Apple (NASDAQ:AAPL) recently took its first official step into the virtual reality market with a 360-degree U2 music video for the Vrse app.
The video was launched as part of an Apple Music collaboration with U2 called "The Experience Bus," a bus at concerts which lets fans don Facebook's (NASDAQ:FB) Oculus headsets and Beats Solos headsets to experience U2's Song for Someone video. The video features 360-degree footage of a jam session, along with other musicians around the world playing their instruments. The bus is also loaded with iPads and Macs promoting Apple Music and the music video.
Apple's demo might seem new to consumers who haven't seen VR videos before, but it's not that different from recent content for Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cardboard, Facebook's Oculus, or Samsung's Gear VR. Paul McCartney's 360-degree VR concert app, created by VR company Jaunt, beat Apple and U2 to the punch by nearly a year.
To be fair, Apple wasn't really promoting the Experience Bus as its entry into the fledgling VR market. But if we take a look at Apple's other recent moves in the space, it's clearly interested in the market. The question, however, is how Apple plans to pull all the pieces together.
Understanding Apple's VR ambitions
Two years ago, Apple bought PrimeSense, which designed the first motion sensors for Microsoft's (NASDAQ:MSFT) Xbox Kinect, for $345 million. Apple also filed various VR-related patents over the past year, including one for an iPhone-powered VR headset similar to the Gear VR. Back in March, Apple bought augmented reality start-up Metaio, which owns dozens of virtual reality patents, for $32 million. In August, Apple reportedly poached a top AR audio engineer from Microsoft's HoloLens team.
These moves all fueled speculation that Apple might create a VR headset to compete against the Oculus Rift, an AR one to challenge HoloLens, or something in between to take on both. If Apple launches an AR or VR headset, it will probably arrive much later than the Oculus Rift or HoloLens, which are both expected to launch next year. But arriving fashionably late to the party isn't a new strategy for Apple -- it disrupted the smartphone, tablet, and smartwatch markets in the same way.
Understanding the VR market
For now, the biggest challenge for the VR market is raising mainstream awareness of VR platforms. That's why Google launched Cardboard, a cheap DIY headset which turns Android and iOS into crude but effective VR headsets. The popularity of the Cardboard app, which has been downloaded up to 5 million times on Google Play, convinced more developers to create VR apps for the platform.
Google also partnered with GoPro (NASDAQ:GPRO) to launch Jump, a VR filmmaking initiative that uses massive multi-camera rigs to create 360-degree videos for YouTube. Those interactive videos can also be viewed in Cardboard. Earlier this year, Facebook formed its own VR film studio, Oculus Story Studio, to create original content for its headsets. Facebook also recently launched 360-degree News Feed videos, which might complement the Oculus launch. Apple and U2's Experience Bus is yet another way to spread mainstream awareness of VR hardware and apps, although it will likely reach fewer far people than Google, GoPro, or Facebook's efforts.
Tech M&A advisory firm Digi-Capital estimates that the VR market could grow from nearly nothing today to $30 billion by 2020 thanks to the arrival of new VR hardware, films, and games. But if the mainstream market never fully embraces VR, those estimates might be too high.
It's about Apple Music for now
Apple is clearly interested in the VR market, but it could be a long time before the company develops its own VR headset or software platform. For now, Apple is merely capitalizing on the hype about VR to promote Apple Music. In the future, Apple could launch similar VR buses with other artists in the future to promote the platform.
Apple Music had 15 million individual and family accounts and 6.5 million paying customers at the end of last quarter. This means that it's quickly catching up to market leader Spotify, which has over 75 million active users and more than 20 million paid subscribers.
However, investors should remember that Apple Music is an ecosystem play rather than a revenue one. Even if Apple Music eventually matched Spotify's 2014 revenues of $1.2 billion, it would only account for less than half a percent of Apple's projected sales for this year. Instead, Apple Music -- along with iTunes and the App Store -- is just another way for Apple to lock users into its ecosystem and prevent them from swapping to Android. That strategy ensures that most Apple customers return year after year to buy new iPhones.
Leo Sun owns shares of GoPro. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Facebook, and GoPro. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.