The new service, called Daydream, is expected to launch in a matter of weeks. The VR platform will provide access to a number of entertainment apps, including YouTube, Hulu, and HBO Now, as well as content from sports leagues like the NBA and MLB.
So far, dozens of filmmakers have agreed to work with YouTube to create content for Daydream, according to those familiar with the matter.
"It's apparent they [Google] have spent a lot of money internally," said Finn Staber, co-founder of TheWaveVR, a virtual reality startup that is working to develop a music app for Daydream.
Google, however, has been wary of investing millions into any particular project, and has reportedly offered up to "high six figures" for video games, and "low five figures to low six figures" for projects with filmmakers and web celebrities. The company will promote Hulu projects and fund the production of videos with YouTube stars, including the Dolan twins and Justine Ezarik.
The subsidiary of Alphabet, Inc. faces heavy competition in the race to develop a robust VR experience. Facebook alone has spent millions on individual film projects for its Oculus Rift headset, while Sony is working to develop its Morpheus device, connected to the PlayStation 4 video game console. Samsung and HTC also offer VR products.
Still, analysts point out that Google has a competitive advantage in that it's uniquely focused on mobile-based VR. Daydream has the potential to reach a larger audience since it's less expensive than most cutting-edge equipment. Oren Rosenbaum, a digital media agent at United Talent Agency who heads its VR division, agrees. "Mobile virtual reality is what's going to get the most people to strap things on their head," he said in an interview with Bloomberg.