Virtual reality’s mainstream adoption and tremendous impact on humanity is coming. How long it will take and who the winners and losers will be widely disputed, but it’s hard to deny the potential of a tool that has the power of infinite simulation.
That said, predictions of the rise of VR have been too bullish in the near term, and now the hype, especially in the venture world, has largely subsided. Our view of VR becoming a critical piece in the future of work, communication, play, and experience remains unchanged for the long term. In a previous note titled “Is VR Dead or Just Getting Started?” we outlined five reasons to be excited for the next five years of VR. To that end, we want to give an update on some of the important VR developments of 2019.
Before we dive into those updates, we should mention why virtual reality hasn’t taken off as fast as many thought it would two years ago. VR hardware, software, and content simply were not ready for mass adoption and expectations outpaced reality. Top-tier head mounted displays (HMDs) like the Oculus Rift and HTC Vive were expensive and required consumers to own a high powered gaming PC, another expensive piece of equipment. Affordable and accessible HMDs like GearVR and Daydream lacked engaging experiences and had a difficult time retaining users.
While there is still no killer app and VR’s user base is currently still too small for an attractive and sustainable developer ecosystem, the barrier to entry for compelling VR experiences is about to fall this year thanks to some new hardware.
Oculus Quest
If there is one reason why 2019 could be an inflection point for virtual reality, it would be the Oculus Quest, Facebook’s first all-in-one, 6DoF headset. At the surprisingly low price of $399, Quest, reminiscent of the first home game consoles, is poised to be a breakout hit with consumers.
Quest represents the first time virtual reality will be given a chance to go mainstream. Consumers will no longer need to already own or go out and purchase an $800 gaming PC. It will now cost the average consumer $400 instead of $1200+ to have VR experiences that will convert just about anyone into a VR believer. A phrase often repeated in the VR community is “Once you try a compelling 6DoF experience, it’s hard not to fall in love with the new medium and imagine all the possibilities that follow.”
VR’s target market will go from the ceiling of the number of people with a gaming PC to just about anyone with $400. This is a massive development.
Valve Index HMD & Controllers
While Facebook/Oculus is currently taking the approach of making VR accessible to the masses, Valve, creator of the hugely popular PC software distribution platform Steam, is building what could be the “luxury” VR HMD for those with a powerful PC.
We are expecting the Valve Index to be revealed on May 1st and released this June. The Valve Index will likely represent the best of what consumer VR offers on the market today.
The Index is expected to be quite expensive and bundled with Valve Index Controllers, formerly known as the Knuckles controllers, and the long awaited and rumored Half-Life VR game. The new Valve Index controllers could be a major selling point of Valve’s HMD since they drastically improve the ability to naturally interact with virtual objects.
While we don’t expect the Valve Index to makes strides in helping VR’s mainstream adoption, it will likely become the go-to HMD for PCVR enthusiasts for at least the next year.
Oculus Rift S
When the Oculus Rift S was announced at the Game Developers Conference (GDC) last month, VR enthusiasts were left wanting more. While a product would ideally appeal to all markets and demographics, this is rarely possible. Oculus decided to make the necessary tradeoffs to build a “Rift 1.5” that made it easier than ever for regular people to enter the premium PCVR ecosystem without having to spend $600+ on a headset.
The Rift S is more of a replacement for the dated original Rift which launched three years ago and does not represent the next generation of PCVR HMDs that many were expecting. However, the Rift S, at just $399, still represents the best value VR HMD on the market in 2019.
The Downfall of HTC?
HTC has had a rough start to 2019 and it just got much worse with the announcement of the Valve Index. HTC’s advantage was it had a loyal following with hardcore PC gamers and had partnered with Valve for best in class tracking technology. It also was assumed the new Knuckles controllers would be a major selling point for HTC HMDs. All three of these advantages are going away this year.
Now that Valve has entered the game, HTC is in a bad spot. HTC’s followers will likely be converting to the Valve Index and not buying another Vive unless there are some major innovations to stand apart. The Knuckles controllers are also now called Valve Index Controllers and most headsets are transitioning to inside-out tracking which HTC has not yet shown they are very good at. HTC will also not be able to compete against the Oculus Quest with their own weak entry into the standalone VR market, which is the future of VR hardware.
If there is one thing that will save HTC, it will be the company’s focus on the enterprise and arcade markets which are not being as heavily pursued by others. HTC has announced multiple new HMDs that are on the way such as the Vive Cosmos and Vive Pro Eye, but too little is known about them at this point to get excited.
Nintendo Labo VR
Nintendo is finally redipping its toes into the VR world with the Labo VR Kit after its failed attempt in the 1990’s with the Virtual Boy. The Labo VR Kit is a DIY cardboard accessory for the Switch console. It features simple (almost gimmicky) mini games that are designed for younger gamers. While this likely isn’t a threat to more established VR players, it does represent an important step for the VR industry to see yet another big gaming company show they are clearly thinking about VR and how they need to be positioned going forward.
New Experiences
Great software is of course needed to go along with great hardware and there are some new compelling virtual experiences coming this year.
UploadVR put together a list of 52 experiences to look forward to in 2019 but here are a few standouts:
Why 2019 Could Be a Big Year for VR
If we were to sum up 2019 for VR in one word it would be accessibility. And there is little doubt the Oculus Quest will be one of the most important developments for VR in years. For the first time in VR’s history, anybody will have access to the VR experiences that turn skeptics into believers. Up until this year, the only accessible VR was largely lackluster 3 DoF experiences on the Oculus Go, Samsung Gear VR, or a cardboard headset.
A technology wave like this only comes along every few decades. We are lucky to be here for the beginning of it and while we are still likely a few years away from VR becoming a must-have device in everyone’s home, 2019 has been an important year for the virtual reality industry.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.