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Consumers have spent $3 billion on VR apps to date

That's a lot of $100 Bills.

Welcome to Lowpass, a newsletter about the future of entertainment and the next big hardware platforms, including smart TVs, ambient computing and AR / VR. This week: Immersive tech VC Tipatat Chennavasin shares his insights into the VR market, and Sonos is launching a new service for businesses.

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A golden age for indie VR developers

Beat this: Last week, the Wall Street Journal revealed that the VR rhythm game Beat Saber generated $255 million in sales between its initial release in May of 2019 and last October. The revelation was no surprise to Tipatat Chennavasin, whose Venture Reality Fund was an early investor in Beat Saber maker Beat Games.

Chennavasin’s investments in the VR space are informed by a lot of number crunching: He regularly scours VR app stores to count the number of reviews for listed titles, and then combines those numbers with other publicly available stats as well as internal performance data VR developers have shared with him to estimate sales figures — an approach that’s very similar to the way mobile app intelligence companies like Sensor Tower and Data.ai work.

Following the Beat Saber news, I caught up with Chennavasin this week; here are some of his latest insights:

VR developers have sold $3 billion worth of apps and games since 2016, the year Meta released the first consumer version of the Oculus Rift, Chennavasin estimates. Sales have been picking up significantly ever since Meta released its Quest headset; last year, Quest sales accounted for 73% of the entire VR apps market. “It's not a $100 billion sector yet,” he said. “But the fact that so many developers are making real money now is fascinating to me. 40 titles have done over $10 million in revenue, that's huge for the Quest.”

Beat Saber outsold every other VR game, but Chennavasin told me that the story behind the game is emblematic for the entire industry. “(It was) developed by app developers in the Czech Republic that (weren’t) really on anyone's radar,” he said. “A team of three full-time people, a couple of part-time people. They didn't come from AAA game studios, didn't have special access to anything, and they released the biggest game in VR. That's nuts. I'm looking for the next games that will do that, and I think that there are plenty to come.”

Game mechanics matter. “When we look at what's really driven the VR market, it hasn't been AAA gaming, (but) innovative game design,” Chennavasin said. “Gaming is not just about what you see, it's actually more about how you play and how you interact. The gamepad, keyboard and mouse have dictated what PC and console gaming has been for so long. Really embracing gesture control, and really reimagining game design has been the key for succeeding in VR.”

It’s time for developers to get excited about VR. “People are saying: It's not a huge enough industry yet for people to get excited (about),” Chennavasin said. “Honestly, indie game developers should be the most excited about VR. On mobile right now, you can't even launch a game without a million-dollar marketing budget. But most of these VR games have just a million-dollar budget total. They might not be making $100 million, but if you take a $1 million budget and you make $10 million, a 10X return, that investment is fantastic. Right now, we're in this golden age for indies. If you are a very creative, small team (with a) small budget, you can really have an outsized win.”

VR may just be the next big thing. “When people talk about the next platform, or what comes after the smartphone, for me, (the question is) always: What's the next app store? There are great products like smartwatches and smart speakers (that have) sold hundreds of millions of devices,” Chennavasin said. “They all have app stores that did pretty much nothing in revenue. The fact that we have a new hardware device that does tens of millions of hardware sales, but can create an almost $2 billion app store? That's awesome. We've reached that tipping point in VR where it's definitely not going away. And with Apple coming in and others like it, I think this is just going to get bigger and bigger and better.”

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Sonos goes Pro with new SaaS offering

Smart speaker maker Sonos unveiled a new subscription service for businesses dubbed Sonos Pro this week that combines licensed music streaming with central control across multiple locations. I recently had a chance to chat with Sonos Professional Director Alicia Ling about the service.

  • Sonos Pro is launching in the US for now, and the company is initially targeting small-to-medium businesses with more than two storefronts, with a focus on dining and retail. Over time, Sonos aims to expand both geographically and into other business areas.

  • Sonos Pro will cost customers $35 per month per location. For that, they will get access to a web dashboard that shows them what’s playing at every of their stores or restaurants, and control playback, down to the zone and speaker level.

  • Sonos Pro integrates with existing commercial music services, but Sonos is also launching its own programming: Sonos Backgrounds is a new commercially licensed radio service that only features independent artists, presumably to keep licensing costs down.

  • The service’s dashboard also makes it possible to put a number of restrictions in place, which include maximum volume, as well as access to AirPlay and line-in to make sure that employees don’t hijack store speakers.

  • “Recently, I spoke with a company that has a bunch of cookie shops (with) a country vibe,” Ling told me. “One of the employees loves German electronica, and that’s just not quite the vibe.” (If the anonymous employee happens to be reading this: I promise to be your first customer if you ever do open a cookie shop that plays Kompakt records 24/7!)

Sonos began dabbling in services three years ago with the launch of Sonos Radio, and added a paid radio tier in 2021. Revenue from those services hasn’t made a huge dent yet, but Sonos clearly thinks it’s onto something with Sonos Pro. “We think there’s a really large opportunity for us here,” Ling told me, adding that the company estimates that its speakers are already in around 150,000 commercial locations around the globe.

What does all of this mean for the company’s consumer business? The Verge’s Chris Welch thinks that the launch means Sonos could delay its headphones until 2024, as CEO Patrick Spence had promised one new product category for this year. That may or may not be true, given the fact that the Sonos fiscal year actually ends in September.

I do think that there’s some potential for Sonos Pro features to trickle down and become more widely available, both in business and consumer contexts. The owner of an AirBnB could probably benefit from being able to centrally manage the property’s speakers, and some web-based controls would be pretty neat for end users as well — if only for the fact that the Sonos desktop app is long overdue for a replacement.

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What else

Apple plans to bring iPad apps to its VR headset. The company plans to make millions of iOS apps available on its headset, according to Bloomberg’s Mark Gurman. What could possibly go wrong?

The viewership of LG’s free linear channels tripled year-over-year. In Europe, that is. No absolute numbers, but another data point showing that FAST is booming.

Netflix is getting rid of DVDs. The streamer plans to shut down its DVD.com subsidiary later this year. Netflix made the announcement in conjunction with its Q1 earnings, which included a bunch of other tidbits: Stricter password sharing policies will come to the US and much of the world this quarter, and ad-supported viewing seems to be working.

Meta is opening up Horizon Worlds to teenagers. Teens, who have long been on Horizon, will be officially allowed on the service in the coming weeks.

Americans spend an average of $48 on streaming services per month, and many of them think that’s too much. That’s good news for free, ad-supported streaming … and bad news for much more expensive pay TV services?

Snap’s latest hardware is an AR mirror for retail outlets. Mirror mirror on the wall, who pukes the most rainbows of them all?

Spotify’s audiobooks head is leaving in October. Nir Zicherman was a co-founder of Anchor, which Spotify had acquired in 2019.

BuzzFeed News is shutting down. Wow. 180 people are losing their jobs. I guess going forward, BuzzFeed is just gonna be quizzes and AI content?

That’s it

Like many others, I spent some of my evenings this week finishing “Beef,” Netflix’s road rage show that ultimately turns out to be about a lot more than anger management problems. Highly recommended, if you haven’t watched it yet. And if you have: Noticed any impact on your driving? I definitely have been a bit more cautious.

Speaking of being civil with each other: I had fun chatting with a few Lowpass premium subscribers on Slack last Friday, and will be around at 1 p.m. PT tomorrow (4/21) as well. Feel free to stop by, and let me know if you didn’t get your Slack invite yet!

Happy 4/20 to all those who celebrate, and have a great weekend everyone.

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