By Charles King, Pund-IT, Inc. May 25, 2016
If you pay attention to tech industry news, it’d be reasonable to conclude that virtual reality (VR) is one of the market’s most compelling topics. That’s partly due to the expanding capabilities of VR products. But it also reflects efforts by vendors and others invested heavily in the VR space, hoping to build it into a massively successful business. That’s a common enough dynamic in new and emerging markets, but in the case of VR, it seems oddly skewed and largely divorced from market reality.
Why do I say that? Because these efforts mainly highlight the value and/or leadership claims of specific headsets, like the Oculus Rift, HTC Vive and Samsung Gear. That’s fine if self-promotion is your main concern, but that view largely ignores the fact that the VR market is essentially still in diapers. Yes, commercial products are available and will likely increase over time. But prices are high and content is still, at best, thin on the ground today.
More importantly, with attention continually focused on headset products successes and stumbles, the vendors and developers whose efforts are critical to the success of VR solutions are largely being ignored. It’s almost as if Henry Ford had promoted the Model T while mostly ignoring public roads and the sales and repair services required to support his vehicles. There’s actually a useful analog to that exact situation occurring today for alternative electric and fuel cell vehicles.
So why is the attention on VR headsets so shortsighted, and why is taking a wider view so important? Let’s consider that.
Get your head out of the headset
It’s taken about a generation for the industry view of VR to pivot 180º. When vendors, notably SGI, began focusing on commercial immersive technologies, including VR in the 1990s, the cost and complexity of solutions restricted interest to industrial developers and a handful of adventurous entrepreneurs. Cumbersome headsets and controllers made solutions awkward to use, which was problematic for most applications. When SGI hit the skids, immersive and VR momentum declined significantly.
The latest interest/optimism around VR is due to hardware advancements, including far smaller, more comfortable and easier to use headsets and controllers, and massive advances in computing technologies that Intel, PC vendors and others delivered during the past two decades. VR solutions still carry premium price tags: $1,500 for a “basic” bundle, including headset/controllers and a PC, and a “premium” experience will set you back $2,000+.
That’s a small fraction of what VR systems once sold for, but it’s likely to limit interest in these initial offerings to hardcore gamers who are the natural audience, anyway. But unless rich, compelling content is under steady development, the larger market could be endangered. The fact is that while headset vendors command media attention, the interest, imagination and energy of developers and PC vendors is what will really grow the VR market.
To their credit, most headset makers who understand that point are actively engaging developers who are or may be interested in VR projects. For example, at last week’s Google IO event, the company announced Daydream, an expansion of its low cost Cardboard platform that aims to enable high quality VR on Android smartphones.
Other VR vendors are involved in similar wooing of developers, notably Oculus (not surprising given Facebook’s staggering $2B acquisition of the company in 2014). But most of these efforts are also self-promotional in the sense of raising the profile of one headset or another. So it’s worth considering the various “infrastructure” tools developers require to make VR projects a success.
Software development kits (SDKs) and other developer tools are obviously important but so is hardware, particularly the workstations and high end PC platforms to support gaming and other VR projects. Fortunately, there’s a wide variety of such solutions available for such projects. But given the fact that there are tens of millions of developers worldwide, those solutions represent billions of dollars in global sales for PC, semiconductor, storage, networking and peripheral makers.
The business case and opportunity for VR
The size of that market should also grow markedly as VR expands beyond gaming and entertainment and becomes a recognizable business tool. As noted before, that was the case during the first flowering of VR in the 1990s when U.S. government agencies (notably DARPA and the Air Force) recognized the value of immersive VR simulations for complex training processes and project designs.
More recently, VR solutions have been created for a number of industrial applications, notably in healthcare, automotive, tourism and advertising verticals. In addition, increasingly sophisticated VR applications continue to be used for training scenarios in military, aerospace, law enforcement and education markets. That, in turn, suggests potentially enormous financial opportunities for VR-focused vendors of every stripe, not just headset makers.
It’s no surprise that the media and many audiences love simple stories, particularly in technology where stories of how plucky, talented entrepreneur(s) become billionaires are instilled in Silicon Valley’s DNA. But nearly everything becomes increasingly complex as it matures, including markets. In the case of VR, a narrative that began decades ago, then was given new life by innovations from Facebook/Oculus, Google, Samsung, HTC and many others is growing in complexity day by day.
But that complexity is also expanding the potential value VR solutions can offer. Those certainly include the enjoyment that hardcore gamers and their preferred vendors will gain from early solutions. However, if VR truly succeeds this time around, it will impact and likely enhance the lives of thousands of vendors, millions of businesses, tens of millions of developers and billions of end users.
Products like the Oculus Rift and Samsung Gear may dominate headlines today but the real value and benefits of VR rest far beyond the headset.
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