Very Few VR Rigs Have Been Sold. So What?

Justin Williams, The Economist:

Yet despite many pronouncements that 2016 was the year of VR, a more apt word for virtual reality might be absence. Of the 6.3m headsets that were shipped last year, most were cheaper, less sophisticated devices, such as the Samsung Gear VR, that rely on smartphones to act as their screens, according to SuperData, a games-market research firm. Only 200,000 high-end Oculus Rift headsets were sold globally (see chart). In the end, SuperData revised its first forecast, made in January last year, that total revenue from VR software and hardware would reach $5.1bn in 2016, down to $3.6bn. The actual figure for total worldwide revenue was a meagre $1.8bn.

Here’s the aforementioned chart:

Chart by Superdata Research, via The Economist

I’d never heard of SuperData before reading this Economist post. That doesn’t mean anything — I’m not particularly up on who’s who in the world of gaming business analysis. A quick visit to SuperData’s website was notable for several prominent grammatical errors amidst the copy marketing their consulting services. Again, may not mean anything. Just passing along the very little I know about them before saying the following:

When an analyst says their own forecast was off by 275% — especially when that margin represents $3.1 Billion — I’m not sure that’s an indictment of the industry they’re trying to analyze. Seems like it’s at least worth considering whether the industry underperformed or the analyst did.

I agree with Williams in that there was a lot of VR-related noise last year. I started getting involved with consumer-grade VR in 2015 when I hosted a panel on AR and VR for Salesforce Developers at Dreamforce. I spent some time ahead of the conference with a Samsung Gear VR and Kodak 360 camera, and checked out an Oculus Rift-based experience at the show itself. Google Cardboard was also a thing that year.

And Palmer Luckey was on the cover of Time that August. Luckey, of course, is no longer CEO of the VR company he founded. But that’s how it goes when you sell your startup for $2 Billion.

The story accompanying Luckey’s infamous cover photo included this paragraph:

Headsets will start going on sale this year, and competition will increase dramatically through 2016. At first they’ll be bought by hardcore gamers and gadget geeks. They’ll be expensive–as much as $1,500 with all the accoutrements. And just as with cell phones, everyone else will mock the early adopters for mindlessly embracing unnecessary technology with no useful purpose. At first.

We’re past that stage, if barely. Useful purposes for VR have emerged. They’re just not mainstream. VR is most useful to gamers and niche users across health care, industry, research, and training. Prices of consumer VR headsets have dropped some, but an Oculus with the necessary PC to run it will still set you back right around $1,500, minimum. As the chart above shows, Superdata is forecasting year over year growth of VR headset sales in 2017, but the numbers are still quite small.

So what?

VR is a long play. Everyone involved knows that. Tons of money is being invested in the VR ecosystem by tech industry giants betting on it becoming one of the pillars of a new wave of immersive computing. These companies have the resources to invest and don’t need to realize immediate returns.

Facebook (owns Oculus), Google, Samsung, and Sony are all big players in VR’s early stages but none of them relies all that heavily on headset sales for revenue right now. Intel, Lenovo, and Qualcomm are slightly smaller players, and they, too, make their bread and butter elsewhere. Apple and Microsoft get mentioned with the terms “Augmented Reality” and “Mixed Reality” more than VR, but let’s mention them, too: They don’t need to sell headsets to keep chugging along.

That basically leaves HTC. HTC probably has the most to win or lose when it comes to VR’s near-term success. Once a darling of the smartphone world, the company has struggled to generate meaningful profits from their phone business in a market dominated by Apple and, to a lesser extent, Samsung. While they still sell phones, HTC’s future lies in something else. For the time being, that something else is their Vive VR headset.

HTC has sold other assets to fund its VR focus, and their need to generate meaningful revenue from this new line of business is more immediate than what their competitors face. But even if Vive “fails” and HTC is forced to close up shop, the VR business itself isn’t going anywhere even if headset sales don’t grow meaningfully over the next few years. (And don’t get me wrong, I’m rooting for HTC; they made some of the best smartphones in the world ten years ago, and Vive is arguably the best VR system on Earth today.)

That said, we’re on the brink of a transition from VR’s earliest days to the beginnings of mainstream VR. All of the VR hardware action to date has been at the extreme ends of the price spectrum, plotting out a barbell curve with super cheap headsets (Cardboard, Gear VR) on one end and super expensive headsets (Rift, Vive) on the other. A new wave of standalone VR rigs offering more power and ease of use than today’s cheap stuff, but in simpler, less expensive form factors than today’s expensive stuff, will launch by year’s end. Google, HTC, Lenovo, and Samsung have already shown their intentions. Facebook/Oculus just jumped on the train today, too, according to this Bloomberg report.

As technology and production techniques improve, and consumer preferences mature, the VR industry will mature. Too much has been invested, and too many big players are excited, for VR to fizzle out now. Ignore the short-term projections and anxiety and play the long game. The Virtual Reality industry is barely in its adolescence.

Four Years and $15M Later, CastAR Packs It In

Brian Crecente, Polygon:

CastAR, the augmented reality start-up co-created by two former Valve employees, laid off its staff, shut down internal studio Eat Sleep Play and closed its doors today, according to now former employees.

A core group of employees are working to try and sell the existing technology, a source tells Polygon.

CastAR was launched by Jeri Ellsworth and Rick Johnson, who left Valve in 2013 with the company’s permission to take their AR research with them. After a successful Kickstarter campaign, CastAR raised $15 Million from Andy Rubin and Playground Ventures. They then refunded all of the Kickstarter money and set out to build a hardware company and content studio. The aim was to launch a pair of standalone AR glasses – and accompanying content and developer platform – as soon as this year.

Today’s news immediately made me think of Magic Leap, another company with high-profile backing and ambitious plans for mixed reality. More on them in this post.

VR For Retail Spaces Is The New Old Thing

A few years ago when I worked for Salesforce, I attended Dreamforce 2015. I actually hosted a panel for developers at the show, discussing Salesforce-powered AR/VR applications.

Two things about that experience came to mind as I read the news of Nomadic closing a $6M seed round to help them build location-based VR for retail spaces:

  1. I distinctly remember checking out a rather involved and lengthy VR experience put on by a Salesforce partner at the show. Try as I may, I cannot recall the content I consumed, or even the name of the company who’d built it. What I do remember is waiting a long time to get strapped into one of two available PC-connected headsets, seated in a rather complicated chair, and guided through the experience by a human who stayed in the non-virtual world.

  3. A week or two before the show, I was researching in preparation for my panel. I came across a video of what is still one of the best consumer-facing uses of virtual reality I’ve ever heard of:

What’s my point? High(er) quality virtual reality is too expensive, technically involved, and physically cumbersome for most consumers to use on their own. It was two years ago, it is now, and it likely will be for a few more years. Snapping your iPhone into the free Cardboard that came with your Sunday NY Times is one thing; manning an Oculus rig is another entirely.

Retail space VR, on the other hand, has been making an impact for some time now. Though Nomadic seems to be focused on a sort of movie theater-meets-VR Arcade experience, and n0t immersive marketing stunts in malls, the point stands: Wide scale home VR use is likely a few years off, and may or may not ever see mainstream-scale adoption. But high quality, one-off VR experiences in dedicated spaces are well within reach in the US today (they’re already a thing in China).

Unless you know you’re going to spend hours a day strapped into a headset, why forgo the expense and hassle of bringing VR into your home? Just head to the VR Arcade – or your local North Face store, if you live in South Korea – for a few hours instead.