Magic Leap: ‘We Do See a Very Viable Business Model Right Now For Developers’

Magic Leap was shrouded in secrecy for a number of years. Hype-filled videos about its augmented reality technology tantalized the public while the Florida-based startup managed to raise well over $2 billion in funding. It wasn’t until earlier this year that it took the wraps off its Magic Leap One Creator Edition headset, which it sells to developers for $2,295. And earlier this fall, Magic Leap held its first-ever LEAP conference. With behemoths like Microsoft, Google, and Apple all heavily invested in AR as well, Magic Leap needs to act fast if it’s going to gain any market advantage.

Magic Leap is actively courting developers who are passionate about AR. These “missionaries,” as Magic Leap’s Chief Content Officer Rio Caraeff calls them, will be critical to the company’s success. That’s why it recently launched its Independent Creator Program, which enables developers to apply through December 15 for funding between $20,000 and $500,000 per project. Those who win grants will be provided with a Magic Leap headset, marketing support and will retain the full rights to their IP.

“I call them missionaries, basically people who believe in something that’s often larger than themselves,” Caraeff described to GameDaily. “They believe that the future of computing is the digital world seamlessly and persistently integrated into the physical world. Nobody can dissuade them otherwise. In fact, they can already see it right around the corner. It’s not there yet, but they know it’s coming.

“And they feel compelled and drawn to it and for different reasons. Sometimes it’s because it’s how they define themselves psychologically, by being first and always being able to be there around the corner. Other times it’s they’re just bored, creatively or technically. They’ve already done everything that they can do. They’ve told every story on a 2D planar rectangle that they can think of, and for various reasons, they’re drawn to the fire, and they believe in it. And sometimes it’s for emotional reasons, not always rational reasons…

“We needed a way to help these missionaries… help them in the pursuit of their vision and their dreams.”

While Magic Leap has already partnered on some projects with major companies like Lucasfilm, Weta Workshop in New Zealand, games studio Insomniac, and the Icelandic band Sigur Ros,  Caraeff recognizes that some of the most interesting and creative ideas often come from the indie scene.

They just need a helping hand to get started.

“We didn’t have a structure. We didn’t have a fund. We didn’t have a way to help that end of the pool,” he noted. “There’s a lot of enthusiasm and excitement and demand there. If only they could get hardware, they would do something. If only they could get a little bit of support, they would do this thing that they want to do. And so this is really what this is all about is it’s an independent creator program designed to get hardware, development dollars, engineering support, and marketing support to the best ideas and the best teams, but with a focus on smaller teams. I’d say anywhere from two to 20 people… It’s designed for smaller teams working more nimbly, working faster.”

Caraeff wouldn’t commit to a total budget figure, but he assured us it’s in eight figures. But why max out at $500,000 on any one project?

“It’s really a function of man-hour per month estimates, in terms of the size of teams and what it typically costs to have a full-time engineer and full-time artists working on something,” he explained. “We have a lot of experience in budgeting that in terms of what we see what it can take. And so we basically used our internal tables of this is what we think it takes to make a project over this many months with this many people and essentially designed a program around that.”

While the deadline for the program ends this month, this is only just the beginning. Magic Leap intends to continue funding the AR ecosystem.

“We do envision it as an ongoing program,” Caraeff stressed. “So even though we designed the program to have an initial 30-day window with which you can apply for grants, it’s meant to be a program that we replicate and essentially launch again and again at different intervals throughout the year. And so we’re being explicit, the eight-figure investment is for wave one. That’s for the 30-day window we’re in right now.

“But it’s designed to be a program where I would say at a minimum of twice of year, we open up the program for new applicants. I wanted the concept of a graduating class, if you will… There are going to be people who have short and sweet things they’re working on that may ship in March, and then there’s going to be people who have larger scale, more audacious things that maybe are more complicated, and they would ship in June or September, but the point is I wanted the concept of a wave, of a class, a band of developers who are in it together.”

While VR still has a fairly limited consumer base, AR is still truly in its infancy. Magic Leap isn’t ready to say when they might be preparing a consumer headset. So, how will developers make money with Magic Leap’s headset? It’s great to be passionate about AR, but indies need to put bread on their table. The answer may be, for now, in enterprise solutions, not video games.

“We have a large amount of interest from enterprise customers, Fortune 1000 type of companies who are looking for specific solutions,” Caraeff explained. “Businesses, as you know, don’t buy hardware. They buy solutions to problems or they buy access to opportunities. And so basically, these companies are interested in Magic Leap to solve a specific problem or to create a specific opportunity, but these companies may not have the skills to build spatial computing or mixed reality applications or experiences. Everyday I get asked by a company, ‘Can you turn me onto a developer that I can pay to make this training application? Or that I can pay to make this retail physical, digital prototype? Or that I can pay to help me do this specific thing that I need by this date?’

“So there’s a business for developers who have experience on a platform to get paid by others to make things. And it’s not just about getting paid by us. It’s about getting paid by a whole range of businesses who have a need for talented people.”

The Independent Creator Program is just step one. It exposes talented developers to Magic Leap’s platform and technology, but Magic Leap can do much more for talented creators.

“We are going to launch a program soon, which is all about matchmaking, basically saying, ‘Platinum Magic Leap developers can get referred to this enterprise company or this corporation or this company,’” Caraeff continued. “And so this program also gives independent developers a leg up because right now all of those funds [in the AR space] are getting directed to a relatively small amount of companies who are getting all of the spoils … I see millions of dollars going to two or three companies. I don’t see it getting spread around to small developers or to independent teams.

“I think another side effect of this program will be … It will give essentially a whole new category of independent developers access to people and companies who want to pay them to make things, if only they had access to those people or people who had experiences and credibility on the platform. And these enterprise customers don’t care what the size of the app catalog is in the store, and they don’t care whether there’s a billion users or not on the platform because that’s not relevant to the problem that they’re trying to solve in their company. I know you’re more focused on games and maybe consumer optics… but we do see a very viable business model right now for developers in the enterprise space.”

Enterprise isn’t the most attractive notion, especially coming from the games world, and it also represents a broad array of industries. But the fact remains, whether it’s VR or AR, game developers are often the first people to master these technologies.

“If you look at what Epic and Unreal and Unity are doing, they’re classically game engines, but really, if you look at their total positioning they’re experience engines, they’re application engines, and they’re focused on industrial use cases, automotive design and architecture,” Caraeff said. “If you’re going to design a hospital, if you’re going to make a rocket engine, you want to visualize it and experience it in Unreal Engine. It’s not just for game developers. It’s not just for games.”

Magic Leap certainly welcomes game submissions to the Independent Creator Program, but the company clearly wants to see a diverse roster across a variety of experiences and applications. Having diversity — in both the projects and the people making the projects — will be key to growing the market, Caraeff said.

Ultimately, though, Caraeff added, “The number one criteria is really all about, ‘Does this play up to what’s unique about Magic Leap or what’s unique about spatial computing?’ If it’s something I can do on any computing platform, on any television, on any phone, on any tablet, then it’s not particularly compelling.”

Creating something that truly leverages what the medium of AR offers is easier said than done. AR is a whole new paradigm for developers to contend with.

“The creator needs to consider the analog physical world into their experience,” Caraeff noted. “When they’re making a VR game or a title for a console or a phone, the developer’s used to conceiving and composing their own world, which is all encompassing. In AR and mixed reality, my dog walking into the room is a character in the experience. The size of my coffee table, what my kids are doing, they all play a role.”

“You have to consider what I’ll call the cognitive load of the customer, of the user. My brain might have to process everything that I’m perceiving and experiencing, and so I need to be able to see my kids. I need be able to pet my dog. I need to be able to make sure I don’t walk into a wall or a table. Magic Leap is not about divorcing you or disconnecting you from the people, places, and things around you. It’s about connecting you to the people, places, and things around you and amplifying your connection to the analog physical world.”

In an era of game development where 4K HDR visuals and ultra-realism are often pushed to the max, in AR development less is actually more.

“The best AR experiences on Magic Leap are those that I would say introduce sparse digital content into the physical world,” Caraeff continued. “A little bit of pixels goes a long way in terms of the magic that it can convey to you. You don’t need to overwhelm me with lots of digital stuff because if you selectively and purposefully add a little bit of digital into my physical world that feels magical and special.

“So for example, Insomniac’s title Seedling, if it can find a light source in my room, it can grow towards that light source. That’s whether it’s a light in a window or a light coming from a lamp or a ceiling. Those are attributes of my physical world that are all of a sudden characters enabling the digital world to react to it… If the seedling can grow down the table and up the wall, it knows all about those aspects of my physical world, and it feels more real and feels more magical and special at the same when the digital world reacts to the physical world.”

AR has the chance to be truly transformative to society as a whole, many tech experts believe. Investors keep pouring billions of dollars into the market, and as impressive as Magic Leap’s funding has been, there’s no question that they’re the underdog. The Googles of the world have literally hundreds of billions in cash, and if a particular AR technology fails, it’s not going to put them out of business (look at Google Glass).

At the same time, Magic Leap has yet to really get mainstream press on its side — something Nintendo did with aplomb for the original Wii — and so you see articles like this one in The Hollywood Reporter, asking if Magic Leap has “fallen off a cliff.” You’d think Caraeff and the rest of Magic Leap’s executive team might be losing sleep over this, but they’ve embraced the underdog mentality.

“[Being the underdog] really hones your focus and refines that hustle,” Caraeff remarked. “I remember when I started my first company when I was 19, and I was terrified of all these big companies with lots of resources. And only once you work in a big company and see kind of how slow they move, how distracted they can be, how many things they’re trying to do in so many different areas, that you understand how it’s possible to run circles around them.

“I think that at the same time, you have to be sober and realistic, and you have to have a cautious level of respect for what that comes with, but I find that basically Magic Leap is just doing one thing. We’re just trying to drive the market forward for compelling experiences around spatial computing. We don’t have a hundred other businesses that we’re driving, with the good and the bad that that entails…

“And we think that ultimately the market opportunity that you’re talking about, if you play this out over 10 or more years is vast. You’re talking about the market of all computing. You’re talking about the market of every screen. You’re talking about the market of every industry. You’re talking about markets that are far in excess of a trillion dollars all in. And so you don’t really need to have 80% of the market. You can have 10% of the market and still have a $100 billion company there as well.”

For Magic Leap, Caraeff believes success or failure all comes down to how the company puts people at its core — both in the developers they work with and in the people they one day hope to touch with their technology.

“I think Magic Leap has always been focused on people, not myopically focused on a sales channel,” he said.

“We believe there’s just people at the end of the day, people who go to work, people who have families, people who need to be productive, people who need to informed, and need to be entertained, and so the flame that we carry at the company is firmly rooted in that, in that focus on people, focus on freeing your mind, captivating your imagination, activating your inner 12-year-old, giving you super powers.

“That’s very much kind of why we’re at Magic Leap and how the company was founded, and so that’s what we believe in, and so we’re going to carry that flame until there’s enough of a market for that. But in the meantime, we also have to go where we find there’s interest and demand for our product. So we’re learning about the enterprise market. We’re engaging with these customers, and then we’re adapting and going forward because we need to make sure that we’re around in the future.”