China’s VR ‘Boom’ Is A Bust, Say Some Experts

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China’s VR ‘Boom’ Is A Bust, Say Some Experts
February 9, 2017
US$30 Xiaomi VR brings the price down by using your phone. Photo credit: Xiaomi.

 

While all the headlines say that virtual reality is the next big thing in China, an US$820 million industry in 2016 growing to a projected US$8 billion by 2020, a number of people are saying the very opposite – that the supposed boom is actually a big bust.

 

Of an estimated 35,000 VR arcades that last year popped up around China, only less than half or around 12,000 are still in operation, according to iHeima, a well-established Chinese business news site.

 

Only about 20 percent of those arcades are making any money.

 

Enterprising store owners leaping into VR are finding it impossible to charge fees comparable to cinemas or bowling alleys for a VR experience. One VR arcade owner told iHeima that he saw eager queues when charging US$1.50 for a 30-minute session, but everyone vanished when it rose to US$5. From that kind of revenue it’s impossible to pay the rent.

 

Hard sell

 

People are not buying VR hardware either.

 

90 percent of Chinese startups producing VR headsets have gone bankrupt, according to data cited by state-owned news outlet China.org. And manufacturers that turned to VR are now – just as many abandoned hoverboards – going out of business or changing their assembly lines to make something else.

 

“There were about 200 to 300 firms engaged in producing VR helmets in 2015, but now no more than 10 companies remain functioning,” said Fang Wenxin, who started a VR business in 2015 that eventually went bust.

 

China’s lukewarm reception to VR mirrors western markets. Demand for VR headsets has been disappointing, with estimated sales figures below both analysts’ and brands’ expectations. 20 percent of China’s VR arcades aren’t making any money.

 

Not even Sony, the biggest name involved in VR, has been immune. Its PlayStation VR was downgraded by a research group in November, slashing projected sales from 2.6 million to below 750,000 in 2016. The gadget was hotly anticipated as it’s powered by Sony’s popular gaming console, negating the need for a powerful PC.

 

Sony is the biggest VR seller, ahead of HTC’s Vive and Facebook-owned Oculus. With the trio’s estimated 1.7 million cumulative sales in 2016, VR is far behind other forms of entertainment. Sony sells around 1 million PlayStation 4 consoles each month, and Microsoft is not too far behind with the Xbox One.

 

Even at the most accessible end of the VR spectrum, using your phone held in place over your eyes with a cheap gizmo like the US$15 Google Cardboard, there has yet to be a break-out game or movie in virtual reality.

 

Nearly four-and-a-half years after Oculus made a huge splash on Kickstarter, consumers are not yet convinced that VR is worthy of their money or eyeball time.

 

Converted from Chinese yuan. Rate: US$1 = RMB 6.87.

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