A Tale of Two (Virtual) Realities
When I was college in the 90’s, my campus had a virtual reality event. A huge semi-truck full of equipment pulled up to our student union and a crew assembled two structures they called VR booths. Users donned what basically amounted to a football helmet while standing inside the booths where we took part in a clunky fighting game against each other. Today’s virtual reality is worlds different from the demo I tested. While an enhanced and immersive visual experience remains the goal, the hardware has slimmed down, become more affordable and hosts many more applications than the kung fu simulator I demoed.
The consumer technology industry has seen products boasting of enhanced video experiences before, of course. Seven years ago, 3DTV was all the rage. At its height, 3D accounted for 40 percent of TV sales revenue, but consumers never embraced it. The experience of watching content in 3D was hit or miss and viewers never found a reliable source of content. Plus, you know, the glasses. By the time 3DTVs became affordable, interest had already waned. VR is similar in some ways. The glasses are back, but now they’re in the form of a larger face apparatus. Content needs to be shot or specially retrofitted for the format. It’s also being sold as an experience, much like 3D was.
But that’s where the comparisons end. Early on, the nascent VR headset market offers consumers multiple entry points into the technology. For those looking for a taste of virtual reality, mobile VR and Cardboard style headsets that employ a smartphone for the visual experience can be had for as little as $7. Enthusiasts looking for something more immersive will likely gravitate towards higher end PC connected products like the Oculus Rift and the HTC Vive. And game console owners can expect a surge of VR accessories in addition to the already announced PlayStation VR. The selection of products poised to impact the market indicates consumers with interest in the technology will have a number of ways to experience it regardless of budget or tech savvy.
That’s why mobile is key to VR’s success. Near ubiquitous smartphone ownership and a growing assortment of virtual reality apps found on the major mobile app marketplaces mean games, maps, videos, and anything else you can think to view in VR will be readily available. This is a stark contrast to the early days of 3DTV when owners had to rely on a smattering of cable and broadcast offerings and later, 3D Blu-ray for content. The result of this open access to VR devices and applications means the market is actually helping to nurture a growing segment of virtual reality enthusiasts, rather than pricing out aspirants who cannot yet afford it.
This dynamic is reflected in NPD’s Checkout Tracking data regarding online virtual reality headset buyers. While the age and gender profile of PC and mobile VR headset buyers is similar, differences exist in the affluence of these consumers. For the six months ending in April, 77 percent of mobile VR headset buyers had a household income under $125,000 while 42 percent of Oculus Rift owners had an income above $100,000. And while Oculus buyers on average spend more on technology throughout the year than mobile VR headset buyers ($1,897 vs. $1,154, excluding the VR purchase) combined, tech spending by VR buyers was more than three times the level of non-VR buyers. This helps confirm the notion that early VR purchasers tend to be technology enthusiasts and PC connected VR buyers have been more affluent than mobile based buyers so far.
But the Rift, Vive and other forthcoming PC connected VR headsets present unique, upgraded experiences- and from a market development perspective, the built-in step-up opportunity is a great thing for the category. Consumers who initially whet their appetite with mobile VR can upgrade to a more premium device should they want more. One might ask if the “good enough” mobile experience could win out- that’s certainly possible, but it may not be good enough for long. Qualcomm’s latest smartphone processor, Snapdragon 820, supports VR friendly features like 360 degree audio and computer vision capabilities and most expect the next version of Android, Android N, will support more intensive VR applications as well. Additionally, Lenovo has already announced their Phab 2 Pro, the first consumer smartphone using Google’s Tango augmented reality platform. With these developments, VR capabilities could become the next differentiating feature in smartphones or even allow for a new segment of phones designed specifically for VR enthusiasts — all the more reason mobile VR devices figure prominently in the category’s future.
As we continue through the post-PC era, it seems a little counter-intuitive to pin the future of virtual reality on devices that connect to desktop computers. For virtual reality to scale, it will need to tap in to the huge installed base of mobile phone users that includes VR enthusiasts, casual users, and everyone in between. Going forward, the biggest question is which form factor will be most dominant. Will improved smartphone technology accelerate growth in mobile VR headsets and applications, or will increased affordability drive sales of PC and game console connected VR? In either case, the visual experience must be outstanding to engage users, or else it’ll be 3DTV all over again.
This post originally appeared on The NPD Group Blog on July 12, 2016
