Adam Arrigo had always wanted to be a musician. And even though his college rock band -- The Main Drag -- didn't end up making it big, he was still determined to do something that would dramatically change the music industry.

Today, Arrigo is the co-founder and CEO of TheWaveVR, a social music platform that allows artists and DJs to broadcast live concerts in virtual reality. Despite founding just five months ago, the Austin, Tex.-based startup is already working with tech giants like HTC, Samsung, and Google--whose Daydream VR device is expected in the coming weeks--to develop music apps.

"What inspired us was the idea of interaction," says the 32-year old entrepreneur. "When you look at a new medium like VR, its main value proposition is immersion. It's the ability to reach out and interact with the environment, like in a dream--or even a drug trip."

The app is free for now, although Arrigo and co-founders Aaron Lemke and Finn Staber intend to generate revenue through advertising and ticket sales, or by charging a subscription fee to unlock extra content--similar to how Spotify operates. Earlier this month, TheWaveVR closed a $2.5 million seed round, from investors including KPCB Edge, Presence Capital, Rothenberg Ventures, RRE Ventures, The VR Fund, and Seedcamp.

A rocky marriage between music and tech

Historically, the music industry has had a fraught relationship with tech companies, something that TheWaveVR aims to change. Many recording artists, like Taylor Swift and Adele, have refused to make deals with streaming services--claiming that the current model would cut them off from royalties.

Others see more promise in digital services. Last week, R&B artist Frank Ocean snubbed Def Jam, the music label owned by parent company Universal, when he released his long-awaited album Blonde on his own label, as part of an exclusive deal with Apple Music. The artist had fulfilled his contractual obligations to Def Jam through a free visual album. The move, which increased his potential profit share from 14 percent to 70 percent of total revenues, could start a new trend of shirking contracts between music labels and tech companies.

 inline image

"As a musician, it's unfortunate that the industry is so complex," said Arrigo. "In order for streaming companies to have viable business models, musicians end up getting screwed."

Still, he understands the other side of things, too: Tech companies are often compelled to offer free services in the beginning, in order to get customers' attention. TheWaveVR, he says, could help the industry discover new ways of getting users to experience--and ultimately pay for--their favorite songs.

How VR can disrupt the music industry

Unlike Apple Music and Spotify, TheWaveVR doesn't bill itself as a streaming service. The way Arrigo sees it, artists stand to reach a wider audience through broadcasting their shows on the app. It also allows them to experiment with visual cues in ways that would otherwise be impossible to achieve in reality (i.e., overlaying an outer space filter on the stadium).

On the consumer end, many listeners prefer direct access to performances by their favorite bands without being charged a hefty fee, or traveling to the nearest city. They're likely to be attracted by the fact that TheWaveVR is free, apart from the cost of the VR headset on which it runs. The HTC Vive costs $799, while the Samsung Gear costs $99. Analysts expect that the Google Daydream device will cost around $100.

The business model

The company's success depends on how many artists it's able to wrangle -- a point on which Arrigo was tight-lipped. He hints that musicians similar to Deadmau5 are already experimenting on the platform. Earlier this summer, TheWaveVR drew in thousands when it hosted a rave at the annual VR expo in Los Angeles, with performances by artists such as Gladkill, Psyfi, Champagne Drip, and Origin. Strangeloop, a DJ who has worked with musicians like Erykah Badu and The Rolling Stones, is a member of the startup's advisory board.

Unlike its competitors--like MelodyVR, a live concert streaming app -- Arrigo says he doesn't want to simply recreate a concert in virtual reality. The service is designed to be more interactive, assigning filters to bass drops, say, or inviting users touch equipment or dance in the landscape.

"A lot of EDM [electronic dance music] shows try to reach for that level of immersion that you could accomplish in VR," he explains, "but you're bound by the unfortunate laws of gravity."

The burgeoning VR market

Google has reportedly been investing hundreds of thousands of dollars into exclusive content deals with filmmakers and app developers as it makes a bigger push into the VR market. Still, Arrigo points out that TheWaveVR is not receiving any compensation from the tech giant, because it intends to continue working with other providers.

That's probably a smart move for now, as the VR market continues to grow. In 2016, investors poured $2.8 billion into VR companies, totaling more than $8.8 billion invested over the last four years, according to research from Superdata, a firm focused on video games and interactive media. Data suggests that Facebook, via the Oculus headset, and HTC (Vive) have fallen behind Sony -- which makes the PlayStation VR device, tethered to a console -- since they only sell devices on their own websites, whereas Sony sells the headsets in physical stores.

But Arrigo could change his tune in future when a market leader emerges. Google Daydream has the opportunity to reach a wider demographic, analysts suggest, because it's focused on mobile (i.e., will function when the user straps a smartphone into the headset.)

The pros and cons of VR devices

The film industry is also taking note of the rapid rise of virtual reality.

Penrose Studios, a VR film production company based in San Francisco, is working with Google to create content for Daydream. Eugene Chung, the company's founder and CEO, notes that creating film for different devices can be tricky. Headsets that are compatible with smartphones, for instance, allow users to experience things on the go, but it's much easier to create an immersive experience with devices that are tethered to a PC or console.

Still, Chung sees immense promise in partnering up with all companies that embrace VR. "When people think of film, a lot of times they think of live action. We're really excited about the possibilities of CG [computer generated imagery]," he adds. "Especially with the tethered headsets, it allows for six degrees of freedom."

For now, Google Daydream is poised to be the VR "front-runner," says Jessica Llamas, the director of research and insight at research firm Superdata. "They're positioned in a more privileged place than Samsung because they're able to serve a much wider audience [on smartphones,]" she says.

Still, with as many as 52 percent of Americans either unfamiliar or uninterested in VR, she flags that the company's biggest challenge moving forward will be in generating awareness for the medium itself.