Big Questions for VR Still Remain

Yesterday, Facebook announced a VR headset called Oculus Go that will start at $199. This device will certainly be a less than a full-featured version of the Oculus and it seems much closer to a Gear VR experience than an HTC Vive or Oculus device that is tethered to a PC and provides much better graphics. However, at this price, the VR category will be tested to see if it can truly go mainstream.

There are still so many variables and big questions lingering for VR. Samsung has had minimal success with the Gear VR with somewhere between 5-7 million unit sales total according to most estimates I’ve seen. That is a 99 dollar product that requires a >$700 smartphone. This may not be the right compare, but we certainly know at the current price of $429 for an Oculus Rift that they sold less than 300,000 units. While Samsung’s Gear VR requires a high-end Galaxy smartphone, they have a much stronger brand than Facebook/Oculus which is a key driver in their volume.

The challenge with Virtual Reality is it is still novel. Even with pure gamers, we do not see a swell of sales, and I’m not sure if this has to do more with price or with the content library available. According to recent survey data from eMarketer, less than 10% of PlayStation 4 console owners say they have a PS VR headset. So even within console gaming, VR has yet to penetrate the broader customer base.

We can look at this data and argue that, perhaps, dedicated VR experiences are only and always going to appeal to a small market. There is certainly a good argument to be made, but this is where the merging of virtual and augmented reality into the same device comes into play. Mixed Reality, as Microsoft likes to call it, may very well be the sweet spot. There are hardware challenges that need to be worked out for this to work, but I have a hunch the market will be more receptive to headsets that offer full VR experiences and full AR experiences in the same hardware.

This is why I find Facebook’s relentless focus on VR somewhat interesting versus most the others in the market who are focusing more on the mixed reality experience. This is truly a question of which one of these the market will adopt first and which is the right strategy to focus on first. Facebook certainly has augmented reality experiences they can easily integrate into the Oculus headsets when they want, but they are choosing to focus heavily on pure VR experience first for better or worse.

Consumer Adoption
There is also a question of consumer adoption to deal with regarding VR. This applies to AR also since both AR and VR are relatively new experiences. This is why a key part of this analysis is to understand how consumers will start to get exposure to VR and understand its value more broadly than just a few use cases. This could be where the entertainment industry comes into play and one company, in particular, could play an interesting role in making VR go mainstream. That company is Disney.

Yesterday, Disney announced a new VR experience coming to Disney parks. This is not just any VR experience either; it is one centered around Star Wars. The technology enabling this is also not tethered to a PC but a full-featured head-mounted display and instead of being tethered to a PC you have a small backpack that powers the VR head display. At the moment Disney plans to have these in certain locations and will charge separately for the experience. You can see a day where eventually Disney will add more of these experiences inside their parks or as a part of some new ride/attractions.

In this context, it is interesting to see how companies like Disney could help mainstream innovations in technology and give consumers a quality first experience with an innovation that could help make adoption go faster.

Still a Ways Off
I still believe we are quite a ways off for VR to go mainstream. The technology still has a long way to go. Even though advancements in packing sophisticated computing power, sensors, display technology, etc., is getting better every year we are still a long way from where we need to be. Hopefully, what is happening in the market is a simultaneous development of market demand as consumers experience VR at places like Disneyland, theatres, friends and families houses, etc., and when the technology is ready, we can then see if the market responds.

Samsung, Microsoft and their partner ecosystem, Amazon, Facebook, Snapchat, Google, and Apple all have their sights on this market in one way or another. And while the industry sometimes thinks new entrants can break into this market the reality is one, or a few of the above, will be the ones who capitalize and VR/AR/Mixed Reality when the market is ready.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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