How Will Virtual Reality Scale?

We are all waiting. Waiting for augmented, virtual and mixed (AVM) reality to become mainstream. For it to be as normal as having a mobile phone. And for those of us who use it — enthusiasts, gamers etc. — the world of AVM seems like it’s around the corner. But then you see the stories about the exaggeration of VR. It could be a multi-billion dollar market in 2020 or it could be a billion dollar market. Take for example China where Bloomberg reports that the VR market will be $8.5 Billion and noted that there are at least 200 startups working in China’s VR industry.

And that is just China.

So if the market and the resources building new products are that big, it seems that VR is guaranteed to become a success. But the reality is that scale at that level has a lot of moving parts. So the question then becomes when will commercialization be viable? And more importantly, what will it take?

Consider the the mobile phone and it’s scaling process as an example. It started when Martin Cooper of Motorola made the first publicized handheld mobile phone call on April 4, 1973. Ten years later in 1983, the first mobile phones went on sale in the U.S. at almost $4,000 each. Ten years later in the mid 90’s there were viable commercial solutions, thanks to many factors that I’ll discuss below. Then in 2007, the iPhone started a smart mobile phone revolution. When you look at that history, the mobile phone was a 30+ year overnight success.

But the scalability in mobile show us the potential route that AVM will take. As I see it there are four major points that will usher in success for AVM.

A critical factor will be determined by technical improvements. Look at the first handheld mobile device and the subsequent iterations. Look at most electronic products. They get better over time and the current investment scale of VR is ensuring that a more rapid progression at this time.

Telecom's and mobile carriers will bring the other three advantages: costs, connectivity and distribution. Costs have to go down. A gamer will pay for a Playstation VR HMD but an average consumer will not. And that’s where mobile carriers will come into play. As Fortune describes it: “ When consumers sign up for a contract in the U.S., they typically get a steep discount on their phone — known as a subsidy — but carriers aren’t just eating that cost. They’re charging customers much higher monthly plan fees in order to make up for that subsidy.” So the start of the AVM scalability will rely on mobile carriers to subsidize the costs for high quality devices.

The other major part that will make AVM scalable is connectivity. To have access to content you have to be connected. And telecom's are bringing higher level connectivity to the market in addition to accessible contract rates that are already part of their pricing structure. You add to that the distribution model they enable — imagine picking up any AVM device at a AT&T, Verizon, T-Mobile store — and now you have a sales model that enables commercialization.

As I see it for all these players to want to work together, it will take rising consumer demand, multiple product iterations and hopefully a breakout product such as the iPhone of VR to give consumers the feeling of magic. But better technology, multiple price points, connectivity and distribution will be the foundation behind it. There are a lot of horses in this race for AVM but I’d like to think that everyone will be a winner when they finish.