By Daniel Terdiman | 10 February 2016 | 5-min read
Virtual reality may feel like something that died in the 1990s, but as an industry it’s predicted to generate $30 billion in annual revenue by 2020. And this year is where it starts its comeback.
There’s one thing that inevitably happens whenever someone gets their first taste of virtual reality.
Take a Gear VR to a party, for example, and let a bunch of friends and family try it out, and the same thing will happen again and again: Each person will pick up the headset, say something a little dismissive about VR while they’re starting to put it on, and then….”Amazing,” and a big, wide smile.
Virtual reality technology is nothing new, of course. It goes back decades, but was first popularized in the mid-1980s by Jaron Lanier at VPL Research. But it’s only in recent years that VR has become aimed at individual consumers.
The consumer VR revolution started in earnest in 2012 when Palmer Luckey, then a researcher at the University of Southern California’s Institute for Creative Technologies, launched the now legendary Kickstarter campaign for his so-called Oculus Rift. Huge interest in the Rift led to Facebook acquiring Oculus VR in 2014 for $2 billion.
And the race was on.
Few have tried it
The reason almost nobody at a party will have tried VR is that very few people anywhere have. The consumer VR era began only in November with the launch of Samsung’s Gear VR—a $99 mobile VR device that works with Samsung’s mobile phones and software powered by Oculus—and the distribution that same month of a couple million New York Times-branded Google Cardboard VR headsets.
There’s little doubt that VR is coming, and fast. Analysts predict that by 2020, the entire virtual reality ecosystem will generate $30 billion in annual revenue, while VR content alone is expected to be worth $5.4 billion a year by 2025.
It’s all starting now, with 2016 sure to be the year the technology becomes a major part of the zeitgeist. That’s because in addition to the availability of the Gear VR and the increasing popularity of the Cardboard, three other major high-end virtual reality platforms will hit the market this year.
Those three are the Oculus Rift, HTC’s Vive, and Sony’s PlayStation VR. The Vive is planned for an April launch, while the Rift is expected during the first quarter of 2016. It’s not known exactly when the PlayStation VR will be available. Both the Rift and Vive are connected through PCs, while the PlayStation VR connects to a PlayStation 4. Neither Oculus, HTC, nor Sony has released pricing information for their devices.
Low-end to high-end
Given all the different VR platforms that consumers will be able to choose from in 2016, from Google Cardboard to the Oculus Rift, people are going to have to decide what kind of quality they want—and, of course, how much they’re willing to pay for it.
At the low end, headsets like Cardboard can be free, or close to it, and offer a very basic 360-degree view of content like news segments, travel pieces, sports, or music.
At the Gear VR level, it’s more immersive, with built-in controls, and a more curated selection of content.
Sony’s PlayStation VR is probably the next level up in terms of quality, offering a sophisticated virtual reality experience, positional tracking, and the use of handheld controllers that allow users to manipulate things with their hands. Much of what’s being developed for the PS VR are games, though third-party developers are working on some non-game content for the platform.
Finally, both the Oculus Rift and HTC Vive are considered high-end VR, offering terrific quality, as well as positional tracking and handheld controllers. The graphics are better than on other systems, and the overall sense of immersion is top-tier. The prices are likely to reflect that.
Why is this all happening now?
It’s due to a “perfect storm of technology,” says Richard Marks, who heads up Sony’s VR efforts.
“There’s a lot of technology in VR, and a lot of those technologies have just become possible recently,” Marks told Fast Company last month. “The display technologies are now at a good place, the tracking technologies that are needed are at a good place, and also, actually, the graphics power that takes the drive of VR system [is ready]. I think it’s a lot of different factors all coming together…. And that’s why you’re seeing so much excitement in the industry around it.”
With VR hardware finally hitting the market comes a vital need for content. After all, consumers aren’t likely to spend money on devices if they can’t count on having a lot to do with them.
When Samsung launched the Gear VR, it made sure users would stay busy with the device—there’s more than 100 available apps for the Gear VR, including the ability to watch 100 full-length 20th Century Fox movies, anything in Netflix’s catalog, and much more.
To date, there’s less content currently available for the Rift, the Vive, and the PlayStation VR, all of which are still accessible only to developers, but it’s certain that by the time each launches, there will be plenty of software.
“What the ecosystem needs the most now is content, bottom line,” Jeffrey Greller, a William Morris Endeavor agent who represents clients throughout the VR industry, told Fast Company in November. “And we need great content creators getting brought through things like [VR demos], to figure out how to do it.”
Still, Greller said, there’s a bit of a chicken-and-egg thing going on in the industry because most of the hardware has yet to be released.
“Content creators just want the platform to go out and create,” Greller said, “and that’s the trickiest thing right now—the lack of hardware to consume an experience, and the lack of tools to go out and create.”
Fortunately, those tools are coming. And with it should come investors eager to get in on the party.
Already there are many venture capital firms are putting money into VR. Most of those are one-offs, at least so far. But one brand-new firm in San Francisco, Presence Capital, is devoting itself entirely to VR (and augmented reality). Similarly, San Francisco’s Rothenberg Ventures has an in-house accelerator known as River, which is entirely focused on VR.
At the same time, there have been more strategic investments in VR companies. For example, Disney was the lead investor in a $65 million round of funding for Jaunt VR, which has an end-to-end content creation to distribution system. For Disney, being involved with Jaunt is about having direct access to its technology. There will no doubt be many similar deals announced in 2016, especially as Hollywood gets more and more interested in VR.
The “wow” moment
What’s not known at this point is how well any of the VR systems will sell. Despite what is sure to be tremendous hype around the launch of the Rift, the Vive, and the PlayStation VR—not to mention what’s already happened with the Gear VR—those in the industry caution that growth will be gradual.
“I think that we can be extremely successful and really prove out mobile VR and VR in general,” Samsung vice president and general manager for immersive products and virtual reality Nick DiCarlo told Fast Company in November, “and not have to say millions [of units sold]. That’s just not how technology gets adopted in real life.”
What is essential is people getting their hands on the hardware.
“It’s hugely important,” says Ted Schilowitz, a futurist at 20th Century Fox who helps oversee VR projects for the Fox Innovation Lab. “It’s a litmus test of, ‘Do people want this?'”
Most people don’t know if they do. That’s probably because they haven’t had a chance to try it out. And this is year that will change. To Schilowitz, there’s one big reason to be bullish on virtual reality.
“Everybody I’ve shown VR to,” he says, “has had a major ‘Wow’ moment.”