Espial dips toe in virtual reality waters

The Ottawa-based tech company, which creates software for set-top boxes and smart TVs, is expanding into the fledgling virtual reality sector.

“To us, virtual reality is the next screen we want to enable. It’s a user experience that adds new dimensions of depth and motion and there are some really interesting, creative things you can do with that,” says Jeff Huppertz, the director of marketing at Espial.

Though it’s still in its early stages of development and years away from being launched to consumers, staff at Espial are already conducting tests of its virtual reality technology. Users open an app on their smartphones, then slide the device horizontally into a headset, similar to cardboard ones distributed by Google.

Huppertz envisions that in the next few years, Espial’s technology will allow cable customers to login to their provider’s app, put on their headset and experience premium content from channels they subscribe to, like HBO or TSN, in virtual or augmented reality.

At the annual International Broadcasting Convention in Amsterdam this past September, representatives from Espial demonstrated a 360-degree concert experience to cable service providers from around the world.

“The experience was as if they were in the front row or on the stage,” says Huppertz. “You could use virtual or augmented reality in a lot of different scenarios, but we think live music is a case where it makes sense for an earlier adoption and use of this technology.”

Concerts perfect for VR

Huppertz says concerts are the ideal first foray into virtual reality for cable service providers because it’s high-value content that appeals to an ever-elusive demographic of customers, many of whom have never subscribed to linear television – millennials.

“If you have a popular artist like Taylor Swift or Jay-Z that subscribers really want to see, that’s a compelling event that people, especially younger consumers, would want to invest in and put on a VR or AR headset,” he says.

While the sector is still very much in its infancy, Espial’s bold leap into the world of virtual reality might not be as big of a gamble as it appears. An October report from Citigroup Inc. predicts VR and AR could be a half-trillion-dollar industry in less than a decade.

“We think the overall VR/AR market could reach $692 billion by 2025 and continue to ramp after that,” says Kathleen Boyle, managing editor of the financial firm’s Global Perspectives and Solutions publication. “VR/AR is now firmly on the radar as an investment theme and is expanding as an industry.”

New software for fall 2016

Espial has its sights set on innovative investments in the near term, too. In September, it launched its latest software platform. Branded as “Elevate”, the cloud-based, multiscreen system is now used by more than 40 cable providers around the world, including Shaw and EastLink in Canada. It contains cutting-edge features, including voice control technology and user personalization across numerous devices, allowing cable subscribers a consistent experience on their televisions, tablets and smartphones.

“When you start up the service, you click on an icon that identifies you as the viewer, and because the software knows the kind of stuff you like to watch based on a mix of your viewing habits and preferences that you’ve imputed yourself, it’s able to bring up that for you,” says Huppertz. “It’s similar to Netflix’s recommendations feature, but it goes a step further because we can expand beyond just the on-demand content that Netflix has by including live linear TV and other content providers like YouTube, Hulu or Amazon Prime Video.”

The personalization technology is also able to differentiate between PVR recordings made by different users, allowing each user to easily access the content they recorded without having to scroll through a lengthy list.

“The ability to recognize and personalize the experience really helps to make the viewing experience more efficient and more satisfying. You find the content you want quickly, whether it’s recorded, live, on-demand or on a streaming service,” says Huppertz. “You need the efficiency because we have such a vast array of content today — it’s really overwhelming.”

European interest and sales

The advanced functionality of Espial’s set-top box software has piqued the interest of some big players in the cable industry. In September, Portugal’s largest operator, NOS, launched its Elevate-powered next-generation television service, with Germany’s Tele Columbus following suit later this month – and more providers could soon jump on board.

“Espial continues to be in discussions with 25 of the largest cable operators in the world, and in deeper engagements with six operators, says Pardeep Sangha, an analyst at Haywood Securities. “Management is expecting decisions from several operators over the next six months, which represents potentially five million new subscribers for Espial.”

Despite the optimistic outlook, it’s been a bumpy road of late for the software firm. In its third quarter ending September 30, Espial posted a $2.4 million loss – its fifth consecutive quarterly shortfall. Still, analysts are bullish on the slumping stock, currently hovering around the $2 mark.

“We believe Espial is significantly undervalued. It’s well positioned to grow its sales and pipeline in the coming years,” says Sangha.

Huppertz, too, is confident that the company is on the road to steady profitability.

“We firmly believe that we’re pursuing the right long-term strategy, but in the immediate term, it’s had a negative effect on our bottom line. But our board and our investors agree with our strategy and heartily endorse what we’re doing,” he says.

“By far, the best is yet to come.”