It's been nearly four years since HTC and Facebook's (NASDAQ:FB) Oculus launched this generation of virtual reality (VR) with the Vive and Rift headsets, respectively. They were supposed to be revolutionary products that would open up a new world of innovation that would disrupt nearly every aspect of our lives. 

Instead of being in every home, as hoped, VR is still a novelty with only a few million headsets in the market. HTC and Oculus are actually trailing Sony's (NYSE:SNE) PSVR, which recently surpassed 5 million headsets sold since launch. And the number of headsets being used on a regular basis is well short of that number. So why hasn't VR taken off, and can HTC and Oculus fix what's ailing the industry? 

Person playing virtual reality in Oculus Quest.

Playing with an Oculus Quest. Image source: Facebook.

VR's awareness problem

The simple fact is that it's much harder to introduce people to VR technology than something like a PC or smartphone. Headsets aren't particularly mobile, and even wireless headsets take time and space to experience. To give an example, it's very easy to show off your new smartphone when out at a restaurant with friends, but it's not easy to show off your new headset in the same situation. 

As a result of the difficulty in simply trying VR, there are a fairly small number of people in the U.S. who experience the technology each year. Data on the industry isn't great, but according to eMarketer, 19.6 million people (6% of the U.S. population) tried VR in 2019. That's an incredibly small percentage of people for an industry that's already four years old. 

No killer app

There are a lot of uses for VR, like entertainment, education, and corporate training. But there's no killer app for the industry yet. There's no equivalent of email or spreadsheets or text messaging, which have made PCs and mobile devices so popular. 

Until VR has an application that makes it a must-have for consumers or businesses, it probably won't reach mass adoption. 

Cost is no longer the problem

One barrier that has been overcome in the last four years is price. VR systems once cost thousands of dollars to build when you added up the headset and gaming computer, but now an Oculus Quest is as little as $400 and includes everything you need to get started. 

The challenge will be introducing people to virtual reality and giving them a reason to buy a headset. And that's something the industry hasn't yet figured out. Online sales don't spread awareness of VR, and demos are limited in retail locations, so another path is needed. 

What's next for VR?

What we do know is that developers and businesses continue to innovate in VR. Location-based VR (LBVR) businesses are popping up across the world (full disclosure: this author owns an LBVR venue) and are expected to be an $8 billion business in 2022, according to Greenlight Insights. Plus, content in these locations is evolving and showing the way for headset manufacturers. Developers have built arena-scale games using the Oculus Quest, and that will be the next wave of entertainment. 

If HTC and Oculus want to grow the VR industry, they need to lean into the accessibility that location-based VR venues provide and use that to introduce customers to their products. Without this touch point with customers, VR will be a cool technology with no distribution to the people it's trying to reach.