Despite Naysayers, VR continues to Ramp

on March 3, 2017
Reading Time: 3 minutes

The virtual reality backlash has begun, with some industry watchers suggesting 2016 was a disappointment and recent retail changes and price drops from category heavyweight Oculus point to doom and gloom. I’m not buying it for a number of reasons.

First, those disappointed by the final tally of shipments in 2016 had unreasonable expectations for such a new technology. At IDC, we just published our fourth quarter numbers and, for the full year, virtual reality hardware came in very close to our forecast. When we summed up the screenless viewers (such as Google Daydream and Gear VR), the tethered head-mounted displays (such as HTC Vive, Oculus Rift, and PlayStation VR), and the small volume of standalone HMDs, the total for the year was ten million. Our forecast was for 10.1 million. Note also we’re not capturing Google Cardboard shipments. Earlier this week, Google announced its partners had shipped more than ten million units since its launch in 2014. Google also noted there had been more than 160 million Cardboard app downloads to date.

And the VR hardware industry is just getting warmed up. In addition to the recent prices cuts on the Oculus Rift with Touch Controllers (cut from $798 to $598), Samsung announced an upgrade to its Gear VR product at Mobile World Congress (it now has a handheld controller). Google says there are now six DayDream-enabled smartphone models in the wild. A long list of vendors are putting together lower-priced tethered VR HMDs that will work with Microsoft’s recently renamed Windows Mixed Reality Platform. Plus, there are numerous products in the works based on standalone VR reference designs from Intel and Qualcomm, which should ship in the second half of the year. And, of course, both Oculus and HTC are working on their own standalone HMD designs, although neither has talked about ship dates yet.

More Content is Coming
Of course, all this hardware is useless without good content and that brings me to my second point. Out of the gate, a great deal of VR content focused on gaming. As more mainstream users begin to consider virtual reality, they’re going to expect a broader mix of content. One of the areas I’m most interested in seeing develop is access to live sports in virtual reality. Today, you can view one pro basketball game per week, through a partnership between NBA League Pass and Replay VR, using a Gear VR or Daydream VR. The Big Ten broadcast its first football game in cooperation with VOKE VR late last season. And Intel is partnering with La Liga, the Spanish Soccer League, to outfit three stadiums so they can capture live soccer as well. These experiences are a little rough around the edges today but the potential is clear. Now imagine being able to see other high-dollar live events such as concerts and live theater up close and personal.

Another element required to drive more and better content is a willingness from advertisers to support the medium. At CES, I met with several content producers and they suggested many big-time advertisers are beginning to warm up to the idea of VR and the concept of associating their brands with the technology. Expect to see more top-shelf content, driven by advertising deals, appearing in VR this year.

Consumers Are Ready
Finally, I’m more convinced than ever that consumers are ready and willing to give VR a try. Over the 2016 holidays, IDC ran a survey of U.S. consumers on a long list of items, from smartphones to wearables. I slipped in some questions about VR. The results were quite positive. Of our 2,041 online respondents, a whopping 78% said they’d heard of VR and knew what it was. Another 17.6% said they’d heard of it but weren’t sure what it was. Only 4.4% said they’d never heard of it. About 13% of respondents said they or someone in their household already had some type of VR hardware (primarily Cardboard and Gear VR). But what was most interesting was about 25% of non-owners said they were interested in buying VR hardware in the next year. About one-third of this group said they expected to buy in the next six months. Now, we all know consumers are pretty good at telling us what they’ve already done but not as good at predicting what they will do, so I take the future purchase totals with a grain of salt. But the underlying sentiment is clear: Consumers have heard of VR, know what it is, and a sizeable percentage have indicated they’re interested in buying.

The next 12 months will bring a flurry of new VR hardware announcements and an influx of new and rapidly improving content to appeal to a widening base of users. We’re still in the very early days of VR; we’ve barely scratched the surface of what this technology will offer (including a growing list of commercial use cases). Yes, there will be some up and downs and there’s a good chance 2017 will leave some industry watchers wanting. But let’s not bury a technology before it has had a chance to take off.