Tech In Japan: Stop And Smell The (Virtual) Roses

Summary

  • Virtual Reality (VR) is extending beyond visual and audio.
  • Video game industry development of smell VR might benefit from commercialization in physical retail and e-commerce.
  • There are a couple of investable companies with smell VR technology that should be followed.

Overview

When talking about Virtual Reality (VR), most of us tend to think about companies like Facebook, Google, Apple, Nvidia, and Sony. These companies are on the forefront of VR technology, especially for the visual and audio portions of VR. However, VR is more than just seeing and hearing: It involves all senses. Recently, several companies have expanded VR technology to involve other senses, and its applications go beyond the video game industry.

 

Koei Tecmo’s VR Sense Goes Beyond Seeing And Smelling

There are several companies that are working on expanding VR technology beyond seeing and hearing. One such company is Koei Tecmo, a Japanese videogame maker. Without any coverage from mainstream western media, Koei Tecmo unveiled its VR Sense arcade machine at the Japan Amusement Expo (JAEPO).

Koei Tecmo unveiling the VR Sense at JAEPO 2017 on 2/10/2017.

Source: Game Watch (Japanese Source)

The VR Sense is built on Sony’s PlayStation VR – and no, Koei Tecmo did not simply build games to play on PlayStation VR: They added to the current PlayStation VR experience. In addition to the visual and audio VR effects that PlayStation VR provides, Koei Tecmo added functionality to stimulate the “smell” and “touch” portions of human senses. In their unveiling, they offered 2 video games (left & center picture below), with a 3rd game still under development (right picture below):

Source: Digimono Station (Japanese Source)

The first game is a horror game. There are parts of the game where you can feel rats and bugs crawling up your arm. The second game is a horse jockey simulation game. You can feel the wind and shaking in this game. The third game appears to be a VR adaptation of Koei’s most successful franchise: Dynasty Warriors.

Game Watch’s review (Japanese Source) of the unveiling did not discuss details on how Koei Tecmo’s smell functions were implemented. However, the VR Sense comes with an attachment to PlayStation’s VR headset, which adds the smell functionality. According to Nikkei (Japanese Source), the user can insert up to 5 cartridges, which can be mixed and matched to produce a variety of smells.

 

Going Beyond Video Games

While the efforts to simulate the smells inside a haunted house or a war torn kingdom is admirable and should be continued, I can’t help but think about the opportunities outside of video games. E-commerce and physical retail are two areas that come to mind.

E-Commerce

A picture is worth a thousand words… until you try to describe what your teenage son smells like after a game of basketball. In recent history, companies heavily relied on visual depictions of smells in creative ways. Here is a screenshot of P&G’s TV commercial in Japan,  visually depicting the floral scent of their laundry detergent:

Source: DailyMail

Yes, pink flowers all over a bright white towel with Miranda Kerr closing her eyes and embracing the smell. Although I’m not fond of the idea of my desk smelling like something different each time a new YouTube ad pops up, Koei Tecmo might be onto something with their smell-simulating cartridges.

Physical Retail

Perhaps most folks who have never been to Japan are not familiar with this sort of display at a restaurant:

Source: Wikipedia

Often times, restaurants have many of their key menu items on display at the entrance. The displays are fake, typically made out of plastic or wax. Wikipedia says these food models originated in the 1920s so patrons could order food without looking at a menu. The story I heard as a child was that American soldiers didn’t know what many of the Japanese dishes were, so the display gave them an idea of what they were actually ordering.

The food displays closely resemble the real deal. Now, imagine adding a smell to each of these displays. While visuals are important, a big part of taste is related to smell – and in a country that largely remains a mystery to the outside world, surely visitors would appreciate smelling what’s about to enter their mouth before placing an order.

 

Who Else?

Aside from Koei Tecmo, Vaqso, a Tokyo originated, Silicon Valley-based startup is out to make the world more smelly. While Koei Tecmo’s VR Sense strictly uses PlayStation VR, Vaqso’s smell-producing gadget attaches to just about any VR headset in existence. To make things more interesting, Founding CEO Kentaro Kawaguchi comes from ZaaZ, a Japanese company that primarily sells an odor producing box to restaurants – converting nearby pedestrians into hungry customers. Considering that the Vaqso gadget is about the size of a regular Snickers bar, Mr. Kawaguchi is probably thinking beyond VR headset specific applications.

Other competitors in the field with similar smell-creating gadgets are FeelReal and Ubisoft’s Nosulus Rift.

 

Investor Takeaway

With or without VR headsets, the technology to recreate smells is one whiff away from commercialization. Besides Koei Tecmo (TYO: 3635) and Ubisoft (PAR: UBI), it doesn’t appear that there are any other investable companies for the individual investor right now. Both Koei Tecmo and Ubisoft are videogame companies with so-so financials and so-so intellectual property. While I would not bet the house on either of the two companies, I’d pay close attention to how they develop their smelly gadgets (whether they go beyond VR headsets or not). Additionally, I would start thinking about larger companies that have the corporate aptitude to further develop the technology and can benefit greatly from developing the technology. My best guess, while very broad, is a tech-strong company that is in some way connected to the food, advertising, and/or tech industries that also possesses the capability to develop and manufacture gadgets.

Author: Clayton Young

Hi! I’m Clayton. My value investing journey began in 2012 during my college days. It was not until recently (2016!) that I decided to leverage my Japanese language skills to research Japanese equities. I hope to provide valuable insight on Japanese companies to the English-speaking world through this blog!

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