Getting Real About VR: Why It’s Not DOA

April 11, 2017 — by Todd Wasserman    

The 24-hour news cycle and need to supply a steady stream of click-worthy content is why we see so much hype about new technologies—even those that might not stand a chance. No matter how much of a long-shot they may be, readers want to hear about it. And whether it’s Second Life or Google Glass, some  pundits will be quick to declare that This Changes Everything. When that doesn’t happen, the media often interprets the new technology via the preexisting narrative of launch-disillusionment-ridicule.

That’s what’s happened with virtual reality. In early 2016, as Oculus was about to be released with Facebook’s backing, VR appeared to be the new smartphone. Then it wasn’t. Oculus had some shipping delays that compounded the problem, but the basic issue was a chicken-and-egg problem: Few people wanted to buy VR headsets because there wasn’t enough content and few people wanted to make content because there wasn’t a big enough audience.

But while much of the media was quick to declare VR DOA, its adoption is actually occurring pretty quickly. The rise of smartphone-based VR and mall-based VR ensures a substantial install base. All the industry needs now is a hit, and marketers—and the media—will be investing further in this emerging technology.

VR adoption isn’t bad

VR’s main challenge is perception. Pundits look at the growth of tablets and smartphones and assume that VR will follow the same trajectory. The reality is that the public did adopt tablets very quickly. In under five years, more than 10% of the public owned a tablet, which is considered a very fast adoption rate. Consider though that Steve Jobs put his weight behind the iPad launch in 2010, which may have been the height of Apple’s influence.

Then consider the smartphone. Many people assume that the iPhone was the first smartphone. However, the U.S. smartphone era really began in 2002, when personal digital assistants like the BlackBerry, the Treo and Microsoft’s PocketPC got phone features. If you take that into consideration, then it took about six years for smartphones to get to 10% penetration.

By contrast, the top three VR headset manufacturers – PlayStation, Oculus and HTC – sold a combined 1.7 million headsets in 2016, according to Canalys. By comparison, Apple sold 3.3 million iPhones in their first six months of release. But at that time – 2007 – the market had already been primed for five years.

Maybe that’s why industry analysts are undaunted by VR’s seemingly sluggish start. IDC projects that by 2020 VR headset shipments will reach 61 million. The other thing to consider is that if you include bare-bones smartphone-based VR lenses like Google Cardboard, then the install base for VR was actually around 16 million in 2016.

Beyond the headset 

Google Cardboard points to an alternative way forward for VR. Rather than buying $600 strap-on headsets, the masses can get a taste of VR with Google’s $15 device. (It is often given away free as well. The New York Times has given away some 1.3 million Google Cardboard headsets to subscribers. As we saw last summer with Pokémon Go, consumers don’t mind using their smartphones for AR experiences. A hit like that could mobilize the existing base of Cardboard users.)

Another factor to consider is arcade VR. A startup backed by Steven Spielberg, for instance, plans to offer mall-based VR experiences, starting this fall with a mall in Los Angeles. Earlier this year, IMAX also opened a VR Experience Centre in L.A. and plans to roll out five other pilot locations by the end of this year.

Hit needed

All of which is to say that the infrastructure already exists for rapid VR adoption. The only element missing is a hit property. In the late 1940s, the popularity of Milton Berle’s Texaco Star Theater prompted consumers to buy TV sets. In the 1970s, Pong’s popularity drove the videogame category. In the 1980s, Lotus 1-2-3 gave consumers a reason to buy a PC.

VR is likely to follow the same pattern. So far, there hasn’t been a hit game or entertainment property, but with so many sales forecast for the near future, there is a strong incentive for someone to create one. For instance, last year a Culver City, California, company, Survios, made $1 million a month from its VR game Raw Data. That’s just the beginning. It’s a safe bet that someone will beat those numbers soon and rewrite narrative for VR.

One comment

  • Scott

    May 24, 2017 at 5:12 am

    Hi Todd, great article. We would love to show you our VR software that is being used in education to teach and visualize vector calculus and by drug designers to accelerate drug development. Feel free to visit and for more info and reach out to me, Scott.

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