The Virtual Reality Inflection Point

As the decade comes to an end, we have seen the worlds biggest consumer technology product, the smartphone, pass its peak and face a worldwide decline. It is going to be a long time before we see another market as big as the smartphone market and as we wait a number of interesting technologies are being packaged together to solve current problems that will make future electronics possible. Virtual reality was once seen as a potential short term market opportunity, but after a slow start, we have still yet to see a true market for VR emerge. While there are a few variables required, I do think we could be on the cusp of VRs inflection point.

The market size for VR headsets is still up for debate. However, if we believe, as I do for now, that VR headsets are optimally positioned as a gaming platform primarily, then we can use some basic numbers for console sales of hardware that costs north of $200. Approximately 42 million video game consoles are sold each year and have an installed base north of 300m. Quality VR headsets will cost $199-$399 (like the Oculus Quest) which leads me to believe we are looking at similar market size in annual sales. If the VR headset market is, at a minimum, as large as the console market, then that is a sizable enough market to garner investment and innovation from many technology companies. It’s enough to keep the market interesting let’s put it that way.

But, like many hardware platforms, content is king, and this market will go nowhere if there is not a robust and innovate collection of entertainment experiences available and primarily video game content. With that caveat established, I’ve had several experiences with the Oculus Quest that have led me to more of a believer in VR than I was prior to using the Quest.

First off, with the hardware, the Oculus Quest confirms my conviction that VR headsets needed to be cordless standalone platforms in order to gain any meaningful market traction. This seems obvious, but it becomes even more obvious once you have tried a corded and then a cordless VR solution. The second is the price. We have been waiting for a stand-alone cordless VR headset to hit the market, and the Quest has nailed the price at $399. Lastly, the experience is nearly as good as any high-end VR experience I’ve had with expensive headsets tied to powerful GPUs. Which is impressive given it is running a several-year-old Qualcomm Snapdragon 835. The visuals are rich, with low-latency, and the display is much higher resolution than I expected. I can only imagine how much better this platform will be when it runs a more recent Qualcomm part like the Snapdragon 855.

While there is not as much of a robust library of games, there were two in particular that sold me on where VR can go.

Entirely New Gaming Experiences
At a high level, what I’ve always been watching for was for a developer to take advantage of the unique experience VR can enable and do something truly innovative, and unlike anything, we have experienced before. For me that was a game called Super Hot VR. This game can only exist on a VR platform, and that is what makes it so interesting. The concept is like a first person shooter/action game, but your physical movements dictate your strategy to move through each room. It is essentially a puzzle that involves fighting these red glass figures, and how fast or slow you move your body parts dictates the pace of the action. It is a remarkable experience. This game is a prime example of something you can only experience in VR and was one of the coolest games I’ve played in a long time.

The second is Vader Immortal. This game is the first of a series of episodic content where you are playing a role in the Star Wars universe. While there is not nearly enough lightsaber action, in my opinion, there is a mini-game component called Light Saber Dojo where you get to engage in as much lightsaber action as you like. The first time I picked up the lightsaber and ignited the blade, along with that awesome sound of a lightsaber turning on, I was giggling like a little boy.

This game led me to believe a few other things related to VR adoption. The first is Disney has the potential to blow this platform wide open. Nearly all of their Marvel franchises would make incredible VR games. On top of that, Star Wars experiences alone could drive VR into the mainstream. We are one Jedi game away from VR going mainstream.

If you think that sounds crazy, look at the exposure, as well as strong sales of Lenovo’s Jedi Challenges AR headset. This, mostly toy, was launched at a price of $199 and during the holiday season was nearly impossible to find. Even now, Tiger has a Star Wars Light Saber game that connects to a TV that sells for $129. A fully immersive, interactive, and well-produced Jedi game alone would cause an Oculus Quest at $399 to go gangbusters.

The big takeaway for me was how different quality game experiences on VR were compared to their PC or console counterparts. This the opportunity waiting to be unlocked by game publishers and if they create entirely new game experiences for VR platforms, then we will see this market develop and develop quickly.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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