Virtual Reality is Transforming into a Niche Sub-Industry

Last month, we asked whether virtual reality (VR) is doomed to become a niche sub-industry, despite Facebook and other companies pouring billions of dollars into the technology.
When that article was published, Facebook had just unveiled its latest standalone headset: the Oculus Quest, slated to retail for $399 once it ships early next year. Although it isn’t tethered to a high-powered PC like previous Oculus headsets, Facebook claims that this new Oculus will support higher-end VR games. And “games” is the key part of that sentence, since Hugo Barra, head of Facebook’s Oculus program, suggested that the Quest is primarily a gaming platform.
That was before Facebook announced that it was ending Rift VR support for renting and buying non-VR movies via its Oculus Video service (Oculus Go and Samsung Gear VR will continue support). “Over the years, we’ve seen how people use VR for everything from gaming to movies, and it’s become clear that while people love to stream immersive media on other devices, Rift is used primarily for gaming,” read a note sent to users according to Road to VR.
Then, Oculus co-founder Brendan Iribe decided it was time to leave Facebook. According to TechCrunch, he left because he wasn’t interested in a “race to the bottom” with regard to VR headset hardware specs.
Facebook clearly wants virtual reality to serve primarily as a relatively low-cost gaming platform, and perhaps that’s the route to broad adoption. At the top end of the market, there’s still the HTC Vive; at the lower end, headsets such as Google’s Daydream, in which your smartphone serves as the screen. All offer a range of games, along with a few other apps.
But even virtual reality gaming might face a struggle. CCP, which built flagship VR games such as “Eve: Valkyrie,” has retreated from the VR market. “We expected VR to be two to three times as big as it was, period,” CEO Hilmar Veigar Pétursson told the media. “You can’t build a business on that.”That admission—and the corporate maneuver behind it—came as a bit of a surprise, considering how often Facebook pushed “Eve: Valkyrie” as a key example of what the Oculus platform could do.
Earlier this year, research firm IDC reported that shipments of VR and augmented reality (AR) headsets plunged 30.5 percent between the first quarters of 2017 and 2018. Enthusiastic early adopters snatched up their Oculus Rifts and HTC Vives, but that didn’t ignite a broader market. Perhaps that’s why Facebook has decided to drive down the price of headsets.
For the moment, virtual reality is very much a niche (and still gaming-focused) product. Those developers and other tech pros who thought that VR would quickly spread to the enterprise and other contexts might be disappointed. But those who love and create games might still see VR as an opportunity, albeit one that might prove hard to monetize.
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