Postmortem: VIVID Virtual Reality Cinema

In 2016 I co-founded a pop-up virtual reality cinema in Toronto. This postmortem reflects on that experience and, to my best ability, distills lessons learned along the way. 

The idea

The world was captivated by virtual reality in the beginning of 2016. Oculus and Vive were set to launch later that year. Google Cardboard and Samsung Gear VR already offered glimpses of this new reality. 

Imaginative filmmakers experimented with VR for storytelling. VR promised to remove the “fourth wall” that separated audiences from performers, opening up the space for immerse storytelling. One film, Imago, told the story of a paraplegic girl from her perspective. Audiences looked down to see her broken body in a wheelchair, looked back to see her helper, looked up to see her family argue about her. 

Yet despite filmmaker and audience enthusiasm for VR, I saw a deep disconnect in access. High end virtual reality gear at the time required powerful computers to run. Even lower end devices required gear investment. Consumers wanted VR, but few were willing to dish out hundreds to thousands of dollars to access this nascent content ecosystem. 

My idea was simple. I wanted to create a physical cinema space that exhibited VR short films, bridging the divide between filmmakers and audiences. We would operate similar to a traditional cinema: licensing, curating, and exhibiting VR films for our audiences. 

The go no-go decision

As I modeled out the opportunity, I recognized that the biggest unknown was licensing. If I could license emerging VR films at a reasonable price, everything else was operational. Film licensing was a complicated business involving minimum guarantees, exclusivity, and other provisions. At a high level, exhibitors paid producers a percentage of box office ticket revenue, sometimes as high as 65%. 

In the cloistered world of entertainment, I was an outsider with no experience or connections. But I was also scrappy. I took a crash course on film licensing and set up a simple web landing page, promising to open a VR cinema sometime later in the year. I then reached out to filmmakers with VR films that have already won awards at Cannes, Tribeca, and other festivals, asking to license their films under my terms. 

To my surprise, the response was overwhelmingly positive. VR filmmakers were facing the opposite conundrum: there was literally nowhere to exhibit their content. Their beautiful creations were showcased at film festivals and then shelved, because no one knew what to do with them afterwards. They were eager to license.

One of our filmmakers in action. Custom rigged camera to shoot first person view

In the course of my exploration, I even had licensing conversations with the Head of Strategy at the New York Times. The NYT had produced a beautiful VR documentary on New Horizon’s exploration of Pluto called Seeking Pluto’s Frigid Heart, but didn’t know how to monetize the content. They admitted that I was the first person to ask about licensing. Though I never got Pluto, these conversations convinced me that I was solving for a real pain. It was time to build a cinema. 

Assembling a dream team

There’s an African proverb that says: “if you want to go fast, go alone. If you want to go far, go together”. I knew I needed to assemble a stellar co-founding team. To that end, I recruited two co-founders who became instrumental to VIVID: Crystal Chen, who led all things operational, including staff hiring, logistics, space leasing, and finances; and Gary Tam, who led our branding, marketing, and media outreach. 

Between the co-founders, we decided that building a permanent VR cinema was too much risk. We simply did not know how audiences will engage with VR long-term. Instead, we opted for a two-phase plan. First, we would open a pop-up cinema that would run for two to three months to test the market and gather data. We would only open a permanent cinema if the pop-up performance gave us enough confidence. 

We set our pop-up launch date for July 2016, giving ourselves five months to build everything from scratch. Building any business in five months is tough. Building a fully functioning theater with staffing, films, and physical location was many times more so. Reflecting back, two elements made hitting this timeline possible: first, a strong team with clear role definitions, responsibilities, and decision authorities. Second, a relentless focus on things that actually matter. 

Our name, brand, and marketing

We wanted our brand name to start with a ‘V’, to signal virtual reality. We had initially toyed with the name ‘Virtual’, but abandoned it for SEO reasons. ‘VIVID’ fit all those descriptions: it was unique, easily searchable, started with a V, and reflected our mission. 

Public perception associated virtual reality with gaming and technology. But we were not going after gamers or tech enthusiasts. We targeted a broad audience of film lovers. From the beginning, we made the brand decision to deemphasize tech and emphasize content. VIVID was about using VR to experience new worlds and new forms of storytelling. It was meant to inspire, not be a tech demonstration. 

One of our creative assets

We depended on three forms of marketing: earned media, performance-based marketing through Facebook, and viral word of mouth. Our VR cinema was the first of its kind in North America, and we figured that distinction would help us attract media coverage. We were right, but it worked too well. 

One local media outlet announced our launch before our news embargo lifted, sending thousands of interested audiences to our website prematurely. Unfortunately, we had not fully set up our online booking and ticketing system at the time. I watched helplessly as thousands came into our still-under-construction website and quickly left. We could not convert a single one into purchase. It was a moment of deep frustration for me and the team. 

Our operations and films

Our film experience worked like this: we exhibited three short VR films per screening. Each film lasted around 5 minutes (VR films were all short and experimental). In between films, we provided filmmaker commentary and hosted small discussion sessions. The whole experience lasted ~30-40 minutes and cost $20 CAD. 

For our location, we leased a gallery called the Milk Space, which we converted into a VR cinema that fitted 20 audiences per screening. We also hired an amazing crew of retail staff to serve our customers: two managers and six crew members. We looked for staff who were empathetic and deeply passionate about the arts. Many were film students who were excited to be a part of a new future. 

All smiles: the VIVID team

We ran two slates — or six films — in our pop-up cinema. They included a space horror, a documentary about endangered rhinos, a postmodern thriller, an intimate love story, and more. We carefully selected and curated these films to provide breadth and diversity for our audiences. 

Launch and our audiences 

After months of hard work and multiple test runs with our friends/family, we officially launched in July 2016. The public response was amazing. Our occupancy rate was consistently over 70% and we were profitable from day one. 

Even more gratifying to me was the audience reaction. So often, I saw audiences lift their VR headsets in awe. They would turn to their friends or strangers next to them and say: “Wow, did you see that?”, which then turned into long discussions. Many stayed long after the screenings ended to chat with our staff and each other. 

Over the course of 2.5 months -- the length of our pop-up run -- we served over ten thousand audiences and exposed Toronto to virtual reality films. We were featured by over 15 news publications and consulted for the Toronto International Film Festival (TIFF). It was an incredibly gratifying journey. 

Video encapsulating our audience experience.

Decisions on permanent location 

Whether we should build a permanent location was a difficult decision. On one hand, we ran a continuously profitable pop-up business that received so much audience and community support. On the other, we saw troubling red flags that we could not ignore. Weighing the benefits and drawbacks, we ultimately decided not to pursue opening a permanent VR cinema. Below were key reasons. 

1. VR film content was not yet strong enough to compete with traditional films: Our occupancy rate was falling over the course of 2.5 months. If we projected this forward, it would eventually lead to a rate in which we cannot profitably operate the business. More troubling was our repeat customer count. We intentionally scheduled two slates over two months so we can measure repeat customer count. Audiences came the first time for the novelty and experience, and the second time for the content. We saw very few repeat customers despite rave reviews. This signaled to us that VR film content was not strong enough to re-engage audiences.

2. VR cinemas did not enjoy levers of traditional cinemas: First, concession sales. Cinemas made most of their revenue through concession sales (popcorn, soft drinks, etc.). For obvious reasons, it’s much harder for audiences to eat popcorn or drink Coca-Cola when immersed in virtual reality (though we had audiences try!). Second is what I’ll call staff leverage. In traditional cinemas, a few staff in ticketing, concessions, and control rooms can serve hundreds of audiences. This is not true for virtual reality, as the process of putting on headsets, etc., is personalized. We found that it was hard to serve audiences beyond a staff-to-audience ratio of 1:6. There were limited economies of scale to be had.

3. We saw limited upside: to put simply, we possessed few barriers to entry. We did not own content, technology, or exclusivity of any kind. As our pop-up success became more widely known, we heard rumblings that major movie theater chains were converting some of their former arcade spaces for virtual reality screenings. We also saw imitators pop up. The reality was that our head-start gave us no competitive advantage long-term. If the market really took off, we’d compete with many others for very thin margins. 

As Kenny Rogers famously sung: “you gotta know when to hold ‘em, know when to fold ‘em”. With the benefit of hindsight, I believe we made the right decision. We also learned a ton along the way. 

A snippet of our customer reviews.

We achieved 4.6 / 5.0 overall score

Postscript: thoughts on the future of storytelling in VR

VR has changed in the intervening four years, but many of the challenges we saw remain the same. Shooting live action in VR continues to be incredibly difficult, if not impossible. Paramount to any virtual environment is the sense of depth: things that are far away appear far away. Depth perception in humans is created through stereoscopic vision. That is, we have two eyes that perceive objects at slightly different angles. 3D films achieve depth by essentially shooting with two cameras. But how do you shoot 3D across all 360 degrees? It’s a problem constrained as much by technical innovation as by the laws of physics. Google and others have attempted to solve this with clever workarounds — but none have achieved groundbreaking success. In the absence of depth, all live-action VR films are essentially 360 degree videos that appear flat and unconvincing. 

Depth is much more easily created in simulated virtual environments like game engines. At least in the short term, VR storytelling is likely to be constrained to virtual (e.g., 3D animated, game) worlds. 

New mediums demand new ways of storytelling: it’s not enough to simply recreate existing experiences (films, games, etc.) in virtual reality. New and previously unattainable experiences must be introduced and embraced. Things that storytellers take for granted in older mediums — like how to guide attention — need to be rediscovered. Steamboat Willie launched an era of animated motion pictures with sound. Avatar did the same for 3D movies. The Avatar of virtual reality has not yet arrived. 

Technology and device penetration are also key. New Oculuses now embed processors within the device, freeing users from cumbersome wires tethered to computers. Hit games like Half Life: Alyx are driving consumer demand for VR devices, which in turn provides more reason for other creators to build on VR. VR device penetration has quietly grown at an exponential rate. 

Source: https://www.roadtovr.com/analysis-monthly-connected-vr-headsets-on-steam-record-high/

VR devices are becoming increasingly powerful: with higher frame rate, higher visual fidelity, and lower latency. The combination reduces nausea. Nausea is induced when the eyes see things that they shouldn’t see, which the body interprets as ‘I ate a poison mushroom’ and responds by inducing vomit. This occurs in VR when a user turns her head quickly and the images don’t catch-up fast enough. These issues will dissipate with ever-increasing compute capabilities, furthering consumer adoption. 

In the grand scheme of virtual reality’s possibilities, I believe we’re still in the first innings. I’m proud and grateful to have taken a swing with VIVID.