Virtual Reality War: Sony's Announcement Threatens Competitors

Source: BagoGames on Flickr.

New players now vie for the virtual reality market, thanks to Sony's  (NYSE: SNE  ) announcement at the 2014 Game Developers Conference that unveiled Project Morpheus, a VR headset designed to work with the PS4 and provide immersive worlds for its players. Sony stock rose by 0.64% at the news, up by around 4.21% year over year. Analysts, spurred by the change, are busy comparing Sony's VR offering with the other big player, the Oculus Rift, a poster child of Kickstarter that has raised more than $100 million since 2012. The private designer of the Rift, Oculus VR, has already developed a headset prototype that is inching nearer toward production and has encouraged the emerging interest in VR tech. Facebook has now entered the VR field by reaching a $2 billion agreement to buy Oculus VR, announcing its intentions to offer virtual reality games, classrooms, and doctor visits, among other options.

The Oculus Rift may be closer to production, but Sony has more brand recognition and has recruited well-known developers like Crytec and Epic Games. Sony also appears to be aiming for a lower price than the Oculus team: The Morpheus lacks the OLED screen tech and 100-degree field of view that the Rift has, but it comes close with LCD and a 90-degree viewing angle. Both designs have identical HD resolution specs. If the two products are released in similar timeframes, it will prove a close competition. Sony, struggling with an expected $1.1 billion loss for 2013-2014, has plenty of incentive to win that competition, which could explain the sudden attention to its VR research.

Microsoft late to the game?
With Microsoft  (NASDAQ: MSFT  ) and Sony already rivals in the gaming sector, a Microsoft VR wearable would be in direct competition with both the Rift and Project Morpheus. Microsoft shareholders would welcome a VR-related announcement as well. Microsoft shares have already risen to match prices seen back in 2000, reaching $40 on the news that the new CEO Nadella is expected to bring Office to the iPad, buy Nokia's smartphone business (expected in April), and launch new features around its Office 365 cloud services. 

The company does have a virtual reality project in the works, called Fortaleza, but little news about the product has surfaced since its discovery back in 2012. 

Announcing Fortaleza as a rival VR product could portray Microsoft as a company successfully following tech trends. By waiting until it has more details and developer partnerships, Microsoft's potential VR announcement could overshadow Sony's, but the longer the company waits, the more Sony will appear in the lead. However, with a struggling consumer division, Microsoft may want to concentrate on its phone, tablet, and console properties to help shore up its consumer hardware gross margin, which was down 46% in its Q2 2014 report compared to a year previously.

The Google question
Google 
(NASDAQ: GOOGL  ) Glass, not directly associated with a gaming console, offers a different type of virtual reality. Google VR is targeted toward finding accurate directions on foot or accessing overlaid information in the real world. There is also room for gaming apps, but they would not be as immersive as the sensory-enveloping Rift or Morpheus. The minimalistic Glass, with its low field of view, will appeal to those who still want a connection to the real world, aiming toward a wider market.

Like Microsoft, Google could see positive gains by offering evidence that it is also taking part in the VR trend. Google's Glass is one of the most-watched products in the upcoming wearable market, but the company is also working on smartwatches and other hardware entries in the tech world. This gives Google the choice of either highlighting Glass' VR (and augmented reality) capabilities or continuing to market it as a more general mobile device. By keeping Glass from comparisons with the Rift and Morpheus, Google could keep its attention on rivals like Apple and avoid losing focus. However, Glass and various 3D imaging projects, such as Tango, have shown that Google is far from risk-averse. More VR applications for Glass could also benefit new partner companies, as seen from eyewear designer Luxottica's 3.7% share price growth following its announced partnership with Google.

Right now, the question is which companies want to join the VR gaming world badly enough to devote necessary resources, and which would prefer to back off and focus on competencies. Sony has already made its bid for VR dominance. Will the other tech companies answer as interest continues to grow?

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