HTC (NASDAQOTH: HTCCY) recently unveiled Vive, a virtual reality headset co-developed with Valve. HTC plans to launch the developer edition this spring, followed by a commercial launch by the end of the year.
The developer edition sports two 1200x1080 displays with a refresh rate of 90Hz, which HTC claims will eliminate "jitter" and achieve "photorealistic imagery." By comparison, the latest development versions of Facebook's (NASDAQ:FB) Oculus Rift and Sony's (NYSE:SNE) Project Morpheus headsets deliver 960x1080 images to each eye at respectively lower refresh rates of 75Hz and 60Hz.
HTC also designed a pair of wireless controllers that can be tracked across space to allow a player to interact with virtual objects. The player can also walk around that virtual space, thanks to a pair of Steam VR "base stations" which can track movements within a "15 feet by 15 feet" space.
What Vive means for HTC and Valve
HTC's share of the global smartphone market plunged from nearly 11% in 2011 to less than 2% today because of rising competition from cheaper Chinese brands, Samsung (NASDAQOTH: SSNLF), and Apple.
New products like Vive represent ways for HTC to diversify its business away from that saturated market. Its other new products include a new fitness tracker, the HTC Grip, and the RE Camera action cam. HTC hasn't made any gaming devices of its own yet, so partnering with Valve was a logical choice.
Last year, Valve launched its Steam Machines initiative, which tried to accomplish two things. First, Valve hoped its Linux-based OS, SteamOS, could challenge home consoles and gain a foothold in living rooms. Second, Valve wanted to distance Steam from Microsoft (NASDAQ:MSFT) Windows by launching a stand-alone gaming OS. Unfortunately, Steam Machines haven't really caught on because of hardware fragmentation and competition from Sony's PS4 and Microsoft's Xbox One.
Therefore, Valve needs to give gamers a reason to play Steam games in their living rooms instead of at their desks. That's why Vive -- which can be used in a larger environment -- might convince more consumers to buy more Steam Machines.
Entering a crowded niche market
Virtual reality is still considered a niche market, but it's quickly becoming a crowded one. Oculus might commercially launch the Rift in mid-2015, according to PC Advisor, although the company hasn't provided an official release date yet. Last December, Sony told Tech Radar that Morpheus was still "purely an R&D project", indicating the device won't be commercially launched anytime soon.
Today, the two most notable VR headsets are Samsung's Gear VR, which the company co-developed with Oculus, and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Cardboard, a DIY headset which can be constructed for as little as $5. Both Gear VR and Cardboard were built on the idea that a modern smartphone can replace the most expensive components of a VR headset. The Gear VR is only compatible with Samsung's Galaxy Note 4, while Cardboard is compatible with most newer Android devices and iPhones.
Google Cardboard isn't as refined as the Gear VR, but its companion app has been installed up to 5 million times and given plenty of people their first taste of VR tech. More importantly, it encourages app developers to produce more VR apps, forming the foundations of a software ecosystem, which the industry still lacks. Many tech demos originally designed for the Oculus Rift have since been ported to Cardboard and Gear VR to reach a wider audience.
An evolving and growing market
For now, companies are still experimenting to see which path could lead to the mass-market adoption of VR headsets. Sony wants to launch its headset as a PS4 peripheral, Samsung wants to sell it as a smartphone one, while Google wants to first introduce the concept of VR to the masses to spur app development. Facebook's Oculus first targeted hard-core gamers and recently launched a dedicated segment for VR filmmaking.
HTC and Valve's attempt to bring Steam gamers into the living room with VR games might succeed, since the gaming platform has over 100 million active players. But it could also flop, considering the market's lukewarm reception for Steam Machines. Whether it succeeds or fails, Vive will likely be remembered as a stepping stone for the fledgling VR market, which research firm Kzero projects will be worth $5.2 billion annually by 2018, up from just $90 million in 2014.