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Without content, virtual reality will see boom and bust

New content will help bolster the growth in virtual reality device sales and shipments, but it’s still unclear how big the market for VR will grow beyond gaming.

Google announced this week it’ll bring VR support to the newest version of its Chrome browser, and promises that in doing so Google will be enabling users to access a new world of immersive content. The VR Chrome update is designed to make surfing around the Web easier for users with Google’s Daydream mobile VR headset strapped to their heads: “Just browse to a VR experience you want to view, choose to enter VR, and put the phone in your Daydream View headset,” Google’s Megan Lindsay wrote in a blogpost last week.

But what will users be looking at on Chrome in VR? Lindsay noted that there already a few VR-enabled Websites, and promised that more are coming soon. Those sites include a library of VR tours through museums, iconic buildings and celebrity homes, and a science site that tracks bear movements across Canada. To be clear, these sites can be experienced on a desktop or mobile device using mouse or finger navigation. One assumes the experience is vastly more “sticky” for users in VR headsets, however.

These VR sites – like all VR content, really – blur the lines between lean back and lean forward viewing experiences. Most VR content is “gamified,” meaning the viewer interacts with the content in order to advance within the narrative. But the question remains as to whether the masses of “viewers” are ready and willing to transition into “gamers” for VR.

Google’s announcement points to another disconnect in the wider VR market: while the most popular VR devices are mobile VR devices, the most compelling content is the type that can only be played on the higher-end VR headsets that are tethered to a powerful PC. That could spell trouble for both the mobile VR market and the gaming VR market.

VR experienced a phenomenal surge in popularity last year, spurred by a bevy of hardware releases that gamers had been waiting years to get their hands on. And while those first generation tethered and console-based headsets all sold out within days of their release, most VR sales have been tied to phone systems like Samsung’s GearVR and Google’s Daydream.

VR device shipments are supposed to reach 110 million by 2021, according to a report from ABI Research (Cisco VNI said 100 million). It expects the standalone VR headsets will see a 405% CAGR through 2021, thanks to new entrants and a swathe of Chinese VR headset makers that are poised to enter the global VR market. Mobile VR, on the other hand, will see more like a 42% CAGR.

“Mobile VR built a solid foundation for the overall market over the past few years, but standalone VR devices will eventually drive it,” said Eric Abbruzzese, senior analyst at ABI Research and author of the report. “Low cost and high accessibility has, and will continue to, drive VR adoption with mobile devices and associated VR accessories. However, a trend toward standalone devices is surfacing, and will continue over the next five years until mobile and standalone VR devices see parity in terms of shipments.”

The report noted that the VR market has been “content-starved” to date, which has caused the market to stall a bit around gaming. The initial wave of non-gaming VR content has largely been limited to promotional short videos, immersive advertising experiences and user-generated 360-degree content. The mobile VR sector has driven both content creation and wide consumer adoption of the technology, but ABI expects renewed interest in standalone VR headsets will help to renew interest in VR use cases beyond gaming.

And yes, interest in VR is waning. Electronics retailer Best Buy recently admitted that it’s closing over half of its VR demonstration booths located within its brick and mortar stores throughout the US, less than a year after opening them up to help interested consumers experience VR. ABI predicts the total VR market to reach $64 billion by 2021, with non-gaming content, software and revenue holding up “a significant portion of the market,” it said. Retail and marketing VR applications, for example, will see a 124% CAGR through 2021. Given the Best Buy reaction, it is hard to see that ABI is right here unless content comes through soon.

What’s becoming obvious is that the VR video format will improve some experiences by leaps and bounds – education, for example, or remote medicine, and anything that relies on geospatial analysis – but alas, entertainment video isn’t one of them.

And another important reality that’s becoming obvious in the VR world: different VR devices occupy different segments of the VR market. “The three primary VR device types—mobile, standalone, and tethered—are entering the market with unique value propositions, target audiences, and use case support,” said Sam Rosen, managing director and VP at ABI Research.
Mobile VR captured the hearts and minds of tech enthusiasts, but there isn’t enough content – and the content isn’t arriving quickly enough – to hold their attention for much longer.

One theory that’s gaining credence among analysts and observers is that VR headsets are too isolating for the modern, social consumer; and that social VR experiences will become the “killer app” of the space. Even Facebook CEO Mark Zuckerberg spoke about the immersive, social future he sees for virtual reality and its potential for transforming our global interpersonal relationships. But there’s another red flag of that disconnect: social and mobile go hand-in-hand today, but Facebook’s Oculus makes one of the most expensive tethered VR headsets available today. So if there is a social killer app for VR, the masses will be flocking to mobile VR devices to experience it. Meanwhile, the high-end gaming VR headsets will remain an extremely niche market.

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