Virtual Reality’s Long Walk Before Running

Virtual Reality’s Long Walk Before Running

Virtual reality was always going to be a tough sell initially — even at a decent price.

Sony launched its first VR system in mid-October. The PlayStation VR has several advantages over rival systems from HTC and Facebook’s Oculus: a much lower price and much larger addressable market. Still, VR is brand new as a consumer technology, and a challenging one at that. It imposes discomforting physical demands on users. And demonstrating the systems in retail stores requires extra resources and personnel.

So, while VR has much in the way of long-term promise, early sales are providing a hard dose of reality. None of the companies involved have disclosed actual numbers, but several indications have emerged suggesting a relatively low sales volume to date. Last month, Facebook CEO Mark Zuckerberg
characterized the launch of the Oculus Rift headset earlier in the year as a “slow start.”

For its part, Sony described its early PlayStation VR sales as “on track” with its expectations in its earnings call earlier this month. The company added that production plans for the headset have been “revised upward slightly,” which doesn’t exactly sound like booming demand. U.S. retailer GameStop said this past week that sales have been brisk for the PSVR units they can get their hands on. But supply of the system has been limited. Market research firm Superdata has cut its PSVR sales forecast from 2.6 million units this year to fewer than 1 million.

This doesn’t mean virtual reality isn’t generating significant interest. Retailer Best Buy said in its earnings call this month that more than 700 of its stores now have dedicated virtual reality “departments” that have provided more than 300,000 demos even before the holiday shopping crunch begins.

Offsetting this is the fact that major videogame publishers haven’t really embraced virtual reality yet with their major franchises.

And the category overall is having a tough year. U.S. sales of game hardware have totaled $1.9 billion for the year to date, which is down 23% from the same period last year, according to NPD. Nearly half of hardware sales typically take place in the final two months, and updated versions of the PlayStation and Xbox have recently launched. But even with a strong year-end boost, hardware sales for the year are still on track to fall under $4 billion in the U.S., which would be the lowest in more than a decade.

That doesn’t mean VR companies will be giving up. Sony, Facebook and HTC have invested significant effort and resources into the technology and have a long-term view towards making it work. But getting consumers to plug in will take a while.