The Emerging Virtual Reality Product Parade

With the announcement this week of Sony’s PlayStation VR system, we now have a fairly good sense of what the offerings from most of the major consumer virtual reality players will look like. The picture that emerges is a fascinating one, with a lot of variety in the design, product focus, and pricing among the products on offer. This panoply should be an excellent testing ground for a number of possible applications for VR and we can already make some observations about the potential for some of what’s been announced.

Adding Sony’s announcement to what we already know about three other major products, we can draw a reasonable picture of the landscape from a number of different angles. The chart below focuses on two aspects: the incremental price of adding one of these solutions to existing computing or gaming hardware and the addressable market of those who have such hardware. I’ve also added in a very brief description of the focus of these efforts, which falls into two broad categories – hardcore gaming and mixed content and entertainment.

On the pricing side, we have a significant range. All the way from $100 for Samsung’s Gear VR headset up to $800 for the HTC Vive. Again, this reflects just the incremental investment for the headset, not the total cost of ownership, which is significantly higher in all cases – the Gear VR requires a high-end smartphone, Sony’s solution requires a PlayStation console, and both Oculus Rift and HTC Vive require high-end PCs. But since many of those who purchase a headset will already own the necessary underlying computing or gaming hardware, this actually feels like the best starting point. It’s fairly clear from this analysis the Gear VR has perhaps the greatest overall potential as both the cheapest solution and the product with the broadest addressable market; focusing on sales of the Galaxy S6 line alone suggests a bigger installed base than PlayStation, for example, even before sales of the S7 line ramp up. The HTC Vive and Oculus Rift, meanwhile, are at the opposite end of the spectrum, likely targeting under 20 million existing PCs with solutions that add at least a $600 cost.

When it comes to content though, the story changes a little. While the Gear VR has the advantages we’ve already mentioned when it comes to price and addressable market, the content available for the platform is fairly limited so far. Yes, there are some apps and games for the headset today, but many of them are more novelties than truly engaging experiences. A number of people I’ve spoken to are primarily using the Netflix app once the early novelty has worn off, for example. That’s not nothing, but it’s hard to defend such an investment just for a more immersive Netflix experience. This is where Sony really comes into its own, with both a significant installed base of devices and a very good product/market fit. Sony is targeting existing hardcore gamers with new gaming experiences. The announcement of a device that won’t go on sale until October was also accompanied by a long list of games which will be available at the same time from major names in the industry.

Oculus, too, will have a long list of games available at launch but the cost of the solution will be higher, both in terms of the headset and the total package necessary for it to function well. But again, it’s targeting those who’ve already made an investment in high-end gaming PCs, or are willing to do so, though that market is likely smaller than PlayStation owners. The biggest challenge for Oculus will be attracting gamers who have little or no experience with its brand, whereas Sony will be able to leverage both its brand and that base of installed devices for marketing purposes.

It’s far too early to call winners and losers for this market – most of these products aren’t even in consumers’ hands yet, and we have a lot of road left ahead of us. But it is likely that HTC’s Vive will find the smallest market of any of these products, due to its combination of price, addressable market, and lack of marketing muscle. The Valve partnership should help somewhat but most of the experiences it’s powering are also hard to file in traditional categories, which will make it harder to attract interest. Gear VR looks like the mass-market solution but may struggle to find enough worthy content. Sony’s system looks like it may have the Goldilocks mix of price point, addressable market, and product fit necessary to be successful. Of course, Oculus is the only company here with a stake in two of the solutions – the Rift and the Gear VR – which may also provide an interesting competitive edge.

Despite all this though, one of the most interesting aspects of all of this is that several of these systems might gain sufficient traction to coexist even though they’re all incompatible with each other. Rather than a single official or de facto standard for VR, we may well see a fragmentation that could last far longer than any other new computing category we’ve seen before. In some ways, that’s more interesting than who wins.