2015 will probably be a year where virtual reality (VR) gets some serious traction. With large investments made in Oculus, Magic Leap etc. in 2014, expectations have been set high. The sentiment towards virtual reality in general seems to be that the markets and consumers want to see this succeed.

However, while virtual reality is being perfected there may be a significant opportunity in the less talked about 360 video space, which may prove to be an important stepping stone towards VR adoption. Bill Gurley, a General Partner at Benchmark, with investments in companies such as Uber while highlighting ideas for 2015 (in Eric Jackson’s sleeper ideas for 2015) says, “I anticipate that many interesting alternatives to YouTube will emerge. There is so much left to do in video — it feels like we are only scratching the surface.”

360 videos may or may not be an alternative to YouTube but they will definitely take the video consumption experience to the next level.

360 content fills gap between regular content today and virtual content in the future

Producing regular video content is fairly cheap and if you own a smart phone you can even shoot, edit and publish for free. This ease of availability allows for ‘100 hours of video are uploaded to YouTube every minute’ type of stats to happen.

On the other end of the spectrum, big bets have been made on virtual reality and even though hardware costs to consume VR content are being lowered, the content creation aspect will probably remain a domain for specialists and require resources that don’t reside on your smartphone. This ‘Ascend The Wall’ , Game of Thrones’ Oculus Rift VR content production cost HBO $1.5 million to make.

Today, there is only one type of expectation a consumer has around VR — to have an out-of-this-world experience. And this costs money. But it also needs something more than money. It needs “presence”, which Chris Dixon explains in this post and Sasa Marinkovic explains here. This requires expertise that your average creator does not have today.

Between regular video content and a mind blowing virtual reality experience lies the promise of 360 degree panoramic video content. Play with these videos (yes, move around the content using your mouse or finger) — this is a professionally shot 360 video giving you a superb aerial tour of Dubai and this is a 360 video of an incredible BMX back-flip. The former probably cost some money in production value and the latter was probably shot with a GoPro rig. Neither of them cost anything close to $1.5 million to make and you could view it instantly. What is important here is to note that 1) you could enjoy the experience of 360 panoramic content without having to install new software or buy new hardware and 2) you could interact with the content.

It is safe to assume that between $50M and $100M of venture capital investments have been made so far in companies building panoramic video systems including 360 cameras. Giroptic, Bubl, JauntVR, Centr, Kogeto, Freedom360, 360Heros, 360Fly, GoPano are some of the players vying for leadership in this space. These cameras cost between $499 (for Giroptic’s 360CAM) and $699 (for Bublcam), relatively in line with a GoPro Hero4. We should expect more investments to flow into this space as the market scales, enabling the technology around it to improve and price points of the cameras to drop. For perspective, think of these makers positioned as a GoPro six to eight years ago but potentially could have a much faster path to market thanks to GoPro having paved the way.

Makes content consumption a two way experience

Regular video is just a one way experience. We see what we are shown and we can only watch what is in our frame. We cannot interact with the content. The bets being made on VR are partly driven by the possibilities associated with making content interactive and immersive. The marginal utility of delivering content in HD or 4K has reached its threshold. 3D technology never took off. Virtual Reality is still a little bit away from mass production and consumption. So where is the next new driver for mass interactive content creation and consumption going to come from? From the migration to mobile and the availability of 360 video players on it. The reason 360 videos should be exciting for content creators is that for the first time in the evolution of media it is possible to create high quality interactive content in a very low cost manner. Today you can bring a 360 POV, typically experienced in online video games at the cost of millions of dollars in production value, to a walk on the beach for less than $500.

Frictionless consumption

Empires have been built and fortunes made by making the consumption of products and services easier. 360 panoramic video technology may be the surprise winner in a content hungry environment that allows the industry and consumers to scale to a more advanced level of content creation and consumption. Panoramic videos have the pull to seriously engage viewers making it very practical in diverse and monetize-able use cases. But most importantly all this can be achieved with minimum friction — without asking users to do or own anything different than they already do or own.

Putting the viewer the in driver’s seat, literally

Play with this 360 video of Lewis Hamilton doing a lap in a Formula1 race car. If you are watching this on your mobile screen, you can use your fingers to move around the content. Now imagine these viewing angles in a live Formula1 race. Apply the same to your favorite NASCAR driver. Let’s make this more tangible for you — check out this 360 video of two guys going at it in a Go Kart track. Yes, you just saw the future of auto sports broadcast. How much value (monetary or customer stickiness) could Formula1 or NASCAR create for itself by allowing a fan to experience a live race in 360 panoramic vision from his favorite driver’s seat?

Similarly, imagine the use cases of 360 videos in selling real estate or taking a tour of the Vatican or in the world of advertisements. These are not new content ideas for 360 video technology. They have been done in the past but with a lot of friction (bigger teams required, need for multiple cameras, lack of stitching software, relevant players etc. etc.). How about the combination of a 360 camera and a drone? Or on the helmet of a Tour de France cyclist? The Dallas Mavericks are already working with Replay Technologies to replay highlights in stunning 360 views, an example of which you can see here. GoPro announced partnering with NHL to incorporate GoPro feeds in live NHL hockey games; this is an example of what a live hockey game could like. Cold Play has teamed up with NextVR to offer fans a 360 experience. Taylor Swift’s Blank Space video had a 360 interactive version, the making of which is well described here. The ideas around use cases for 360 content are limitless but the key take away should be that a content creator can now give the content consumer control over the viewing experience. And that is powerful.

Engagement driver

Engagement for any brand, entity or individual now takes place primarily online and is shifting rapidly to mobile. I believe 360 content will be adopted, by those who realize the value of engagement, as another awesome tool to keep the consumer interested and make the experience actionable. Here is an interesting write up on how the University of Southern California is executing its strategy to increase engagement with its fans. With such a proactive effort in play around fan engagement, it should be relatively easy for USC to understand the value of improving engagement through new tools like 360 video, which is now fairly cheap to do. The ROI from such efforts should be meaningful for brands to easily support adoption.

Infrastructure for 360 content creation and consumption is ready

Technology to create and consume 360 content is now available and more importantly platforms to distribute this content are now emerging. 2015 should be the year that 360 cameras go mass market and become a hot holiday season purchase. If this comes to fruition, there should be a wave of 360 content that will seek distribution platforms for sharing.

Recently, there have been reports of YouTube looking to enter the 360 video space, which if it happens would be a major validation for all players. This move is not surprising given that YouTube’s content could be threatened as 360 videos and virtual reality content start going mainstream. However, it is hard to see YouTube emerge as a dominant distribution platform for 360 content if it does not get the community building aspect (of cultivating a niche) right. YouTube’s focus right now seems to be on promoting its stars and supporting content around them. In addition they have to deal with the coming threat from Twitter, Vessel and Facebook. These distractions, potentially, leave an opening for emerging players such as Littlstar to carve a place for themselves in a growing niche.

Regardless of who wins these battles, the wave of news and deals around virtual reality hardware, software and content since CES in early January 2015 indicate that things are moving quickly. But be mindful that the path towards virtual reality will spring many other opportunities, 360 videos being one of them.

Author (Amit Dayal @dayalamit) is an investor in Littlestar Media / Littlstar

Screenshots taken from 360 videos hosted on www.littlstar.com and posted by AirPano , Visualise and Scopic