Sky scours Silicon Valley for virtual reality start-ups

Robyn Beck | AFP | Getty Images

British Sky Broadcasting, the satellite company founded by Rubert Murdoch, sent Hilary Perchard to San Francisco to partner with tech start-ups that could help make sure the TV company stays relevant as entertainment shifts to the Web and smartphones.

In particular, the company is on the hunt for virtual reality start-ups, a phenomenon that is gaining mainstream acceptance much faster than many expect, Perchard said.

"We thought it was three to five years away," said Perchard, who joined Sky in 2003 and now serves as vice president of business development. It now looks like "by next Christmas there will be a decent number of early adopters on the market and the year after it will be really big," he said.

Perchard is closely following Google's Cardboard project, designed to let anyone plug a smartphone into a goggle-like enclosure and transform it into a virtual reality headset. That brings this far-out form of entertainment much closer to mainstream consumer use than Perchard's group anticipated.

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Google shows just how easy it is to make the experience happen. On the project's website, Google provides instructions for building the goggles. All that's required is some corrugated cardboard, biconvex lenses, a couple magnets, two strips of velcro and a rubber band.

"Construct a VR viewer from everyday items you can find in your garage, online or at your local hardware store," the site says. The Mountain View, California-based company provides a software toolkit for developers to create virtual reality apps for Android phones.

Facebook made the loudest splash in virtual reality this year when it agreed to buy Oculus VR, a headset maker that gained an early following on Kickstarter, for $2 billion. But Google's leap into the market "changed our view on it significantly," Perchard said.

Oculus: Facebook's virtual reality
Oculus: Facebook's virtual reality   

Sky, which early this year opened a San Francisco office for investing, is not aiming to back the next billion-dollar start-up with a separate venture unit, the strategy pursued by companies like Google, Intel and Comcast (owner of NBCUniversal, the parent company of CNBC and CNBC.com). Rather, it's looking for strategic deals that in many cases will include funding, but in others will involve distribution partnerships.

The most high-profile deal so far was an investment in Web TV service Roku in 2012, before Sky even had an office in San Francisco. With that partnership, Sky is distributing Roku's streaming boxes, but rebranding them as NowTV and selling them for 10 pounds (about $15), compared with $50 for the cheapest Roku box in the U.S.

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Perchard is now on the lookout for content targeting consumers who prefer the over-the-top experience. In October, Sky invested in Whistle Sports, an online network of more than 200 sports channels for fans of mainstream and obscure sports.

With so many content creators focusing on the Web, "we're looking to take something niche or nascent and make it accessible to mainstream consumers," Perchard said.

Perchard helped guide Sky make three investments in 2014, including mobile ad tech start-up Sharethrough and video aggregator Pluto TV. Looking to next year, Perchard expects to get even more active, though he said that a dozen deals sounds like a lot, so expect fewer than that.