The outer Exosphere can be a digital billboard for ads. The inside, offers state-of-the-art technology, including a high-resolution audio system and a massive 16k x 16k wraparound screen. It’s designed to transport audiences into unforgettable immersive shows and events. The Sphere has been operational for over a year now and cost $2.3 Billion to build. While it’s operational it’s still very much ramping up new offerings and on its path to product-market fit (PMF).

The Sphere platform offers different types of experiences inside. I’ll call these the “products” for simplicity:

• Immersive movies

  • Postcard from Earth - an independently produced film fit for the Sphere

• Events (sporting and corporate)

  • 2024 NHL Draft

  • UFC 306

  • a Hewlett Packard keynote

• Concerts (live and virtual)

  • U2

  • Dead and Co (John Mayer and Grateful Dead)

  • Phish

  • **New** V-U2 (a virtual concert)

I believe the virtual concert is the most interesting part of this business because of its potential. While many of other products are “enhanced experiences”, virtual concerts are about “scaling existing experiences” into feverish demand. More on this.

Traditional “Live Experiences” without The Sphere

Unlike events which lose value over time quickly (who wants to see a re-run of UFC 306?), concerts are more evergreen. As such, tours run for months “replaying” the same content to audiences in new cities. The content doesn’t need to be new, just high quality and intimate. This is similar to movies and movie theatre, but unlike the movie theatre, the experience is 1:1 with the Artist: it doesn’t scale without the artist’s effort. But can it?

Virtual Concerts - Taylor Swift

While movies of concerts have been around for a while, Taylor Swift popularized scaling a Tour digitally at the same time the in person tour was taking place. Era’s tour was distributed to movie theaters and digital home-based channels last year. This allowed fans to have a shared collective experience, whatever their budget.

The tour is still on-going as of this post and Taylor is planning 152 shows across 54 cities with her concert which is set to end at the end of 2024. Box offices sales ran $261M worldwide, and was available to rent on-demand from home for $20. Disney+ then paid another $75M for future streaming rights. Her shows bring in gross ~ $17M / show for an estimated gross revenue of $1.04B. While the box office sales are ~25% of the concert tickets (~32% when including streaming rights), the incremental effort from Taylor is zero. ZERO.

This woman was working hard, jogging on a treadmill every day for 3 hours while singing, to build the endurance to do the 152-show marathon. To say there is interest from artists in this “virtual concert” concept is probably conservative.

4.2M people are planning to see Taylor. That should cover a lot of the die-hard Swifties, but 53% of US adults say they are fans of her in a country with 345 million people. It’s not an apples-to-apples comparison, but it shows the magnitude of potential unmet demand for a superstar. Virtual concerts offer an opportunity to capture some of that unmet demand.

Virtual Concerts - U2 at the Sphere

This is a live concert that U2 ran in the Sphere when they did a multi-month residency:

Now the Sphere is looking to scale this live concert experience by replicating Bono. U2 bandmates will be going to a U2 concert for the first time in their life! See the preview for the September 5 2024 grand opening below:

As of this post, we’re now a couple weeks past the release. The Sphere is running multiple shows per week. They’ve “shipped” the first version of their virtual concert product. Where are they at on their path to PMF? Lets get into some of the data and infer:

“It was way better than I expected. Think Taylor Swift at the movie theatre but much more realistic and immersive.”

Good start! 👍 Although this person could be a paid influencer given that they review new tech all the time?

Same source: “The audio was impeccable. It might be better than going to an actual concert.”

WOW. 🤯 I wouldn’t have expected that. Again, discounting some skepticism from the author but that’s a really bold statement.

“Yes, It was amazing. Literally, at times, I forgot I was at a movie. It felt so real.” Src

Excellent 👍

“Bono’s face is so imposingly displayed during “One”, you swear you can feel his breath.” Src

Excellent 👍

“You hear the roar from the original show too” Src

Good for “experience” 👍

“I’m interested to see how they’ll make it different from the live show which we saw 3x” Src

Hello superfan 👋

“When Bono waves his arms, the crowd from the original show follows suit. But not everyone watching the filmed version participates in the arm-waving;” Src

“Do we shout at a video-image of Bono in the same way we would the actual superstar? Maybe not.” Src

Oops. Yeah that might impact the experience 😬

Overall, it wasn’t as easy as I thought it would be to find reviews to V-U2 so I’d say reception has been quiet. Throwing a dart on the dartboard I’d guess the experience then is probably not “mind-blowing” or it would have had more virality. It probably sits somewhere on a spectrum between “good” and “great”. What markets does that attract at $100/seat pricing? My guess:

• Swifties / Beliebers - the die hards

• Vegas tourists who are looking for something shiny to do

Both these audiences likely have immediate PMF with the virtual concert product. Eventually, the sheen of the Sphere will die off for passerby tourists, but they’ve got years, maybe even decades of middling performance that they can ride on. This is strong base to start to start from, but the potential for the platform is much higher.

Sphere wants to expand. If Sphere wants a dozen of these across the globe, say in London, Dubai, Toronto, Tokyo, Sydney etc. they’re going to have to reach PMF with more audiences / segments. Sphere needs to unlock a good chunk the of everyday concert-goers to their novel offering as there’s a lot of fans with cynicism about paying $100 for a “movie”.

Virtual Concerts - The Alternatives

Lets do a thought experiment for a Taylor Swift fan who is a rung or two below the “Swifties” level and located in a top 10 global city. I’ll suggest a few different alternatives this fan may choose between if they wanted to experience the Era’s tour. I’ve included some current and future-focused alternatives.

• Stadium live experience

• Movie theatre virtual experience

• VR at home virtual experience (future possibility)

• SPHERE virtual experience (future possibility)

For those options, I’ve plotted them on a hypothetical value curve of concert “features”. These are criteria I assume a generic concert goer may care about. A “5” on any of these features indicates complete satisfaction from the concert goer. This would all be done through product discovery in practice:

Based on assumptions, Sphere (virtual) and Stadium (live) concerts are neck-and-neck as premium experiences. Things like home-based VR compete more directly with the Era’s movie theatre experience or streaming from Disney+ (not plotted).

While the Sphere experience may beat the “real thing” on the visuals and audio, it lags on atmosphere. The quote stuck with me:

“When Bono waves his arms, the crowd from the original show follows suit. But not everyone watching the filmed version participates in the arm-waving;” 

I’ve been concerts where music is out of key, and the visuals are weak but I’d probably value the experience of the crowd over all of it. Atmosphere is really what I’m paying for and I assume it's not close enough yet.

Sphere - The Roadmap

What’s in my roadmap for Sphere for a finite R&D budget and team? Well, Virtual Concerts is definitely my area of focus. Within that I wouldn’t be thinking about adding new artists, or figuring pricing, definitely not optimizing for growth / marketing. 

For the next few quarters it would be all about atmosphere, baby. At-Mos-Phere At. The. Sphere. I’d look to close the gap between the Sphere and the real thing:

What is atmosphere? It’s the energy of the room. It’s shared social identity with those in the audience. It’s the social dynamics. The mood and feeling.

Shooting from the hip, some tactical approaches to maximize the “Atmosphere” could be:

• Increase mind-body illusion: have a “starting set” band open shows. They can play a couple songs and talk to the audience to enforce a connection of realism. Think: rubber hand illusion. 🪄

• Have loyalty programs to develop closer relationships with customers. Use this to segment, and figure out which segments are likely to flip to PMF and what makes them tick 👥

• Increase the flow of alcohol 🍻

• The “floor” seats are no longer part of the V-U2 experience. What can be done with that space? 🔦

• VFX optimizations (I doubt big wins are found here since it’s already advanced but every ounce helps) 🎥

The Sphere - Marketing

While I’d focus most energy on enhancing the service experience, I might focus some marketing budget trying to attract a niche segment like Audiophiles: people obsessed with hi-fi sound. They aren’t an obvious target for a platform that appears so visual out of the gate; as such they are probably under-marketed to and have no idea this experience exists.

They could be a sticky customer to add to the Switfies and Vegas Tourists who have strong initial PMF.

My Take

Focusing on Virtual Concerts and scaling this to mass market segments beyond die-hard fans is an incredible opportunity. A concert is relatively evergreen. Technology is advancing to make the realism almost indistinguishable from the real thing. IF The Sphere can do it and expand PMF to other markets, there’s probably billions of dollars of impact here.

I’ll be interested to follow the reviews over time and get a sense of their evolving product <> market fit. I’d also like to go see the virtual concert experience myself, maybe they’ll pay for my ticket 👋.

Over To You

1. What do you disagree with?

2. Have you been to the Sphere Virtual Concert? How does your experience compare to my hypothetical value curve?

Thanks for reading!

This analysis is a Product-focussed discussion covering early-stage companies on the edge of innovation and their path to product market fit. Below includes my own assumptions which are not confirmed or denied by the company themselves and may contain inaccuracies. 

🤕 The Problem: 

The key to a successful startup is not just having a great idea, but having a great solution to a real problem - J. Bezos

America is expected to be short between 37,800 to 124,000 doctors by 2034 and Soma is speaking to the bottleneck of the issue:

Had this existed years ago, maybe I would even be a doctor! Frustrated with the ever increasing bar (demand), with no change in med school seats (supply), I chose another path.

Medical students are squeezing through the medical system in two narrow spots:

1. Medical school: clinical training spots (rotations) in 3rd and 4th year

2. Residency spots: time after med school where a post-grad is doing an apprentice under an experienced physician

I’ll suggest why I believe residencies are the harder problem to solve. Data below from NRPM the amount of applicants to US residency programs vs. spots filled (PGY-1 positions). 

That gap. Imagine going through four years of med school and not being able to continue your path? Devastating.

It isn’t as bad as it looks though. The reality is most US trained students do get placed especially for fields like Family Medicine (98% match rate). The match rate is heavily affected by internationally trained graduates (IMG’s) who are also applying, as well as a mismatch in supply/demand of the specialties (surgery vs. family medicine) but clearly there’s an excess supply of talent.

Back to the long-term graph, why can’t we say yes to more would-be doctors? 

1. There’s a cost to residency programs

   1. While residency students may do “billable” work, on average they are a net cost to the medical system as they train and ramp up. A study suggests the median unsubsidized cost of a Family Medicine residency to be $180k in 2016 (higher now?)

2. Public/private funding subsidizes a lot of that cost

   1. These costs are subsidized and funded by programs like Medicare and other private funding. Taxpayers are paying $18B for the current rate of residency programs suggesting even higher net costs than $180k/spot.

      1. US congress responded in 2021 to add more residency positions, but not nearly in the size needed (1000) - this was the first increase since 1997!

3. Some like the status quo

   1. Adding more doctors theoretically means downward wage pressure on existing doctors. Yes, some darker things at play here.

4. Post-grad’s medical backgrounds don’t match the spots / need

   1. Students may be unwilling or incapable of moving from say Dermatology to Family Medicine

Bringing this back to Soma. Is the product going to substantially reduce the cost of residencies, influence funding, incentivize the existing medical community to do something different or increase the adaptability of PGY-1 applicants? The runway to make an impact is probably 2 years (a startup only has so much capital runway). 

Let’s go to the product to explore.

📦 Product / Offering / Value Proposition:

“People don’t buy products; they buy the benefits that those products provide” - Peter Drucker

From what I gather the core of the value prop today is focused on:

• Improving clinical judgment

• Improving empathy and communication

A student is taken through a computer-based scenario where they figure out what's wrong with the patient. They’ll communicate with different computer personalities (pharmacists, cardiologists etc.) and eventually square-in on a diagnosis. 

It’s like gamified House MD - hopefully there are more end game’s than “Lupus”. 

Now, House might pass his clinical judgment evaluation but may struggle with his bedside manor and communication, so the simulation could even provide value for assessing and continuous improvement of existing doctors.

The Soma product / prototypes are an excellent application of Generative AI which enable the creation of personified specialized agents (cardiologists, psychologists) that can communicate, reason and could generate content like labs and reports that are ordered in-game. There’s probably a technology opportunity to expand the medium from computer-based to something more immersive (VR) and/or tactile in the future. Heck, the application could even be interesting as a FlightSim-esque game attracting die-hard would-be doctors. A possible shoot for the moon and end up in the stars type of play.

A computer based assessment capturing hard and soft skills is valuable so long they are reasonably accurate, but probably doesn’t replace any human assessment:

🧰 The Use Case

Whats a residency program look like anyways?

YouTube video showing a case presentation in a clinical setting

Attending Physicians: Essentially mentor and assess Residency Students into their independence alongside doing their regular clinical work (responsibility for patients, research, teaching etc.). As a result they are really busy and do a lot of teaching on-the-job during their rounds with patients.

Residency Students: Since residency programs are very competitive and a net cost to the healthcare system, there’s been a trend of overworking the residency student. This has improved over time but has come from a bad place of 80+ hour workweeks and lawsuits over poor working conditions.

Lets just say both stakeholders are very busy.

🖐️ My Take

“Strong opinions, weakly held” - Paul Saffo

To solve the problem of increasing residency spots, I don’t see it from my vantage point today:

1. Cost: Residencies are very hands-on programs, the product may add complementary training value but IMO doesn’t replace many tasks for the attending physician. Realizing the efficiency gains would also take time as would be educators and students get comfortable with the tool

2. Funding: N/A - I don’t see a direct connection to the product

3. Incentives: The product may provide some increased pay for attending physicians taking on more residency students, but will it be worth it? Will reviewing simulations on the computer just be an extra administrative task? Ontario MD’s are already doing 19hr/week of paperwork.

If we move back up the bottleneck to 3rd/4th year Medical School clinical rotations, I can see more of a fit with ramping students up to practical experience but schools risk building a bridge to nowhere for their students. Maybe some schools would risk the reputational damage 🙈

Simply, the biggest thing I see is a lack of funding and I’m not sure if AI can scale residency training as it is today to drive cost efficiencies.

Here are some interesting areas from my seat:

• Can Soma or tools like it influence regulations to cut down the length of residency programs from the current 3 years to something smaller? A bridging program? This could be particularly valuable for IMG’s who are practicing doctors in other countries who probably don’t need a three year residency program

• Can Soma be used for communication / empathy training for IMG’s again who have practiced in other cultures? Increasing likelihood of placement and/or quality in the US Medical System (still bottleneck)

• Can this technology be used with Nurse Practitioners and Physician Associates who are increasingly taking on more physician workloads?

• Can the technology be applied better outside the US market? I recognize Soma Lab isn’t necessarily focused on US

I look forward to following this story. Very well the “Timing” card could turn in Soma’s favour. There’s certainly potential energy for something to happen: new regulatory and/or government spending tides.

💬 Over To You

• What do you think about this analysis? 

• Do you have a different view on the problem or use case?

And, of course, kudos to the Soma team for getting after it.

“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena…” - Theodore Roosevelt

What do you get when a mediocre tennis player*, a recent immigrant grappling with a sense of belonging, and a software engineer walk into a cafe? Apparently, a Y Combinator-backed startup. Their background in financial and data products and services at PayPal, Instacart, and Deloitte, have fueled their mission to streamline capturing data from documents like PDFs right into your existing spreadsheets.

*Kieran’s words

Disclaimer: This is a company focussed analysis that includes my own assumptions which are neither confirmed or denied by the company themselves and may contain inaccuracies.

👤 Core Customer (ICP)

A product for everyone is a product for no one

Who: Analysts: MidShip is signalling a few use cases across different industries (Finance, Real Estate, Medical research).

Their examples seem to focus more on Real Estate and Finance though and I like the targeting even discounting the team’s experience. Why? These tasks are often:

1. Frequent: there's lots of data being ingested all the time (text, tabular and financial images). These images need to be converted to numbers.

2. Urgent: brutal hours - Investment Bankers and Private Equity (P/E) analysts doing 80-100 hour weeks to get the work done. What kind of non-urgent work are you staying in the office past 7pm to do? 

3. Expensive: these firms make a lot and the cost of getting it wrong is high (the wrong number in the model can make or break a decision)

Within Finance, lets turn the Frequency dial up some more. Investment Banks will more likely deal with public companies (ie. have a stock symbol) than Real Estate or Private Equity companies. Public companies data is cleaner and more likely already in spreadsheets due to compliance and data infrastructure built out for the industry. Thus, I’d assume Private Equity data is messier and has to deal with manual drudgery more often.

Also, I’ll assume regardless of what area of Finance, the people doing this spreadsheet grunt-work are more typically junior and summer interns so I’d look for that person as an end-user. 

🎯 Junior Analysts at Private Equity (P/E) Companies who are analyzing non-public information

💊 Underserved Needs:

“Know your customers better than they know themselves” -Steve Jobs

In practice this will be filled in with real customer data through discovery and research but the below is just a thought exercise of some hypothetical needs:

• P/E Analyst: Minimize the time it takes to update our companies proprietary models so I can go home at midnight instead of 2am. 🥲

• P/E Analyst: Maximize the percentage of time I’m spending doing enjoyable, skilled work so I can progress in my career. 📈

• B2B Buyers: Help me attract more junior talent by promising better work life balance without sacrificing our units bottomline (and my bonus…  😉)

Other table stakes things:

• B2B Buyers: Pass my organization's security requirements ☑️

• B2B Buyers: Don’t screw up (ie. have a transcription error that blows up in my face) ☑️

I’d argue the P/E Analyst doesn’t need too much motivation to use this tool. They are desperate for a solution! It’s the B2B Buyer(s) that are more important to convince.

📦 Product / Offering / Value Proposition:

The solution is as follows:

1. Upload your source documents (PDFs, reports, etc.)

2. Upload your target spreadsheet template

3. Midship extracts the required data and maps it to your template

4. Download your fully populated spreadsheet, ready for analysis in minutes

Death to tedium. As someone who has spent hundreds of hours doing manual copy-paste & transcription over my life it feels like a magic API. Walk away, make a coffee, tada!

Value proposition:

For B2B Buyers, MidShip speaks briefly to Security on the website, but to what degree do they match the requirements of these organizations? Reliability isn’t mentioned on MidShip’s site, perhaps its not a concern for the buyers like I’d imagine it would be.

For P/E Analyst Users, if the conversion takes 30 minutes as per this video it might not fit for all time saving situations, unless there is some batch operations or improvements over time. I think this is more than fine for the start though.

📈 The Business

“A Product Manager’s job is to create value for the customer and the business” - Marty Cagan

Why Now? Gen AI, duh! But specifically, I think this is unlocked by LVLMs (Large Vision Language Models) seen in GPT-4o. LVLMs are less mature than LLMs which means more open space.

Economics: I believe they work for the Use Case of the ICP but wonder about AI inference costs on long documents especially with lots of images. My research suggests ~$0.02 to input and ~$0.04 output a page of information with an LLM and those costs creep up with images (LVLM). These costs are minor versus the cost of human production but 1000 pages would be $60 would be meaningful.

Go To Market: As part of GTM it appears they approaching with partnerships and potential solutions. I like this approach as human-touch will help with customer discovery as well maybe Reliability!

Moat: I don’t see one today but providing the best solution to a small set of customers should make it hard for others to enter.

🦺 Risks

When you can remove risk, do it, when you can’t, reduce it

Aside from what I’ve mentioned that is top of mind for the value proposition:

Competition: this is a highly competitive space from open source to big tech. Niching is typically important for a startup, I think its particularly important here.

💬 Over To You

Let me know one thing you like about this piece and one thing you’d change.

Stay tuned for the next edition!