Most people who attended last week’s International CES confab were dazed by the vast array of new gadgets. But one of the most important demonstrations centered on a piece of Hollywood content: Fox impressed some attendees by showing them a specially produced clip that could have been (but wasn’t) taken from its recent film Wild. Those who put on a pair of Samsung Gear VR virtual reality goggles, which works with a Samsung Note smartphone, found themselves with a 360-degree view of the Pacific Crest Trail and in the middle of a conversation between Reese Witherspoon and Laura Dern. Viewers had to turn their heads back and forth to see whoever was talking.

The experiment illustrated the kind of contribution studios believe they can make to virtual reality, an all-encompassing new medium that’s mostly been used to showcase video games and clips of nature, sports events and rock concerts. Hardware makers crave more compelling content: Samsung, Facebook’s Oculus, Razer, Intel, and HP were among the companies displaying VR products at CES. In its opening-day presentation, Samsung trotted out The Walking Dead producer David Alpert, who said his Skybound Studios will produce a “mystery suspense thriller” for the manufacturer’s platform.

But can VR become a real business? Fox Home Entertainment Worldwide President Mike Dunn is on the front line of executives who are determined to find out. He shepherded the clip of Wild-The Experience at CES and also talked up VR at Samsung’s event. I sat down with him to discuss the challenges and opportunities for scripted content in VR. Here are his thoughts, edited for length and clarity.

Samsung Launches It's New Galaxy Note 4 PhoneDEADLINE: Is virtual reality more than a gimmick?
DUNN: I don’t think it’s a gimmick. There are many use cases in a person’s life where you can see this becoming necessary. In sports, in education, in video games, and movies.

DEADLINE: Is movie-watching one of the main things we’ll be doing with it?
DUNN: Movies are central to this. Is that enough to push it mainstream? If it gets into other areas of your life like education and sports, then it becomes a mainstream device.

DEADLINE: Is this something you could use for ordinary movies, or just special ones?
DUNN: I don’t think it’s just a way to view a movie. It’s a standalone product. It’s a brand extension of the movie where there is an experience that enhances the overall brand of the movie, that actually puts you behind the screen into the action.

DEADLINE: How would that work?
DUNN: If you look at our Wild experience, you’re actually in the middle of a conversation between Reese Witherspoon and Laura Dern. You’re inside. That is a good proof of concept. So if you go to a movie like X-Men or some franchises like that, you’re not just following the basic story. There are parts of the story that you’re really enhancing. Part of the challenge from the creative aspect is: How do you tell a story in this medium? I think we’ve proved it to ourselves with the Wild experience.

DEADLINE: So you’d use VR for just part of a story?Wild Witherspoon Dern
DUNN: It’s probably somewhat like a videogame where there might be a 10 minute experience that can lead into a 10 minute experience that can lead into a 10 minute experience. It’s pretty intense to have goggles on; you’re probably not going to want to stay for two hours under a pair of goggles. You’re going to say, “I’m going to binge on three experiences.” Or, “I’m going to do one and then I’m going to come back to it.”

DEADLINE: Could you envision a movie that would have a flashing sign for users to put goggles on for certain scenes — like some films did with 3D?
DUNN: I’m not so sure this is a theatrical experience. I think it’s a home entertainment experience. It’s a different product. It’s not a movie. It’s not a videogame. It’s a virtual-reality experience. The big wins will be in your living room.

DEADLINE: Are you tempted to take old films and offer fans a nice, big-looking home viewing experience even if it isn’t 360-degrees?
DUNN: I think that’s one use case. But having just returned from the Samsung press conference, the amount of data that you can put on one of these large-screen TVs and the immersive sound is pretty incredible. This [VR] offers an experience that’s in that direction, but I don’t know if it competes with that experience.

DEADLINE: Every year the TVs get bigger and brighter, yet more people want to watch video on their handhelds. Is the portability of virtual-reality goggles a big virtue, for example to watch a movie on a long airplane flight?
DUNN: I think it is. Virtual-reality in some of the forms is actually taking a piece of hardware that you already own [smartphones] and extending it into a different use case which I think is really appealing and a great way to get the market launched. When you look at the virtual-reality headsets, I feel like we’re at the rock wheel. The comfort and ease of viewing will improve dramatically over the next few years.

Fox_IL_LOGO_vG.inddDEADLINE: How deep is Fox’s commitment to VR?
DUNN: The Wild has been a proof of concept for us. Our idea was to come to CES and talk with the manufacturers on the consumer electronics side and see what could be next for the content that would go into the goggle experience. We’ve earmarked a few of our movies in the future so we’re going to explore it. But the first thing we have to do is write up the concept and feel that, from a creative standpoint, we have a concept there that is going to be pleasurable for audience.

DEADLINE: It sounds like you’re devoting resources, but not a lot of money.
DUNN: We’re not willing to make the leap until we feel like the creative content – at least on paper – is ready to go. It’s not something that you put together in a short period of time. This is something that requires a lot of thought, a lot of planning, a lot of creativity.

DEADLINE: Where does it fit in your infrastructure?
DUNN: I think it will initiate from the same place where our film ideas initiate. It will come from the creative side. And then the distribution opportunity will be somewhat limited to a theatrical experience or a home entertainment experience. My sense is that it’s going to be a personal experience and is going to be something that you’ll do in your home. And my sense is that we can build content that people will pay for and that you’ll be able to experience over and over.

DEADLINE: Do you have any sense of price points?
DUNN: Video games are anywhere from $20-to-$50. But it’s hard to tell. What is the cost to produce this? It’s almost like movies: There are some movies that are script based and are very simple in their nature but emotionally satisfying, and they’re incredibly successful. There are other movies that have intense special-effects and every technology known to Hollywood is employed there, and they’re incredibly satisfying. And I think that the technology in virtual-reality is literally at the very beginning of where it’s going to end.

DEADLINE: Could VR hurt your relationship with exhibition? Theater owners might want your full attention.
DUNN: A movie is a very complicated endeavor. There’ll be no attention taken away from that process. My sense is that there will be a second crew that does this. But I don’t think a videogame takes away from a movie. It’s a product extension of that movie. The merchandise that consumer products sells in Target and Walmart is an extension. This is a product extension of the film.

DEADLINE: If I’m a filmmaker, why would I want to get into VR? You have a proven financial model for theatrical films.
DUNN: [Fox Post-Production President] Ted Gagliano and his team are taking the Wild Experience to Sundance and they’re going to show it to filmmakers there. And the beautiful thing about Sundance is that you have established filmmakers there and up-and-coming filmmakers. And hopefully a filmmaker would say, “This is a great product to enhance my overall film vision. I can shoot my film and have a virtual-reality product that hopefully enhances the consumer experience.”

Cinerama posterDEADLINE: In the early days of Cinerama they put you on a roller coaster. Then with 3-D everything would come out of the screen at you. Are we at risk of having a lot of virtual-reality productions that are designed to dazzle you but the storytelling isn’t so great?
DUNN: That’s always a risk in anything you do. If the technology is there for the long term then those things will fade off pretty quickly. It will be a novelty for a minute and then it will go away.

DEADLINE: What will tell you whether VR is going to be big or just a sideshow?
DUNN: In the film business when you have an hour-plus experience, and it may be in bites to get to that hour, and it’s a great story – if that happens in the next, say, 24 months and filmmakers are intrigued by it, then you probably have yourself a business.

DEADLINE: What’s the significance of this CES for virtual-reality?
DUNN: CES is kind of a melting pot. It’s a good time to come and say, “we are excited about this,” and show them proof of concept, and see other products, and see some of the CE guys and see where they’re going. Then you say, “All right, what are our next steps?”

DEADLINE:  How much revenue do you expect virtual-reality content to generate five years from now?
DUNN: There’s a chicken and egg. You need the hardware penetration and unique content. With DVDs it was easy because all you needed was the chicken, the DVD player – the eggs [movies] were already in the vaults. Here, yes, you have some base use cases in a kind of IMAX experience. But I’m not so sure that sells you long-term use of something like this. Our challenge is to have one or two or three or four major content developments in the next 24 months. If that happens, then you have a mainstream product. To me a mainstream product is 25 million households. What we’ve seen with mobile technology is that once it gets going it can penetrate really quickly. So in five years this could be the real deal.

DEADLINE: Five years, 25 million users?
DUNN: Yeah. If it’s the real deal, then it will be at least 25 million.

DEADLINE: What will that mean for gross dollars spent on VR content?
DUNN: It’s hard to tell. The way we always look at our home entertainment movie business is, how many films does an average household acquire in the year? At the max during the DVD years it was like 16 or 17. But on the videogame side it’s like four or five. Hopefully it’s in the 4-to-5-to-10 ratio per avid consumer. That would be a great business. That would be $1 billion-plus in terms of revenues. It would be a pillar in most studios’ business if that happens.