When Odesa-based tech entrepreneur Bogdan Nikitin first visited the VR club — a place where people play video games wearing virtual reality headsets — he was so transfixed by the concept that he decided to open a club of his own.
He invested $13,000 to start his first club and was surprised that the company immediately took off.
Nikitin continued to put money into Cube, now a chain of 25 virtual reality clubs, the biggest in Ukraine. One club in Kyiv brings its owners $5,000-$6,000 every month and fully returns on investments in nearly 10 months. But in smaller cities the company is struggling to stay afloat.
Now Nikitin wants to expand his business into Europe because he cannot grow the company further in Ukraine — there is simply no market left for virtual reality in the country.
“Here, we always have to explain what virtual reality is,” Nikitin said.
That is the paradox of VR in Ukraine. Globally, the virtual reality market is valued at $6.1 billion and is expected to grow to $20.9 billion by 2025. But here only a few companies have delved into the technology and found use for it in art, entertainment, architecture and science.
“Businesses are still wary of VR because they don’t know whether they will get a return on their investments,” said Natalya Zheltukhina, a virtual reality expert at the Ukrainian tech company Sigma Software.
Emerging market
Virtual reality began as the territory of gamers who used VR headsets and gloves fitted with sensors to feel as if they were inside their video games. In VR, players can move, jump, look up or down and control objects with their hands or eyes.
For example, in Nikitin’s virtual reality club, a player can become a warrior and fight aliens or villains with a digital sword. In reality, their hands are empty, but when they put on a headset, the sword looks and moves realistically.
But VR technology has more practical uses, making it attractive to investors and businesses, according to Zheltukhina.
International tech giants like Amazon, Apple, Facebook, Goo gle and Microsoft saw the potential early on and invested in VR. In 2014, Facebook spent over $3 billion to acquire Oculus, the virtual-reality leader that manufactures VR headsets.
Ukrainian techie Daria Fedko was among the first in Ukraine who stepped into the VR business back in 2016 when there were few competitors in the market. She founded WeAR Studio to promote virtual reality tech among Ukrainian businesses.
“I wanted to show that one can use this technology to solve the real problems, not just to have fun,” Fedko said.
According to Fedko, virtual reality tech hasn’t yet conquered the market because it is expensive. One VR headset from the Facebook-owned Oculus, for example, costs nearly $400.
To reduce the cost, businesses turn to augmented reality (AR) — a technology that allows users to add digital images to the real world using the camera on their smartphone. The same technology is used for the popular game Pokemon Go, in which users walk around the city and use their smartphone camera to search for virtual creatures, who look like they inhabit the real world.
Fedko’s company uses similar tech to create AR-features for mobile apps for businesses like Pepsi or gas station chain Okko. It has helped them to increase sales and attract new customers, she said.
Immersive experience
In augmented reality, virtual objects just complement the real world. Virtual reality, on the other hand, creates a whole new world, Fedko says.
That’s why technology is widely used to experience things that are impossible in real life.
In October 2019, Ukrainian photojournalist and game designer Alexey Furman co-founded a project aiming to reconstruct one day in Ukraine’s EuroMaidan Revolution, which ousted pro-Russian President Viktor Yanukovych in 2014, in virtual reality.
In the project, viewers can walk along Instytutska Street — where the bloodshed happened — in VR headsets and see protesters and destroyed buildings like they were real.
To film the story in virtual reality, the Ukrainians spent over $20,000 that they received from UNICEF. However, these projects are usually more expensive, which limits their popularity in Ukraine, Furman told the Kyiv Post.
Given that virtual reality costs money, only big Ukrainian companies — including Unit City, Coca-Cola, Volkswagen and Microsoft — invest in the technology to provide an immersive experience to their clients.
“Because there is no market for virtual reality, businesses don’t know how to use it, so we show and explain it to them,” said Sergei Tereshchenko, the co-founder of Sensorama Lab, a Ukrainian company that works with VR tech.
According to Tereshchenko, virtual reality’s potential is huge because it can be used everywhere and for everything: to virtually explore the buildings for architects, to design and prototype vehicles for car manufacturers, or to view the inside of the human body for surgeons.
Sergei Tereshchenko, the co-founder of Sensorama Lab, a Ukrainian company that works with VR tech, poses for photos at the company’s office in the Ukrainian innovation park Unit.City in Kyiv. According to Tereshchenko, virtual reality’s potential is huge because it can be used everywhere and for everything. (Volodymyr Petrov)
“The VR market is growing,” Tereshchenko said. But, in Ukraine, it is driven by the companies that develop the technology, rather than consumer demand.
Lack of investment
Although virtual reality holds great promise, investors think that the time to monetize it hasn’t yet come.
“We don’t see big investments and big players in the market,” Nikitin said.
However, during the COVID-19 pandemic, interest is expected to surge as people stay home and strive to replace real-life experiences with the virtual ones, according to Zheltukhina.
For example, Ukrainians can film movies and music videos or organize big events like the Odesa International Film Festival in Kyiv’s One Location film studio, which uses VR technology to display any background on LED screens wrapped around the studio walls.
The equipment there costs a fortune, the studio’s cofounders told the Kyiv Post. However, the investment pays off because the studio allows the local film industry to work with all kinds of projects and reduce production costs.
A film crew works in the One Location film studio in Kyiv on Aug. 11. Founded by Ukrainian Andriy Vasylenko, One Location is Ukraine’s only film studio that uses LED screens and virtual reality tech to produce commercials and make movies. (Volodymyr Petrov)
But not all businesses are confident that they will get a return on their investment, so they experiment with the technology, according to Fedko. Many projects are still nonprofit and just showcase the possible uses of VR to a wider audience.
In November 2019, tech company Snap Inc., the developer of popular mobile application Snapchat, created an augmented reality app for the Odesa Fine Arts Museum to celebrate its 120th birthday.
With Snap’s tech, visitors can use the camera on their phone or tablet to explore the art — to add motion to paintings and get virtual explanations of the artwork.
Many companies in Ukraine are working on similar technology, but they usually sell it abroad because Ukrainian businesses cannot afford it or are afraid to invest.
“To change that, people should be more open-minded,” Fedko said.
