VR industry in China

China Paradigm transcript #90: Is the VR industry the next tech revolution in China?

Find here the China paradigm episode 90. Learn Eloi Gerard‘s (CEO and co-founder of CrowsNest) story in China and find out all the details about the VR industry in China.

Full transcript below:

Hello everyone. This is China Paradigm where we, Daxue Consulting, interview season entrepreneurs in China.

Matthieu David: Hello everyone. I am Matthieu David, the founder of Daxue Consulting and its podcast, China Paradigm. Today I am with someone I tried to interview for a long time and finally, I can interview him. He is Eloi Gerard from CrowsNest active in the Chinese VR industry. I expect from this interview to understand more about an industry we talk a lot about. This industry only has a little impact on our daily lives but things may change because in the coming years 5G is going to appear more broadly, becoming mainstream. There is a case study that Eloi worked on and for the first time, it displays actual results on this digital technology importance for China. It shows numbers with VR, AR, XR – we are going to define all those words later. Augmented reality technology in China could become a big industry. This could become the next revolution maybe like the Internet and change our daily lives, by changing the way we shop and so on. Eloi, thank you for being with us today. So, what is the size of your business? What is the number of cases you have worked on, what do you do, exactly in terms of Digital technologies in China?

Eloi Gerard: Okay thank you, Matthieu, first of all for welcoming me in your podcast. It is a pleasure even if we are not actually living far from each other. We are both living in Shanghai, but it is good to be here. So, thank you so much for that. I created a company called CrowsNest 4 years ago dedicated to AR and VR. My background is more into content and creating content for the film industry. I used to be a film producer in Belgium and then in China for many years. I am here for 8 years now. I used to work for many years for marketing content in China. So, I was doing content for TV commercials as well as for multiple types of other marketing projects. I founded the company in the VR industry in China to dedicate our attention to AR and VR and the content in AR and VR. So, we are a studio and an agency where we really help brands to create experiences in VR and AR. One cool thing to know about CrowsNest because many people ask us, “CrowsNest; what is that? What does it mean?” You know, the crow’s nest is, in English, that part of a boat you have a mast and on top of the mast, you have this little platform called a crow’s nest where sailors are using the glasses to look around and to see in 360-degrees. So, we used the name because in augmented reality technology in China you can look in 360-degrees as well. This is why we decided to name the company so.

During the last 4 years, we had the chance to work with multiple types of clients in very different areas.  One of our first clients was a French client – Peugeot/Citroen – asking us to help to promote innovation inside Peugeot/Citroen with virtual reality devices in the Chinese market; a very wide thing.

We didn’t ask for a lot of money for this first case study. We tried to create bring attention to our service in the VR industry in China. We did our first 360-degree video for virtual reality devices in the Chinese market. The first one but not the last one since we are still using this technology to interview people within Peugeot/Citroen, to showcase what happens in their research and development center and different other applications. The goal is to visualize these types of things within Peugeot/Citroen to then attract talents and leverage on the Chinese virtual reality adoption. So, this was the idea.  After that, we had several cases for travel agencies and we still do a lot of cases in the travel industry because augmented reality technology in China is super appropriate to visualize the space. When you decide to go to Thailand, you can visualize what it would look like to go to a Thai hotel and see what it looks like to visit temples, what it looks like at the beach, etc.

Digital technologies in China are a super appropriate way to visualize that because you have a 360-degree view which creates a  new trust relationship between the consumer and the seller. In fact, when you are looking at a hotel with virtual reality devices in the Chinese market you can really see how it looks. There is a new brand promise out there. Now, with VR, you can see everything. You can see the view on the beach and you can actually see if there is a factory or something that would ruin the landscape. Without this new technology, when you are booking your trip on Expedia for instance, you will only be able to see a few pictures. Of course, the pictures will not tell you the reality because this is the job of the hotel to try to sell you something. They will really try to show you the best part of their establishment and you cannot really trust the pictures. Of course, it is the best photo that you can take and when you arrive there, there is actually a factory.  VR has the faculty to change this relationship.

Matthieu David: Let’s go a bit on the case studies and especially the one about tourism. We understand that Chinese virtual reality adoption can enhance the vision you have of somewhere you want to go to, but currently if I want to do use this technology; both on the promotion side and on the consumer side, where should I go? What virtual reality devices in the Chinese market should I use? Are we talking about something existing or something that is still experimental?

Eloi Gerard: So, you have numerous channels. For example a YouTube VR. You also have many influencers using VR, using 360-degree cameras to tell their stories and their travel stories around the globe. You do not only have YouTube VR. There is Facebook VR for instance which makes use of the Chinese virtual reality adoption. Facebook is one of the main investors in the VR field. On Facebook, you can upload videos in 360-degree. There are also Chinese platforms dedicated to the VR industry in China. 

Matthieu David: If I am on YouTube and I search for YouTube VR. Is there a channel or is it a platform called YouTube VR? What about Facebook? Is it a channel or is it a tool to upload?

Eloi Gerard: Yes, it is not something you can really visualize from your computer. You need to have one of the leading virtual reality devices in the Chinese market. In each headset, you have an App Store where you can download YouTube VR and from there you will start watching content. In the end, it is like if you were watching YouTube on your phone.  

Matthieu David: Got it. So, in VR we are all experimented with a headset and putting your phone in the headset. It is not really what you are talking about. This is a thing that could become popular because everyone has a Smartphone, but very few people have an Oculus.

So, going back to my question; you can set up and create this 3D environment or this VR environment or these pictures, even, but if you don’t have the headset where is the market currently? Again, are we talking about something experimental? It is very interesting to see the experiment and I know that you worked, for instance, on events in shopping malls or events. Are we still talking about entertainment or we are now talking about mainstream and real Chinese virtual reality adoption?

Eloi Gerard: So, what does mainstream mean? I don’t really know. To give you some numbers; at the beginning, we had this little cardboard box where you could put your phone in to visualize your content and this is not existing anymore. We don’t do that, we don’t use this type of virtual reality devices in the Chinese market anymore. The quality was really poor. It was great to introduce people to what augmented reality technology in China is. Now, we use proper VR headsets. You need to have that type of headset and connect it to your computer. You need a powerful PC to visualize complex content like games but there are also stand-alone VR headsets like the Oculus Quest which is the most popular VR headset at the moment. Sorry, what was the question again?

Matthieu David: So, my question was: are we talking about entertainment like headsets you may find in a shopping mall or at an event, or are we talking about a mass market and real Chinese virtual reality adoption?

Eloi Gerard: Okay, so at the moment there are between 10-20 million VR headsets sold every year.

Matthieu David: All combined?

Eloi Gerard: All combined and worldwide but we don’t know exactly the numbers for the VR industry in China. I would say this is the estimate that we have. So, you have for example around 4-5 million Sony PlayStation VR glasses being sold worldwide which represents approximately the number of users. When we combine users with Oculus, Windows mixed reality then, we estimate that there between 10-20 million headsets are being sold every year. This represents maybe 40 to 60 million users per month who are active users worldwide. We don’t really know. We don’t have that type of data for these digital technologies in China.

Matthieu David: Is it mainstream then, is there really a Chinese virtual reality adoption?

Eloi Gerard: It is not mainstream. It looks big and the numbers are millions, but compared to the potential market it is ridiculously small. Nevertheless, virtual reality devices in the Chinese market are not technologies that are made or that will become something that everybody will have. It is dedicated for specific purposes and for a specific audience, the first one being the gamers. So, gamers have already a powerful computer and they are very delighted to buy a headset and to enjoy many different types of new games with this technology. It’s a very large community that displays Chinese virtual reality adoption.

If you know about gaming, for example, the platform Steam – which is the leading gaming platform –calculates that one percent of their clients are using Steam in VR. Steam is gigantic, so one person is already big, but it is only one person. Then next to the gaming industry, you the narrative experience for the VR industry in China. This is for people who are using VR to watch films in China and watch content in 360-degrees to experience very new types of artistic experience and new types of story-telling. This is mainly driven by festivals that promote Chinese virtual reality adoption. Numerous film festivals around the world have now a category dedicated to VR. For example the Sun Dance, the Venice Film Festival or Try Baker in New York.  In China, we have a festival in Qingdao called the Sandbox Subversive Film Festival which is super popular and super important for us here in Asia and where all creators come to see the selected work from the VR industry in China. So, it is a new type of experience which is not a film and which is not a game. We try to drive emotions by a narrative or a story delivered to spectators via virtual reality devices in the Chinese market. This is quite confidential, but this is quite important for the VR industry in China. In general, you have to go to the festival but some of them can be downloaded via the Ocular store or Steam. It is the research and development department of the entire VR industry. That is where the industry is at the moment. Trying to see what best language is to be used or what can we developed.

Then, besides that, there is a huge application for education and that’s where there is more Chinese virtual reality adoption. Many start-ups are working in the educative fields to try to really think about how we can learn something with the use of VR and AR and digital technologies in China. How can we visualize objects in science with augmented reality technology in China? How can we learn about space, planets, the human body and all these things that can be visualized in 3D? It was not possible before but now you can really imagine that type of thing and all the applications of the VR industry in China. So, many start-ups and many big educational companies are investing in that field. It is still the beginning of the VR industry in China since we need to have an entire ecosystem of schools having VR headsets, other virtual reality devices in the Chinese market and content providers.

Matthieu David: So, you mentioned specifically in your presentation a case study for Thomas Cook. For people listening to us, people may wonder why we talk about Thomas Cook, but Thomas Cook is still active in China. Actually, the brand was just bought a few weeks ago by an investment fund that invested before in Thomas Cook. So, you have worked with Thomas Cook in China. It is something I really want you to talk about. You comment with numbers about results which is a word I rarely see when we talk about the VR industry in China, AR or XR. You say that Chinese-based platforms got a certain number of western-based customers. I remember a total of 50 000 people and times two in terms of sales and booking. My question is: if so few people have the equipment, if actually it is so selective, then, what are we talking about here? Could you explain more because it seems that there is a gap between those results which seems good in terms of engagement, in terms of numbers of users but that it contrasts with the fact that very few people can use it? What was this campaign for?

Eloi Gerard: So, for Thomas Cook, it is a great example where we created travel content and then we pushed this content on the market like on  YouTube VR and Youku VR for  China – YouCool being the equivalent of YouTube in China. There are also different types of platforms that are less known and we basically uploaded that there as well. We then asked the platform to push our content to their existing users in China that is driving the Chinese virtual reality adoption. The idea is that while the users are watching this content they can be redirected and they are on their computer so they are watching something. Then,  they can be redirected and click on the link to follow the next steps in their journey from watching the content to actually book on the website of Thomas Cook. Platforms could calculate that there is a follow up from the content in VR to the website and it displays the success of augmented reality technology in China. So, there is a clear link between watching the content to actually buying this travel that they just watched.

Matthieu David: Okay, to make sure that people understand what we are talking about: people you are talking about, were they using a VR headset or they were using their phone?

Eloi Gerard: They were using both virtual reality devices in the Chinese market. You could watch 360-degree content form your phone and then you can swap to visualize what it is and we imagine that many did it this way. So, many people could watch the content on Google but many people watched it in VR too. We don’t know exactly how many people used the new digital technologies in China to visualize the content.

Matthieu David: I see.

Eloi Gerard: It’s part of a wider campaign using virtual reality devices in the Chinese market. So, you know, you don’t know if you can actually build that to social media. We know that there are different components but the main result of this campaign is increased sales. We had the same impact with another company we worked with. Logitech, after creating VR content for them, they saw their sales increased by 2 thanks to the Chinese virtual reality adoption.

Matthieu David: So, I understand for Thomas Cook, it is pretty clear. You are offering a 3D immerging experience for people who want to go for a trip and you use augmented reality technology in China. You are able to convince them that the place is like in the pictures. It is good enough to have a better experience and a better understanding of reality than just having a simple picture. Then you have also worked for Logitech. Would you mind telling us what you did for them because it seems less intuitive for me than for the travel industry? Travel seems to be like obvious choices for digital technologies in China, but what about Logitech?

Eloi Gerard: So, they do accessories for gamers. You can imagine that the community of gamers is a community very interested in the VR industry in China. So, what they do is a steering wheel. You can play video games with their steering wheels for different games like GTA or like many other of these types of games. You have to plug the device into your desk or you have a full machine where you have the pedals and a gear to actually have the feeling that you are driving a car. They built that and they sell that. They are the leaders of this market.

You feel that you are driving a car and they wanted to know how they could promote their new version of this product in a nice way. So, they had this idea to try to reach the existing gaming community with virtual reality devices in the Chinese market and to promote these accessories to the gaming community. There is a perfect match out there. It makes sense because gamers who want to buy this type of thing are probably also those who have a VR headset. So, what we did is that we created a 360-degree video where we shot the actual partner of Logitech and celebrities from Japan. They are super cool and famous drivers. One of them is the guy who invented the drift. So, we went shooting with him on the circuit. He was explaining to users or consumers of Logitech how to do super cool things with a car and how to drift. He was also explaining how to use the steering wheel of Logitech.

So, we mixed a bit of the experience of being on the circuit and him explaining how to use the gaming gear with augmented reality technology in China. So, in this case, it is just a super cool content because it is a celebrity and for a specific community. The content is quite cool because it is a circuit so you are within the car. It is fast and it’s nothing like a travel experience with Thomas Cook. It is something that would be more appealing for gamers and it is pure branding content at the end. It is inspiring. It is a brand story. It is peripheral content for the main thing, but it is a super cool content. It is the kind of content people want to watch with their virtual reality devices in the Chinese market.

It is not like a TV commercial not using digital technologies in China. It is a celebrity giving tips on how to drive in video games. So, it’s not directly selling the product. It is a kind of soft advertising using Chinese virtual reality adoption and this is why people really love it.  People watch it in VR and after, they are redirected to buy the gears. Again, the sales have increased thanks to this campaign and I think it was the main content of the campaign. It was a global campaign and the content was even in Japanese. So, you can imagine how difficult it is to reach a wide audience. We had to translate the subtitles in English of course and I think in Chinese as well. There is way more engagement with these types of augmented reality technology in China. So, it is always about creating a great concept that reaches the audience that you want to reach. It is not like if you want to do something, but it doesn’t reach a specific audience. If you want to reach a generation Z gamer then, digital technologies in China are just super cool. You will totally differentiate yourself and engage very differently with your community.

Matthieu David: Let’s talk about the definition. I think that most people understand what VR and AR are. Nevertheless, for the other one that you are using which are XR and AV, they are probably not very clear on what it is. I am going to try to define the first two and you tell me if I am right. VR uses a totally new environment, totally virtual. What you can see is something that does not exist in front of you. AR is implementing through the lenses of a headset some items that are virtual in the place where you are. So, to give an example, you are in your home and you could actually picture new furniture, like Amazon furniture for instance – you have a case where you put furniture in a place. For VR, you would be in another apartment, somewhere else in the world and you could see the new furniture, etc. What about XR and AV and correct me if you think my definition is not proper?

Eloi Gerard: No, you are totally right. You have got it very well. So, the fact is that we are evolving in the VR industry in China and we notice that there could be different things between VR and AR. So, when we at the beginning considered that AR would be just like something like Google Glass where you have an overlay of information coming up to you thanks to virtual reality devices in the Chinese market. The industry progresses. The power of the microprocessor became better and better and we could start tracking it, we could start positioning objects into the real space and this became the new definition of AR where we have transparent glasses and we can see an object positioned on the table or an animation. So, 3D objects, something else made by a computer or something that you see all the time; something like a car on a poster or advertising for a car is actually not really a car. It is a computer-generated car that you use to visualize the car on the poster which is very commonly used by architects to create buildings. So, in AR you see the real world and some of the artificial elements while in VR everything you see is made by computers or shot and then surrounded by an artificial world. We invented a concept similar to augmented reality; AV which means that we can replace existing objects and mask them with other things. So, for gamers in AR, we like the idea that you are at your place and you see a sofa and the sofa is transformed into a castle thanks to augmented reality technology in China. This is augmented virtual reality. So, there are multiple stages between AR and VR where you can see around you and for instance your wall can become something different. It is not a simple object. The world is transformed into a full VR world.

Matthieu David: I see, so what we say AV is augmented because you add a layer of virtuality on something that is existing and the AR is more like you add a perpetual element into space which is real?

Eloi Gerard: Yes, exactly, but then we start calling a mixed reality; MR. So, with virtual reality devices in the Chinese market like the Oculus Quest or the new few HDC device, you have a screen but you also have cameras that are actually shooting the real-world. So, from inside you can see the real world and this real-world can be entirely replaced by a virtual world. These glasses could be considered like mixed reality glasses because with the same headset, you can have an AR experience or you have a full VR experience and everything in between. So, this is what we call mixed reality.  This is why Microsoft has called its technology Microsoft mixed reality which is used to define the headset and the software used as digital technologies in China.

It is a bit complex because mixed reality doesn’t qualify. You would talk about mixed reality when you talk about the headset that can do all of these things, but if you want to talk about the industry it is different. If you look at startups doing AR and startups doing VR you would maybe think, that they are doing the same thing. If you do VR, you are in special computing and you are building worlds and are organizing information in the space to promote the Chinese virtual reality adoption. To qualify this entire industry, we came up with the idea of the name XR which can mean extended reality or which can mean cross reality. So, XR qualifies the entire VR industry in China so that you can say: “We are CrowsNest XR because we can help you with your AR needs or your VR needs.“

Matthieu David: So, is it XR? Is it a word that is common in the VR industry in China or have you created this word?

Eloi Gerard: No, I don’t create words. It is commonly used in the VR industry in China. It has emerged like 3 years ago. It was created by our industry because we started using it and then it became a real thing, but I didn’t create it myself.

Matthieu David: I wasn’t sure if it was a company word you were using internally or it was an industry word. Our focus is China in China Paradigm. You talked about Oculus which is made by Facebook. You talked about YouTube VR, but how does it work in China? Do we have the same issues as the main platform where Facebook is forbidden? Are some headsets also forbidden in China? We know, for instance, PlayStation and Xbox were forbidden for a long time in China. It was 3 or 5 years ago only. So what are the limitations you see in China compared to the west?

Eloi Gerard: Yes, we have all these problems that you are talking about. So, the main leaders in our fields are Sony and PlayStation VR. They are now in China and in the rest of the world they can really leverage this gigantic network and when they publish a game in this platform it can reach China as well as the rest of the world. For the second largest one which is Oculus, it cannot officially enter the Chinese market. So, you need to use a VPN to actually use it in China, but it is so compelling that many people are using Oculus with a VPN in China. You can buy an Oculus Quest on Taobao, T-Mall or JD.com for instance if you are part of the Chinese virtual reality adoption trend. Everywhere you have these, but it creates a huge distortion of the thing.

Just imagine what it means for developers in AR and VR industry in China! They have difficulties themselves to visualize what is happening in the west. You have YouTube VR, you have also headsets being made by Google called Google Daydream and this doesn’t really work here. It is too slow. You need a VPN. So, the ecosystem in China is a bit separated from the rest of the world. It is less aware of what is happening there and it doesn’t really help to make the industry immerging out of China. You have multiple factors that make the VR industry in China very different from other countries. You have also the fact that the porn industry is a major type of content in the US and in the rest of the world. It is a huge industry in Japan. So, you have many studios doing porn content in VR and they are selling it on their own market which is outside of China. This drives, I guess, a lot of users who want to try VR for the first time. Friends think it is a perfect Christmas gift. You have your first experience in porn VR and then from there, you download games and other things.

In China we don’t have also enough schools of design to study film, to study storytelling and to combine three different skill sets which are being creative, being good in technology and being good in business. In the VR industry in China, you need to have a pretty holistic approach. Schools do not really train people to understand these three things at the same time in China. So, we have a lack of skill sets and a lack of entrepreneurs who could build platforms and build content to promote the Chinese virtual reality adoption. As a consequence, we barely have any studios in China that work for the VR industry in China. The number of good content is extremely small compared to the US or compared to Europe. So, there are multiple factors why AR and VR in China, even if it should be the largest market in the world, is actually a very tiny market. It could be something, but we have so many hurdles that it doesn’t always work and we hope we will see a greater Chinese virtual reality adoption in the future. This is a great opportunity for foreigners to actually do content here because there is space for augmented reality technology in China.

Matthieu David: You talked about some of the hardware being Oculus and Sony. You are talking about the representation of Magic Leap and Smart Glasses. Would you mind telling us more about something which is a bit easier to wear, easy to buy than an Oculus and a Sony glass? I think when we talk about smart glasses, we tend to talk about something we can wear in an event that is not entirely immerging but actually adding a layer of virtuality on your lenses. Would you mind sharing a bit more about the set of hardware we can use?

Eloi Gerard: So, AR glasses, like 3 years ago, were the first digital technology in China could be considered as being a hololens. Microsoft hololens were big glasses that positioned objects in the space with a field of view that was super tiny and a quality that was not great. You have to have your first project out there before it you can actually improve virtual reality devices in the Chinese market. So, every year there are new things coming from the VR industry in China that improve the technology. What we would like is a virtual reality device in the Chinese market that is not big and which is something which is similar to existing glasses or sunglasses. You could wear them in the street and no one would look at you because you have gigantic things with a battery. So, we imagine that at some point we will have this type of small glasses that you can wear it in the metro, that you can wear it at work or that you can wear it wherever you want. Information is provided to your eyes without anybody seeing it. This is probably now where we have more and more glass suppliers who have this kind of small glasses and one of the main ones is in China.

In the west, in the US, you have Magic Leap which is a bit smaller and we imagine that there will be a new version very soon that will make it even smaller. Nevertheless, with these glasses, you still need to use the battery and the power of your phone. It is small and it is the size of reading glasses with a wire that you plug on your phone to use the processor of your phone and the battery of your phone to display all these things. I tried it and it is actually super cool. It works really well. You have now a wider field of view, good quality of the image. I tried an experience where you have a cat being built by computers that looks like a real cat. He goes around you because the cat knows that you have a sofa, that you have a table, etc. You can visualize and have the feeling that you have this object around you thanks to augmented reality technology in China. Imagine the number of applications in different industries to help your factory to give you instructions about how to use the machine, to have information about the client, your sales and visualizing data in real-time. Basically, we imagine that everything you are doing with your computer, with your phone or with your television could be displayed in that type of thing in a more efficient way and in a more interesting way simply by using augmented reality technology in China. It provides more information than just having a flat-screen as we have right now. So, that is the idea.

Matthieu David: Talking about hardware, we know that China is a place for hardware and it is a place that produces products in many factories around the country. DJI is not a surprise; the drones are Chinese with DJI. What about the VR industry in China? Do you find some players which are Chinese and are getting momentum now? What do they do? How do you analyze situations of the VR industry in China?

Eloi Gerard: Yes, so in the VR industry in China, we are struggling because we have difficulties to create an ecosystem for China. There is a lack of content including hardware. You cannot sell hardware if you try to build a platform and this was the case for many hardware makers. They build the hardware and then they find a platform that is like a store, but then the store has nothing to promote Chinese virtual reality adoption. That is the case right now with HTC. HTC is based in Taiwan, but they bet on the fact that China would be surrounded by a firewall and they were right. They are Taiwanese, so they can be more Chinese than Google and Facebook and try to really get this market, but they did a mistake.

They do super cool headsets, their platform is the equivalent of the Play Store and out of that, there is almost no content for virtual reality devices in the Chinese market. We do not have any good strategy to try to bring developers and to bring exclusive content and exclusive games to these platforms to have users actually buying this headset and saying, “We need to buy it because we have this content.” They do not think “content” and Chinese virtual reality adoption. For example, you have Half-Life that has just been announced and will be released on Steam. It will be free with the Steam’s headset. That is something that drives a number of users into a platform or encourages them to buy a headset. It is always driven by the content. Users are not interested in something that does nothing even if the tech is amazing. You cannot have a game or a film or something which is cool.

In the VR industry in China, we are not good at understanding that content is key to drive user attraction. So, who are the main players and drivers of augmented reality technology in China? HTC tried to be the leader in China, but it has not found the right strategy. Should it be B2B or should it be B2C? They are quite lost into what to do and they are always too late in releasing the good product at the right time and that is why they are struggling to create a real Chinese virtual reality adoption. Then, you have Pico which is Beijing-based and they really stand out from that mess and succeed with their augmented reality technology in China. They are not so much focused on pure interactive experiences and 360-degree freedom experience or room-scale where you can move into the spaces. Then, in Shanghai, you have DPVR which is competing against Oculus in the VR industry in China. Now it is quite a small player and you have several other companies that bring virtual reality devices in the Chinese market. You have maybe Pimax in Shanghai which is a cool startup where they did one of the highest resolution headsets possible. It is big with a wide field of view. In Shanghai, they build these kinds of things and specialize in doing super high resolution and they found a niche into that world for gamers and also for industrial applications as digital technologies in China. So, you have several players in hardware and I would say the ones I mentioned are the main ones. For platforms, there is VR.TV is a 360-degree video platform based in Beijing. We try to make the ecosystem of the VR industry in China work. You do not have the big component that Hollywood has and America has which is the content and this is where Oculus and Sony are so good. These companies have access to the best games, the best content to watch. This is why it is really working.

Matthieu David: It is also impacting the production in China. China is the factory of the world. China produces actually for others in the world, but still, you don’t have a brand that has been able to produce worldwide from China. Nothing like not what happened with drones, for instance. Last question which concerns yourself and your relation with China. What do you read to stay up to date on China and in the VR industry in China?

Eloi Gerard: I actually read a lot on digital technologies in China. I read on the Internet and plenty of other media. There is not that much literature about what we do so I read all the news from the US. There is one website in China that I really like about the industry which is called Yivian.com. It is a Chinese website so you have to use Google Translate, but I think they are really doing a great job with good information on what is happening for digital technologies in China. It is about reading really all around. I mean every day as soon as I wake up I spend half an hour just looking at what is happening in the VR industry in China.

I also use Twitter to see what people are saying about the industry and read blogs as well. I really like the blog of my friend Tony. It is called Skarredghost.com. I will send it to you after and maybe you can post it. It’s a great blog where he gives all kinds of information about the VR industry in China. It is China-focused even if Tony is from Italy.

So you have different types of blogs and key personalities to follow that really give you the trends of the industry of augmented reality technology in China, but it is still going all around so, it is about technology, it’s about creativity and it’s about business. You have to follow three different types of things and you have to follow the politics of China also to understand what is going to work in China and what isn’t going to work in China. Being holistic is really important in this industry.

Matthieu David: If you had extra time, what kind of business would you start? Maybe other than VR and AR, but what would you be interested in doing?

Eloi Gerard: So, first, for AR and VR we are doing a lot of project-by-project right now and helping clients in marketing to build applications and to boost the Chinese virtual reality adoption. I think that there will be a new generation and a new moment to start building new platforms for different uses like platforms for education, or platform for travel. It doesn’t make sense to have a sea trip in VR yet. Why not? There are only a few millions of people having headsets. There is not anything like that so, I think there is a lot of space for that and also a lot of platforms for avatars and meetings like Zoom. This is typically something that could be built thanks to VR and AR. You could meet the avatar of your friends. It exists already, but it could be much better. Now, it is really the time where we start building these kinds of projects because the number of users is big enough to think about new ideas like that. Outside of AR or VR, I would not do anything like quantum computers. This is not my field of expertise. I am really specialized is in AR and VR content and these kinds of digital technologies in China.

Matthieu David: You have been in China for some years. What failure in any industry, in the society, in any company has a witness that you would not have expected before? A typical example is WeChat payments that everyone is using. This shows the failure of credit cards in China. People are not using their credit cards anymore so the success on WeChat which is digital payment and the area of credit cards could be an example. So, what surprising success or failure have you witnessed in China? 

Eloi Gerard: The biggest failure would be my industry, so, the VR industry in China. I think it was expected to be huge because of a series of factors that we didn’t really analyze properly. Like I said before, education, the porn industry is driving the sector. We were wrong about how the market would develop. The Chinese government is trying to incentivize different industries and subsidizing many companies in the field of virtual reality devices in the Chinese market. It creates a huge mess in the VR industry where they helped a lot of companies that were totally unqualified. They spent a lot of money and in the end, companies went bankrupt and created a huge distortion.

 So, can you imagine what it means for me? My company is self-funded. When we visit a client, he or she has seen three other government-funded companies before. They are not doing great work and when we arrive we tell them that we have a good product but they will say that they have already seen three other projects with VR and have the feeling that VR is not great. It created quite a huge distortion for the VR industry in China. Now, all these companies have gone bankrupt and we only have very few that are still competing. Maybe it represents only 5% of the initial companies, but these are the ones that did a great job. They have an understanding of what the market is about and are properly talking about VR. They are selling and virtualizing in a proper way. They use the technology for real cases and are not simply using the word VR just because it is trendy like some people would use BlockChain or AI right no.

What would be a good example of an unexpected success? I think that success in China has to be based on a concept that is driven by the density of the population and/or the huge amount of people that we have in China. Typical consumer internet businesses like Alibaba are great examples. Great concepts which are based on the fact that China is formed by huge cities with a lot of people on a reduced area are generally successful. Shanghai, for instance, is a city of 25 000 000 people and if you have a concept of e-commerce or of delivery, the delivery becomes so cheap because every guy can go within the same building and deliver to several apartments. In my country, for example in Brussels, a similar business model would be unprofitable.

So, I think that every concept which is about that is quite successful and it’s always a great idea. I would think about the shared bike which is a bit less trendy now. I think it is a great idea and it works really well for big cities. One bike can be shared amongst many people because it is a very dense place and it makes sense. I am a big fan of Mobike and this type of very simple idea. I really like that.

Matthieu David: Thank you for your time. Thanks for sharing your expertise. I believe that it’s going to be one of the topics we are going to use more and more when 5G is going to arrive and be at scale. VR, XR, AR and all the words we have gone through during this interview are gonna be used on a daily basis. I hope you enjoyed it. I did enjoy it and I hope everyone listening to us has learned something and enjoyed the talk. Thanks, everyone, bye-bye.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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