2016: The Year of VR?

2016, as every VR evangelist will tell you, is the Year Of VR. After all, we know with certainty that the Rift, Vive and PlayStation VR are all landing this year. But can we really be sure 2016 is going to be ‘The’ year? When Rift pre-orders went live on January 6th, we also found out how much it’ll set us back, and that $600 price tag was significantly higher than anyone had anticipated. Oculus themselves were talking about a price point ‘roughly in that $350 ballpark’ as late as September 2015, so this was something of a shock to say the least.

Even Facebook’s Mark Zuckerberg, who acquired Oculus in 2014, has been lowballing year one sales in the “hundreds of thousands” of units. Meanwhile, the developers making games and experiences for VR are hedging their bets and talking about significant uptake in 2017. The majority of content we’ll see this year will be mostly short-form, experimental stuff – developers have spent so much time figuring out what works and what doesn’t in VR that they’ve had scant time to actually put those lessons to use.

The Final Platform

We’ve been here before, of course. Anyone of a certain age will remember VR’s first disastrous forays into mainstream adoption in the nineties, when VR withered and died for many reasons that we won’t go into here. Those of us that remember those days are quite used to waiting for the dream of VR to be realised. As a concept it looked like it had been killed off for good until some kid in his father’s garage duct-taped some smartphone components to a ski mask and accidentally invented The Future. We are on the cusp of a technological revolution, one that Oculus CEO Brendan Iribe calls “the final compute platform” that will ultimately supplant and replace all others. But even the tech-savvy, the very people who need to buy into VR if it is to become truly mainstream, are viewing it with both apathy and downright hostility.

That being said, even at a $600 price point, Facebook and Oculus seem to have severely underestimated just how much pent up demand there is for fully-featured VR that actually works. Within an hour of pre-orders going live, the estimated delivery for the Rift went from late March to April. Then through May, June and July. For every angry Redditor vowing that they’re not going to get one, many more will decide they need it in their life and order it anyway.

Early Adoption

Given the sheer amount of Capital investment in VR (and AR) in 2015, which amounted to some $700 Million or so, many people are wondering how big this industry will grow and how much it will end up being worth. Digi-Capital claims that VR and AR will be a 150 billion dollar industry by 2020. Does a $600 price point jeopardise that? If the Vive comes in at $1000 or even $1500, will that slow down or even halt any hopes of mainstream adoption of VR?

Judging by the rapidly lengthening pre-order delivery estimate for the Rift, the answer would seem to be no. For every early adopter who has already pre-ordered, there are several more who are waiting in the wings until they’ve saved the required funds before taking the red pill. However, the question of just how many units the big three can sell is irrelevant; demand will vastly outstrip supply for this year and a chunk of next. The real question is not how many they can sell, but how many they can make. That will be the limiting factor to early adoption.

The Retail Experience

Another big unanswered question is retail availability, and how that will work. At the moment there are more questions than answers here. One thing we do know is that if you want to buy a Rift in-store, you’ll have no choice but to buy the Rift plus a powerful PC, which will push the sticker price to at least $1500. Already got a Rift-spec PC? Tough. If the stores add in a profit margin on top of that eye-watering price tag, will that scare away customers already reeling from sticker shock? Who will pay for the staff (and the training) needed to run demo stations? How many units will the stores get? Which stores get product, and where? When will Europe and the rest of the world get a retail presence? Fortunately, we won’t have long to find out, as retail availability for the Rift begins in April.

Given all that, though, is 2016 really going to be “the year of VR”? I think it will, but it’ll have little to do with what HTC or Oculus does. Their early manufacturing capability has the potential to limit the adoption of PC-based VR, and while HTC has an established supply chain to leverage, it seems unlikely that even they would bet the farm on an unproven, costly technology right out the gate. It will be up to Sony to save the day – they will have the enviable combination of an accessible, all-inclusive price point, excellent content line-up and a larger, more established user base. After all, there are tens of millions of PS4s in the wild, which is all you need to drive PSVR. Even if you don’t have one, a PS4 is a lot cheaper than a Rift-spec PC, and a lot easier to get hold of too.

When we tally up the sales at the end of the year, don’t be surprised to see PSVR outselling the other two put together. Which is fine. First-generation VR is all about making headsets available to the public and giving developers a market to sell to, not competing for market share. That can come later. It’s still a possibility that VR will fail to take off, but barring an unseen catastrophe the signs are looking good this time.

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