Until now, the bulk of the financing for Felix & Paul Studios’ projects has come from Oculus and other companies with virtual reality platforms, including Samsung and Google. This is not corporate altruism; the moves are intended to address the classic chicken-and-egg dilemma faced by purveyors of new media technology: you can’t sell the hardware if there isn’t enough content to play on it, and you can’t finance the content if only a few own the hardware.
While sales for the first generation of consumer virtual reality headsets were underwhelming, a new batch of better, cheaper models, similar to the upcoming Oculus Go, which is wireless and self-contained, have the potential to transform the VR industry and, in turn, the business models used by companies such as Felix & Paul.
“If headsets 2.0 do as well as they’re projected to do or even come close, there are going to be enough viewers and customers, effectively, to inspire third-party financiers to jump in,” says Felix & Paul’s chief content officer Ryan Horrigan. “And if markets continue to grow, I think the budgets will get to a significant place.” Although he can’t comment on specifics, he says, “We’re getting close to cable television drama cost-per-minute.”
According to Horrigan, the business plan Felix & Paul is crafting is akin to those employed in the indie film world, which combine minority equity investments with foreign sales, tax credits and international co-productions. It works particularly well for Felix & Paul, which, because it is based in Montreal, can take advantage of Canada’s wealth of government tax incentives, as well as co-production treaties with close to 60 countries.
As with its counterparts in the traditional film and TV business, Felix & Paul can also use windowing — selling its projects sequentially to different platforms in a variety of regions.
The first window rights have typically gone to the VR platforms underwriting the content, such as Oculus, owned by Facebook, but there are a growing number of potential buyers around the world that could help bolster the balance sheet.
“It ranges from specific location-based venues that need content — that’s a No. 1 evolving market — to more traditional streaming distribution,” says Bryan Besser, co-founder of the talent agency Verve and a partner and an investor in Felix & Paul Studios. “There is a very large market for 2D 360 video, which can be viewed on mobile, tablet, laptop and desktop, so you don’t have to own a headset to experience it.”
(Pictured above: Oculus Rift virtual reality goggles at the 2017 Consumer Electronics Show)