Narrative: AR vs VR
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Narrative: AR vs. VR (Jan 11, 2017)
Written: January 11, 2017
Virtual reality has been one of the hottest technologies of the last couple of years. Though it has in fact been around for decades, it finally seems to have hit the point where mainstream VR experiences start to be compelling and affordable. The combination of PC-, console-, and mobile-based VR provides a range of experiences at different price and performance points for consumers, and there has been strong interest from consumers – Samsung’s Gear VR has sold over 5 million units, and the more expensive PC and console variants have sold well within the context of a much smaller addressable market.
Facebook acquired Oculus on the basis that VR would be the next big interface, having missed out on a strong role in the last major interface: smartphones. Google, too, has made VR one of the categories in which it is now selling first-party hardware, but has also provided a platform for its OEMs to build on. Gaming companies are investing heavily in VR as the next iteration of what they already provide across PCs, consoles, and smartphones, and video streaming services like YouTube and Netflix, along with movie and TV studios are producing content and apps for VR environments.
And yet VR isn’t the only attempt to create a new form of reality – augmented reality, mixed reality and other flavors which combine the real world and superimposed virtual worlds are also taking hold. Apple in particular seems to be far more interested in augmented reality than VR, and hot but mysterious startup Magic Leap is also focused on this space. Pokemon Go has arguably given many consumers their first small taste of augmented reality as well as their first exposure to the term, which is still far less well known than VR. And though Microsoft’s HoloLens is today far more suited to commercial and educational than consumer use cases, it already shows considerable promise in AR.
The next few years will see an interesting battle between VR, AR, and other similar technologies, as various major tech companies place their bets on one, the other, or both. VR definitely has the early lead in terms of consumer awareness and adoption, but a big move by Apple or a strong entry to the market by Magic Leap could quickly begin to change that. I know lots of people who far prefer the idea of remaining present in their physical environments rather than completely removing themselves as with VR, and as such I think AR will find a willing audience if it’s done right. But there are big challenges to be overcome even with AR if it means strapping on a headset or wearing cyborg-like glasses. The form factor here is as important as anything else in determining whether AR is met with acceptance or revulsion.
In all of this, it’s also worth noting that no-one is irretrievably too late if they haven’t launched products yet – though we’ve seen some decent early adoption, the vast majority of consumers have never tried AR or VR in any meaningful sense. Once people do experience the current generation of VR, it’s immediately compelling, though it’s mostly hardcore gamers and early adopters who will actually make purchases for now. The big question for VR is whether it can cross the chasm from gamers to mainstream consumers as a whole, which means far better entertainment, education, communication, and social apps. Technological challenges still need to be overcome too – shrinking hardware, improving frame rates, lag, resolution, and many other factors will be critical for creating truly immersive results. So there’s still plenty of time for others to enter the market.
Apple’s Next Big Thing: Augmented Reality – Bloomberg (Mar 20, 2017)
Yet more evidence that Apple sees a far more promising future in augmented than virtual reality, something Tim Cook has already affirmed several times. There’s little concrete in this article – lots of discussion on the people Apple has leading and working on its AR project, the kinds of technologies they’re working on, and some features they’re experimenting with, but really nothing about what Apple is actually likely to launch. I’ve often said that Apple tends to build up to new technologies slowly, and often subtly, incorporating the necessary hardware in devices like the iPhone long before it actually takes advantage of them, and I think the dual cameras in the iPhone 7 Plus are an example of that. The same technology that powers Portrait Mode and 2x optical zoom could easily be incorporated into some kind of AR technology on the iPhone, and I think it’s likely this fall’s iPhones will start to show some of what they’re capable of using these and other components. But Apple will probably also use the iPhone to build up to something separate over time, like glasses, something this article seems to confirm. For now, VR definitely has far more public attention than AR, and it’ll take someone like Apple getting into the business to change perceptions and raise awareness of the latter.
Microsoft has apparently renamed its Windows Holographic platform as Windows Mixed Reality, which seems to be a reflection of the broadening of the platform from its original narrow AR focus to something broader, including the release of a number of VR headsets that was announced a couple of months ago. At the time, I saw that as a concession that Microsoft’s original vision wasn’t coming to fruition fast enough or at big enough scale, and that it needed to broaden its scope to encompass the areas that are hotter in the short term, notably VR. That was particularly important for its OEM partners, most of whom were never going to build a HoloLens like headset but who likely wanted to build more accessible VR gear. This name change reinforces my sense that Microsoft is realizing that it needs to think more broadly if it wants to play a serious role here in the near term, and that probably also means building more first party VR gear for Xbox among other things.
Oculus Drops Price of Rift and Controllers by $100 Each (Mar 1, 2017)
I’ve just had a little debate with myself (and with some others on Twitter) as to which site to link to for this news – lots provided essentially the same information in my Twitter feed at roughly the same time, and I was left with a choice of a site with a paywall, a site with egregious auto play videos, or a site with more superficial coverage. The news itself is interesting – Facebook/Oculus is reducing the price of both the Rift and the controller by $100 each for a total discount of $200 and a new combined price of $598, which puts it below the price for the $799 HTC Vive, but above the $399 price of the Playstation VR. The combined price of a console or PC plus headset is still lowest for Playstation by quite a distance, helping explain why the latter is selling so well, especially with a large installed base of consoles. Oculus insists it’s not reducing the price because of poor sales, and it’s been saying for months Oculus sales wouldn’t be material to Facebook’s overall business for years, so there’s some credibility to its claim that it’s just executing on a longer-term plan here. Even Sony’s nearly 1 million sales are still very small in the context of any other mainstream consumer electronics category, which is a useful reminder of VR’s relative immaturity. But lower prices will help accelerate things a bit, as well installment plans like the one HTC announced this week.
HTC is making several announcements at the GDC gaming conference, but to my mind the most interesting is its installment plan for paying for a Vive headset. Instead of paying a lump sump of $799, would-be buyers can now pay $66 per month for 12 months, much as many of us now pay for our phones. One of the criticisms (and limitations) of early high-end VR is the price, but of course an iPhone 7 Plus or Samsung S7 Edge or Pixel XL comes in at $750-770, and we don’t all balk at that price, because none of us pays it upfront. Installment plans make these purchases a lot more palatable, and that’s going to be important for reducing the barriers to adoption here. That doesn’t mean we’re all going to rush out and buy one of these, not least because it still requires a high-end PC as well, but this kind of small step will help accelerate the spread of VR just a little bit.
This is a rare non-MWC announcement this morning, but is interesting in context of all the mobile-centric news coming out this week. Sony has sold just under a million Playstation VR headsets since its launch – 915k as of a week ago – which is really very impressive given the installed base of Playstation consoles is vastly smaller than the base of smartphones in use. It also means this will be a useful revenue stream for Sony – at $400 a pop, that’s $360 million or so so far, which is probably as much or more than Samsung has made from selling / bundling its Gear VR headsets. I continue to believe that the next couple of years in VR will be characterized by a bifurcation between relatively small numbers of sales of high-end rigs from Oculus, Sony, HTC, and the like on the one hand, and larger unit sales (at much lower prices) of mobile headsets. Over time, a third category of standalone units will emerge and take some meaningful share, but for now it’s about these two extremes.
via New York Times
Samsung’s Gear VR headset has been by far the top-selling VR device so far, with over 5 million units “sold” (although many were likely given away or bundled at a very low price with smartphones) versus under a million so far for Playstation VR. Mobile VR is the mass market segment, and it’s always going to beat the hardcore VR rigs on volume, but the performance is often sub-par, and the user interface on the Gear VR has been pretty abysmal. The Daydream VR headset Google debuted late last year was much better in this regard, with a nice little hand-held controller which was mostly much easier to use, though it can be a little glitchy at times. It looks like Samsung now has a much more usable controller too, which should be a big help in making its VR experiences more enjoyable. The new controller ships with a new version of the Gear VR headset, and may or may not be available as an accessory for existing owners (price and date are also still unavailable).
HTC announced this subscription VR service for its Vive headset at CES, but it’s now opening it up to developers. The fact that only 14,000 consumers have signed up to be notified when it launches is a useful reminder of just how small the VR audience on any of the high-cost platforms is today. And I would guess that many users will still end up shelling out lots of money on a per-game basis because the best premium content won’t be part of the subscription, at least in the long run. But a subscription model for VR makes a ton of sense for non-gaming content as more of that starts to show up, although arguably it’s a better fit for mobile VR experiences which are more attractive to non-gamers rather than the big-ticket PC- and console-based rigs.
HTC has another tough quarter, with revenue down 13% YOY, but smaller losses – TechCrunch (Feb 15, 2017)
I don’t typically track HTC’s financials that closely, because they’re so small (just $700 million in revenue last quarter) and such a minor player at this point, but it’s worth checking in from time to time, especially as HTC expands beyond its traditional smartphone business into VR and ODM manufacturing for Google. Interestingly, there’s very little sign of any meaningful bump in revenues or profits from either of these initiatives, which either means that their contribution is tiny or that the traditional smartphone business is declining even faster than in the past. Revenue was down 13% year on year, and the company has had negative operating margins for seven straight quarters and most of the last three years. On the Q3 earnings call, HTC said that it was near breakeven on its smartphone business, and blamed the VR business for the overall losses. It also refuses to talk about the Pixel business at all on earnings calls, citing the lack of public disclosure by Google (which is odd because Google has confirmed it). Regardless, it’s worth noting that the company’s gross margin is just barely in the double digits, which obviously doesn’t leave much room for marketing and other corporate costs. HTC is one of a number of what were major Android vendors a few years back which have faded considerably, and unlike Sony it doesn’t yet seem to have figured out how to make the business work at its new smaller scale.
HTC will launch mobile VR device as follow-up to Vive – CNET (Feb 15, 2017)
I covered HTC’s Q4 results yesterday, and it was clear that VR was not yet making a big positive dent in the business yet. Part of the reason is that Vive, like Oculus Rift, is a marginal play – it relies on heavy duty existing hardware and is itself expensive. It’s no coincidence that the top selling VR headset today is Samsung’s Gear VR, with over 5 million units, because it’s compatible with many smartphones and costs very little. HTC is smart to move into this territory too, though of course if this device really is limited to one of its own smartphones, that’s a pretty small addressable market too.