we're reviewing projects. So we have the first process is accepting projects to our platform. And being on our platform means that you're on our online platform, which is accessible to a vetted list of industry leaders, and then having your project involved in our physical events that you attend. And once we make that level of curatorial pass, the next one is, do any of these projects make sense for us to sign on as an executive producer? And our criteria for that is, do they need our help? Some studios, like Secret Location, they've got I don't know how many employees, but they're probably in the 50 to 100 employee range. They're a pretty big studio. They don't need our help. They have people on staff that can do the work that we would do. The other thing is a bandwidth issue, right? Like, we have very limited bandwidth, and we only have the ability to sign on to maybe two to four projects every six months. And the other question is, how much do we personally connect with the project? And there's a sort of Venn diagram you could draw between all those three things, and the projects that fit in the middle of that are pretty small. So we've signed on to Executive Produce Battlescar, we've signed on to Executive Produce Pale Blue Dot, We're signed on for movements, Nakuru Kuru, we signed on for that, as well as a number of projects that weren't at the event. The process for us being an executive producer is the network of industry leaders that we've built up is available to anybody that's on our platform. But when we executive produce it, we take it a step further. And we're the ones making the phone calls. We're the ones sending the emails. We're the ones pestering people and trying to get them excited about the project, which is really hard to do if you're a small studio. I mean, if you're an artist, you're stretched really thin. And it takes a tremendous amount of time. Some of the projects we've been successful in raising money for, I look through the email chains, and it's like eight months of sending probably hundreds, if not thousands, of emails about a single project. It is an epic, epic task. The real goal is that we want to get to a place where we're not actually executive producing any projects, but we want to look for the tasks that we do that take up a shit ton of time, and then build software that enables studios to do that themselves at scale. So it's really a learning process for us. What elements can we build software around that will allow more artists to do the things that we're doing that seem to be successful with raising funds? And that's the long-term vision, is we want to write code to write ourselves out of the picture. So that as a small studio of a couple people to maybe 10 people, you can do all the stuff you need to do to get your project financed, produced, and distributed and marketed, right? If you're a small studio, those are the whole things that you need to do, right? You've got to be a creative, you've got to develop that, then you've got to package the project, then you've got to push it out to a network of people that can fund it, then you've got to know how to negotiate those contracts, then you've got to know how to manage the production, which is, that's the production part is typically the part they're really good at, and we don't need to do too much there. But then once it's produced, you need to worry about marketing it and distributing it. And then when you get returns from hopefully selling it and doing licensing deals, you need to figure out how to distribute those funds to whoever gave you money. It's just all that stuff, all that back office stuff, is really complicated and really hard. And that's the stuff we want to build software so that as a small studio, you can stay focused on what is really important, which is the creative. And that you can pack a bigger punch. compete with big studios that have mountains and armies of people that can do all of those things, we think we can build software for most of that stuff. And that's what we've seen across so many different industries, where the things that used to take hundreds or thousands of people eventually gets eaten up by software that allows a few people to do that. So that's what we're hoping to do.

[00:15:37.329] Kent Bye: So for me, virtual reality represents this new communications medium that has all sorts of amazing new possibilities and affordances that make it unique as a way to capture human experience in a new way. And I think there's a lot of different storytelling implications of that. And so I'm curious how you think about that, what are some metaphors that you use to understand it, and then what kind of makes you excited about that?

[00:16:01.520] Rene Pinnell: So the things that excite me the most are things that feel distinctive and native to the medium. Ben Miller is a buddy at Fox, and I know their big mantra there is, build projects that are in native VR. And I think that that means a particular thing to them. But I like that concept in general is, what can you do in this medium that you can't do in other mediums? And the projects that excite me the most are ones that typically find some really simple design element that is particularly compelling and exciting and then build a story or a game around that. So one thing that always worries me is when I see someone coming from another medium that doesn't know a whole lot about virtual reality but is excited about it and is coming up with an idea that sounds like a good idea. I'm always suspect for that because I feel like the things that I've seen that work the best are from artists that first of all, know how to create VR themselves, right? They're at that level of the production stack where they have their hands on the code or doing the filming and the stitching and really understand it at that level. Because when you start playing with it, you'll notice some little thing. You're like, oh, that's kind of an interesting little accident. Oh, that was a fun little element. And then they start exploring that. And then you build that into a thing. And then you build a story around that thing. And I think Tender Claws is probably the best example of a studio that does that. They come from a heavy interaction design background. And their past project, Pry, was based around the simple interaction. It was an iOS app that won the best Apple app of 2015 or 14. And with iOS stuff, the main interaction was pinching, tapping, pulling. And they built a whole story around that simple UI, where you could pull words apart and see stories unfold by sort of pinching and zooming in and out of a story. And then Virtual Virtual Reality was about this conceit of taking on virtual headsets and going deeper and deeper into a virtual world. And that was, again, built around this simple interaction of can we see what it feels like to put a headset on and take it off in virtual reality and then warp into other worlds. And the story was built around that interaction. That's the stuff that excites me. And so it's hard to nail down what it is other than nailing down the process. So I think anything that stems from that playful, exploratory path to finding a thing that works and then building a story world around that thing that works is the stuff that's going to be the best.

[00:18:29.923] Kent Bye: Great. And finally, what do you think is the ultimate potential of virtual reality and what it might be able to enable?

[00:18:38.140] Rene Pinnell: Yeah, well, I mean, like, to go singularity on you, you know, I think we're all going to warp into a fractal fissure in the universe where we just dive into an infinite number of different realities that we we all create ourselves or some giant artificial intelligence creates for us so I yeah, I mean I think I think we're headed down some path that kind of looks like that where the number of realities that you can slip into and are all of equal validity the one that was sort of like base reality or you know if you think like Elon Musk does that the chance of us being in base reality is pretty low right now we might already be in a simulation of one kind or another. So I think we're at that tipping point where we're going to splinter into a million universes. So I feel like that's the ultimate. But in a shorter term realm, I think in 24 months we'll hit something that is a nice cross-section of hardware that does enough and is priced low enough and there's enough content that a broader audience starts to adopt. And I don't know how big that is exactly, but I think we'll get to a place where you have enough addressable users that small studios can make a living. And that's where I think the industry really gets interesting, is when you have enough people that you can sell your stuff to, that you can make enough money to make your next experience. And I think that'll happen in the 2020 range. And then I think we'll be off to the races. As soon as we can stop relying on industry players propping up studios, I think that's when it gets really interesting. Because right now, it's very hard. Artists spend six to 12 months on a funding cycle. And that's very, very long. And it's very difficult to sustain yourself in that time frame with no funding. It's very hard.

[00:20:22.792] Kent Bye: Awesome. Well, thank you so much.

[00:20:24.033] Rene Pinnell: Yeah, thank you. Cheers.

[00:20:25.912] Kent Bye: So that was Rene Penel. He's the CEO and founder of Kaleidoscope VR. And a couple of projects that we're showing at the First Look Market are actually in the Sundance New Frontier section, including Spheres as well as Battlescar. So I have a number of different takeaways about this interview is that first of all, Before talking to Rene, I had always thought about the whole ecosystem of virtual reality as this three-legged stool, where there was the technology, and then the content creators were trying to push the limits of the technology, and then the audience had to learn how to watch these new experiences that were pushing the edge of technology. But I actually think that there's another leg, which is the distribution arm, which gets into the funding and making this new medium a viable business for a lot of people. I think at this point, it's still so early that most of the major players that are out there are the virtual reality HMD manufacturers. So there's this acronym called FAANG, F-A-A-N-G, Facebook, Amazon, Apple, Netflix, and Google. And so looking at what's happening with the Sundance as a film market, these are the major players. And I think that over time, you're going to also see both Amazon and Netflix get into these immersive content. We've already started to see that a little bit with HBO, who released an interactive storytelling application that was produced by Steven Soderbergh. So, the subscription models of both Amazon and Netflix and HBO are all like you pay up front monthly and then they just, it's a subscription service that you can start to get access to all the content. Whereas both Facebook and Google are more ad driven where they, mostly just trying to get you onto their sites. And the more time that you spend on these sites, then you could potentially click on the different ads. That said, Google, as well as Apple and Amazon, also have a renting or a buying purview. So you can actually rent a video to watch. And so if it's not part of that subscription service, then you can rent it in the short term. So I think all of these different business models are emerging, and I think that within the virtual reality field, we're not quite at the phase of being able to really sustain a subscription-based service to be able to just see all of the different content that's out there. So I'd say that Facebook and Oculus are actually one of the leaders in terms of curating and distributing some of the most cutting-edge storytelling VR content that's out there. They've actually got like five experiences that are showing at Sundance New Frontier, including one that was produced by Rene, the spheres experience. So what Rene says is that over the next couple of years, he expects this to kind of settle down to be a little bit more of a viable business decision for people to actually invest money into this whole ecosystem. And then it'll be at the point where the market is going to be able to sustain this. And maybe either through subscriptions or outright renting or buying, there'll be able to actually sustain a market for this type of content. But at this point, there's a lot of either you can make it really big and successful or just, you know, kind of, you're like the starving, struggling artists who, is just doing it for the love of the medium and exploration, but you're not actually really making much of a viable living off of that yet. So I think that's the biggest thing that Rene is trying to work on is how can artists really sustain themselves and have a nice middle class lifestyle, being able to survive and participate in this industry, pushing the edge of what's possible storytelling without having to sacrifice living a comfortable life. And finally, it was just an interesting thought that Rene had in terms of what he found to be the most compelling commonality amongst the different VR experiences that he's seen that were really doing something interesting in terms of storytelling. And it was mostly around people who were just technologists and makers who had their hands on and experimenting and iterating with what's possible with virtual reality and that they would discover something that was surprising and then kind of build an entire experience around that mechanic. Specifically, Tender Claws is what he had mentioned and being able to put a virtual reality headset within VR and kind of go into these deeper layers of inception. And it was just a great storytelling mechanism. And I'd agree with him in terms of the Tender Claws being one of the most exciting companies that are out there doing a lot of really interesting experiments within virtual reality. And Tender Claws actually had a demo at the first market and They actually also have a experience at Sundance that I'll be looking forward to checking out. And I have an interview with them that I did back at VRLA that I hope to get out soon as well. So that's all that I have for today. And I just wanted to thank you for listening to the Voices of VR podcast. And if you enjoyed the podcast, then please do consider becoming a member. This is a listener-supported podcast, and I do rely upon your gracious donations to continue to bring you this coverage. So if you enjoy the podcast and want to see more, then please do contribute. Just a few dollars a month does make a huge difference. So you can donate today at patreon.com slash Voices of VR. Thanks for listening.

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