After walking the floor of the International Consumer Electronics Show (CES) in Las Vegas this January 2016, many gaming industry participants saw the VR writing on the wall for the first time in a very realistic way. Immersive Virtual Reality (VR) gaming has arrived with the official launch of the Oculus Rift VR viewer on March 28. Until then no one really knew if pre-orders would turn into actual units shipped. But what had only been a dream turned into actuality.
True, some issues remain both in the technology and user experience not to mention the price point. However, barring a major misstep by the Oculus unit of Facebook, none of these remain permanent obstacles that prevent a long-term VR trend from taking place in 2016, according to experts. For example, a January 2016 report from SUPERDATA forecast an install base of about 38 million VR gaming consumers by the end of the year. And an earlier July 2015 Business Insider estimate of VR headset projected shipments growing at a 99 percent CAGR between 2015 and 2020—reaching $30 billion by that end date.
Game Console Makers Feel the Heat from PC VR
While the Oculus Rift VR viewer existed in the purview of developers alone since June 2015, with this January’s announcement, the mainstream gaming public now has the opportunity to experience VR firsthand. However, most of these potential gamers could remain on the sidelines unless they upgrade from Nintendo, PlayStation and Xbox consoles to a fully decked out PC. That’s unless the console makers get in the PC VR game.
“Nintendo either needs to adapt or be left behind,” says Dr. Tim Lynch, Ph.D. and CEO of Psychsoftpc, manufacturer of high-performance gaming PCs. “Microsoft already has its own VR/AR HoloLens in beta for developers. And since Xbox is essentially a PC-based system, it is better equipped to meet this.”
Actually, Nintendo is playing a wait-and-see game, according to Joanan Hernandez, CEO and founder, Mollejuo, an augmented reality (AR) company with a mobile app called Terra Icons. “Microsoft is betting heavily on AR with HoloLens,” he says. “Thus, the only direct competition for Oculus is PlayStation VR and HTC Steam VR. There’s space for the three of them—Oculus, HTC, PlayStation—at least initially.”
In fact, HTC does a great job with physical-digital interactions, according to J.P. Gownder, vice president and principal analyst, Forrester Research, a global research and advisory firm. “And it might have some advantages over Oculus in the features department,” he says, “for example, by tracking your movement throughout a room using base stations.”
Expectations for VR exist at a high level. And with Oculus Rift and HTC Vive VR headsets having hit retail in Q1 2016 and Sony PlayStation VR in Q2, demand for VR technology looks good for console and mobile gaming platforms. “This is positive for both our video game and tech brand businesses,” says Eric Bright, senior director of merchandising, GameStop, the video game retailer. “During our GameStop EXPO September 2015, we saw customers wait in long lines to experience the virtual reality demos Sony and HTC had with positive feedback.”
Price Point and Immersion
Some industry observers have questioned the $599 price point that Oculus chose for the formal introduction of the Rift, such as Mike Goodman, director of digital media strategies, Strategy Analytics, a consumer-focused business consulting firm.
“Oculus views the Rift as a ‘premium’ product and has priced it accordingly, however, there is ‘premium pricing’ and then there is pricing yourself out of the market,” Goodman says. “While there is a small segment of PC gamers who think nothing of dropping $2,300 on a high-end PC, $600 for the Oculus Rift plus an additional $1,500 for a PC capable of running Oculus VR games and entertainment is just too much for most of us. Considering Facebook spent roughly $2 billion to acquire Oculus VR they might want to rethink their premium price point.”
However, others have seen that earlier breakthrough consumer electronics with elevated acquisition costs have gone onto perform well in the marketplace. It comes down to the value proposition of immersion VR vs. price point.
“The future of VR will not be determined by its current cost,” says Olli Sinerma, cofounder and project lead, Mindfield Games, developer of the VR game P.O.L.L.E.N. “What Oculus can ship, it will sell, and others will develop cheaper alternatives like the already available Google Cardboard. Rather than price, immersion will be the key factor in VR’s success.”
Install Base Barrier
But immersion alone may not ensure that Oculus will surmount its seemingly lofty sales tag. Other barriers beside the console makers represent plausible pitfalls for Facebook’s VR gearmaker. The install base of VR-capable PCs presents the largest hedgerow for Oculus to jump over.
“Oculus’s $599 price point was higher than many expected, but that’s not the core inhibitor for adoption—it’s having a PC that’s Oculus-ready,” says Gownder. “Aside from PC gamers—and not even all of them—very few people have PCs with the needed specifications. Most people would have to buy the Rift and a $1,000-plus PC to use the device.”
Concurring with that perspective, Goodman opines that the vast majority don’t have PCs that meet Oculus Rift’s minimum PC requirements to run VR games and entertainment. Overall, Gownder estimates that only 13 million PCs globally are currently compatible with the Oculus Rift.
Which Comes First, VR Hardware or Software?
Seeing that the install base for VR-capable PCs remains at a low level, the market might not yet exist. The classic chicken-or-the-egg scenario pops into view. Without a critical mass of hardware to run VR software, who will write the games? And with a lack of first-person shooters, et cetera, who will build PCs and consoles with VR compatibility?
“When it comes to consumer entertainment, the content dilemma poses a significant hurdle for adoption,” says Maurice Patel, industry strategist, media and entertainment, Autodesk, developer of 3D design software. “Many VR headset manufacturers try to kick-start content creation by funding their own productions through initiatives like Oculus Studio. However, it will take several iterations of hardware and successful production projects before the technology is mature enough to warrant generalized, large scale production of VR content.”
Today, VR is an exciting, bleeding-edge technology for exploring new ways of telling stories, driving gameplay and communicating ideas. Where it will go from here is yours to dream.
Derek Handova is a freelance white paper writer and technology journalist who contributes to B2B News Network, Economy Lead, Energy Central, InfotechLead, IPWatchdog and Talkin’ Cloud. You can also find him on Medium expressing independent views on technology trends and issues of the day. He started his career in the consumer publishing sector working for automotive publications associated with Motor Trend and Hot Rod magazine.