Virtual reality headsets from HTC (NASDAQOTH:HTCXF) and Facebook (NASDAQ:FB) have been available for several months now. Unfortunately, the latest data suggests that neither HTC's Vive nor Facebook's Rift will match 2016 sales estimates. Here are three possible reasons for the disappointing reception.
The price problem
High prices are the biggest barrier to VR adoption -- the Vive sells for $799, while the Oculus Rift is priced at $599.
Sony (NYSE: SNE) will debut its PlayStation VR headset this October at $399, representing a lower-cost option for those with a PlayStation 4 console. But for those who do not already own a PS4, that still puts the price north of $700.
Alternatively, the Samsung Gear VR, which runs on the Oculus platform, has a $99 price tag, presenting a relatively low entry cost for people with newer phones. As with other low-cost headset options, however, it isn't compatible with many games and apps due to hardware limitations.
Must-have software isn't there yet
The VR game and app ecosystem lacks fleshed out experiences and anything that could be described as a "killer app." Potential uses for virtual reality extend beyond video games, but interactive entertainment is the main hook for early adopters, and most of the early software has more in common with tech demos than triple-A titles.
Small user bases for VR platforms mean that developers have less incentive to create the types of big-budget experiences that might be the key to selling this medium. Developers also have to contend with the fact that virtual reality is not standardized, with significant differences between platforms potentially shrinking addressable markets or limiting design.
Rendering virtual reality worlds is also resource intensive and requires some trade-offs to deliver immersion. At least part of the reason for this is that the number of frames rendered per second has to be very high to create a seamless experience; oscillations in frame rate, as well as other visual quirks, can be disorienting for the user. The substantial processing power devoted to running in VR limits overall graphical fidelity, so while experiences are more immersive, they also take backwards steps in some aspects.
Augmented reality is stealing the spotlight
With Facebook, HTC, Sony, and others bringing VR headsets to market in 2016, it's surprising to see augmented reality off to a much bigger start this year thanks to Nintendo's massively popular Pokemon Go. The game's incredible success is likely sending developers scrambling to get in on what could be the next big thing, and the AR push could divert attention and development resources away from VR.
While virtual reality offers new avenues for data collection and ad delivery, augmented reality likely has even greater data gathering potential, as well as a profound ability to direct foot traffic to commerce centers. With both technologies still in their early stages, AR seems to offer a real world social component that's a better fit with the current mobile-centric software market. Virtual reality has greater immersive potential, but it also brings an element of isolation, and the medium currently lacks a breakthrough game or app to get people hooked and invested in the technology.
At least in the short term, augmented reality seems to have captured the public imagination and interest in a way that VR has not -- and price, sociability, and the presence of a killer app seem to be core aspects of that progression.
VR should take hold with time
The combined factors of price, hardware and software limitations, and the emergent popularity of augmented reality present inhibiting factors for early VR adoption, but the technology will improve and its potential better realized with time.
Major advancements for the tech and its software ecosystem will likely play out over the next five-year period and should reduce many of the existing barriers to widespread adoption. Once the technology and software availability improve and prices begin to drop, VR has a strong chance of taking off.