Company / division: HTC
Though Google spent much of its I/O keynote talking about apps and features like Photos and the Assistant, it did devote a few minutes to the topic of AR and VR, which will have a second deeper-dive keynote of their own tomorrow. On the VR side, the key announcement is that Google is extending the Daydream platform beyond mobile VR to standalone headsets, which in the first instance will be built by partners Lenovo and HTC and supported with chips from Qualcomm. Daydream so far has been limited by the fact that the biggest Android smartphone vendor has its own competing platform, so the news that Samsung’s Galaxy S8 phones will support Daydream through a software update in the summer is a big deal. My guess is that Samsung will still favor its own Gear VR system with its usual bundling and discounting deals, but the fact that Daydream View and other compatible headsets will now work with Samsung devices should increase its appeal. Daydream’s system is better than Samsung’s in a number of ways, though the recent Gear VR update closes the gap a bit, so the playing field should be a leveled a little going forward. Also worth noting are a couple of AR announcements, including a new “Tango phone” to support Google’s indoor mapping technology, and VPS, an indoor equivalent of GPS which will enable precise directions within large stores and the like. Neither of those feels remotely mass market yet, which means Google’s AR efforts are far more marginal than the phone-based efforts from Facebook and Snapchat (and likely soon Apple too). Interestingly, VR head Clay Bavor outlined his vision for the space in a blog post today too, and it’s remarkably similar to Microsoft’s in that it envisions a continuum or spectrum that includes both VR and AR, though Bavor’s favored term is immersive computing rather than mixed reality and he’s less pejorative about the VR and AR terms everyone is already using.
Google has today announced a patent licensing alliance which is intended to provide cover to member companies using each other’s patents. The idea is that any member can use any other member’s patents without fear of being sued, something that’s actually been quite common between members of the broader ecosystem over the last few years. The alliance has only nine members to start with, about half of which are smaller smartphone brands, but the members do include Samsung, LG, and of course Google itself, as well as Foxconn. Those members alone apparently have 230,000 patents between them which will now be freely available to other members within the context of Android devices. This is a fascinating move, and it’s impressive that Google was able to get Samsung and LG in particular on board without also having some of the other big Android vendors. Of course, none of this will stop these companies from suing those outside the Android ecosystem (or this alliance), but it might help temper some of the animosity that has sometimes characterized competition between Android OEMs.
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.
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.
It’s musical chairs week in VR, with Hugo Barra leaving Xiaomi to head VR at Facebook, and now an HTC designer moving to Google to work on Daydream VR there. This is one of the hottest areas in tech, and it’s therefore no surprise that it would prompt moves between companies as ambitious people try to find roles in the sector. For HTC, which continues to struggle mightily on the smartphone front and has only a side business in VR, it may become increasingly difficult to attract and retain talent in the face of an onslaught from some of the biggest names in the business.
via The Verge
Why The LG G6 Won’t Have Snapdragon 835 – Forbes (Jan 24, 2017)
This is sourced reporting from a Forbes contributor who (as far as I am aware) doesn’t have a long track record in scooping news like this, so take it with a pinch of salt. But on the face of it, this makes sense – Qualcomm’s 835 chip is brand new, and Samsung would logically need bucketloads of them for its next Galaxy S phones, potentially gobbling up all the supply available and squeezing other OEMs out in the short term. Apple is famous for securing long-term access to the components it needs and squeezing others out in this way, and given the timing and Samsung’s scale in smartphones, it makes sense that it would be able to secure all the available supply of 835 chips on a short-term basis too. That’s going to be tough for other OEMs launching handsets in the first half of 2016 – even though the article downplays the jump from the 821 to the 835, there are some significant additions in the new chip which will create better performance in areas like battery life, VR/AR, and so on.
What happened to virtual reality? – Business Insider (Jan 21, 2017)
This piece argues that VR is currently underperforming expectations, and hasn’t panned out the way many of its proponents hoped. In reality (no pun intended), I think most of the companies have been pretty realistic about the prospects for the current generation of VR technology – Facebook in particular has said it doesn’t expect Oculus sales to be material to its overall financial picture, for example. So this is as much about inflated expectations around VR that came from others – observers, proponents, fans – than from the companies themselves. But in some ways that doesn’t matter – the narrative was that VR was finally here and going mainstream, and now it’s becoming that VR is falling short of expectations. The first was misguided, and now the second flows from those misguided expectations rather than from actual performance in the market. VR is still at a very early stage, and though Samsung has sold 5 million mobile VR headsets, it’s mostly still a niche proposition today, limited largely to the hardcore gaming market. It’ll take both technological advances and much more compelling content to appeal to non-gamers.
HTC’s new flagship phone has AI and a second screen, but no headphone jack – The Verge (Jan 12, 2017)
HTC is the Android smartphone manufacturer I keep expecting to be the first to when the shakeout starts, and it’s hard to avoid the sense that this shakeup is imminent. Its financials make grim reading – rapidly declining revenues and regular losses, with only a brief blip following the launch of the HTC Vive. HTC typifies what’s happened to the big-name Android vendors over recent years with the exception of Samsung – LG, Motorola, Sony, and others have experienced similar challenges. Each has its own attempt to turn things around, and with HTC it seems to be the combination of investment in VR and an expansion of its premium smartphone lineup along with some feature experimentation. We’ve already seen the modular approach come and to some extent go, but second screens seem to be a feature that’s sticking around a bit longer. None of what’s here makes me think it’ll help turn HTC’s fortunes around though.