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Status of VR Industry: Crossing the Chasm

By Teppei Tsutsui (Managing Director)

We believe that the VR/AR will be a next computing platform. That’s why we started GVR Fund to support the community, and become a part of it, not just standing on the sidelines. Now the question is when - when does the VR market really take off? Although we want to say it is going to be this year or the following, we have to accept the fact that it’s taking longer than expected. There should be a number of reasons; a price point and quality of VR headsets, lack of attractive contents, so many platforms, etc. So, let’s look at some data points.

In January 2016, Goldman Sacks published a VR/AR market report. It is a thorough and insightful report, and I’d recommend everyone in the industry read it if one has not yet. Goldman Sacks forecasted that by the end of 2016, there would be 2.1 million ~ 6.8 million VR headsets out in the market, with 3.8 million units under the most realistic scenario. How did the actual market turn out to be compared to these numbers?

Samsung announced this January that more than 5 million Gear VR had been sold since its launch in November 2015. One month after, Sony also made public that they already shipped 915,000 PlayStation VR worldwide. Using the Super Data’s estimates for other brands, we can come up with a rough number, suggesting that approximately 7 million headsets had been shipped by the end of 2016. It is interesting to see the number even beat Goldman Sacks’s higher end of the range (6.8 mission). Encouraging!

Then, the next question is how this figure compares with other devices like mobile phones and tablets? According to Gartner, 1.8 billion mobile phones were shipped last year, while the numbers of shipments of PC and tablets in 2016 are 270 million and 169 million units, respectively. As you can see, consumers purchased 24 times more tablets and 38 times more PCs than VR headsets. If compared to mobile phones, 7 million is only 0.37% of the total shipment of cell phones.

One of the challenges VR industry faces right now is that there are not enough end points for consumers to play and enjoy contents and for developers to monetize. Yes, VR headsets are expensive, a price ranging from $400 to $800, and also, you need high-end computers that would cost you additional $1,000 - $2,000. Currently, the VR market is trapped in the chasm between early adaptors and the mass market and has not been able to cross it over yet. Most of the early adapters already bought VR headsets and have been playing with them. But not the mass market - they are all waiting for inexpensive, high-quality goggles as well as killer contents.

Last year I was hoping that mobile VR would become a driving force, expanding the VR market to the next stage. The reality is that mobile VR headsets were sold more than high-ends in 2016, but not enough for the VR market to take off. And now technologies have advanced so much that many manufacturers are looking to launch untethered, standalone headsets soon. I’m very excited about all the announcements which big players made recently. Google announced at Google I/O their brand new standalone Daydream headset in partnership with Lenovo and HTC. HTC also announced last week that they would introduce their all-in-one Vive headset just to China. Oculus’ standalone headset, which was named "Santa Cruz" and released at Oculus Connect last October, is coming out sometime next year, and there is a rumor that it will be sold at around $200.

If this kind of high-quality VR device becomes available under $300, that could be a potential game changer, pushing the mass market to accommodate this new device. These standalone VR headsets with affordable price may lead the VR industry to cross the chasm finally. I can't wait to try out these next-generation headsets.

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