Amazon Dips A Big Toe Into Virtual Reality

Amazon (NASDAQ:AMZN) seems to have a hand in nearly every corner of the tech industry, but thus far, it has largely shied away from the virtual reality business (outside of selling other companies' headsets on its retail website). That's changing now that Prime Video is getting a VR version for some of the world's most popular headsets, Oculus Go, Oculus Quest, and Samsung's Gear VR.

Adding an app to Facebook's (NASDAQ:FB) Oculus platform won't transform Amazon into a VR leader, but it lays the groundwork for the company to make inroads in the space, which is something everyone in the industry should be both excited and frightened about.

Amazon's move into VR

Amazon recently announced that its Prime Video VR app will be available for the Oculus Quest, Oculus Go, and Samsung's Gear VR devices. "Beyond the Prime Video library of TV shows and movies, Prime Video VR also offers 10 handpicked 360° videos at launch and will continue to add VR-specific content," Oculus said in the announcement.

These videos do not currently include interactive VR that uses the Quest's full six degrees of freedom (DOF). They are three-DOF videos that are often best watched while sitting down.

Laying the groundwork for the next phase of Prime Video

The initial use of Prime Video VR will be to migrate Amazon's existing content into VR headsets. But the interesting content will be the 360-degree videos that will begin going onto the platform. When VR headsets were launched, well-funded start-ups like Littlstar, Jaunt, and NextVR took aim at the task of distributing 360-degree video content. But they never built sustainable business models, and most have undergone major strategic shifts, or shut down altogether. This leaves an opening for Amazon.

What may give the e-commerce and cloud giant more freedom in the 360-degree video realm is that it's not reliant on making money directly from the VR service. It may choose to fund innovative content -- as like it has done with the original Prime Video service -- to become a premium 360-degree video platform. There are very few financiers in VR and 360-degree video today, so Amazon could easily capture a leading position if it builds popular content.

This initial move resembles the Netflix model in VR: Pay others to create the content, but build an experience platform in-house that could one day be much bigger.

Optionality long-term

I mentioned that Amazon has stayed on the sidelines of the VR tech development game thus far, but that could easily change. The company may decide to build its own headset, a VR platform, or expand this video app into more VR content.

VR headsets have become commodified, so Amazon may not want to enter that market. On the platform side, Oculus and Valve's Steam have built the two biggest, but they're far from dominant in a still-nascent industry. It would take an intense effort to build a heavyweight service, but owning the operating system and distribution platform may be an attractive strategy for Amazon.

Right now, I think the clear path is to building an app with a serious VR content library. Some of it could be free for Prime members, and some could be available for purchase, as many streaming movies on Prime are today. Amazon has the capital to build an extremely compelling content platform within its app. Right now, it will be limited to 360 videos, but it could include full VR content in the future.

Every technology company (and every investor) should be watching Amazon's moves here. It may be starting off small, but it has a lot of options, and now that it's putting the weight of Prime Video behind its efforts, the plot of this VR video story is liable to get interesting.

This article originally appeared in the Motley Fool.

Travis Hoium has no position in any of the stocks mentioned and has a family member who works at Amazon and owns a VR start-up, REM5, LLC. The Motley Fool owns shares of and recommends Amazon, Facebook, and Netflix. The Motley Fool has a disclosure policy.