The 2015 E3 conference has drawn to a close, and it's safe to say that the world's biggest gaming expo delivered bigger surprises than usual. Competitors Microsoft (NASDAQ: MSFT) and Sony (NYSE:SNE) presented their annual stage conferences, and each company announced software that's sure to have dedicated gamers giddy with anticipation.
As is always the case with E3, the expo generated a fair amount of discussion about which company put on the better show, and which spotlighted the product line that will most shape the gaming industry. Sony's PlayStation conference showcased some truly shocking content that's sure to appeal to large swaths of dedicated players. But it was Microsoft's HoloLens at the Xbox briefing that won E3, and investors should be salivating.
It's about to get real
High-quality virtual reality experiences have long been a technological holy grail, and VR is finally starting to become feasible at the consumer level. Facebook (NASDAQ: FB) is expected to release its highly anticipated Oculus Rift headset early next year, and new VR headsets are due in 2015 from Samsung and a Valve-HTC partnership.
Digi-Capital expects the virtual and augmented reality industry to be worth $150 billion within five years. Microsoft's HoloLens differs from these upcoming products in that it does not provide a fully immersive virtual reality experience, but instead shows users images on top of the existing physical world.
At E3 this year, Microsoft provided one of the the first in-depth demos of its HoloLens technology, and the company did a fantastic job of conveying the device's potential.
The cornerstone of the HoloLens demo at the Xbox conference was a new version of the incredibly popular Minecraft video game, built specifically for the new AR headset. If you haven't yet seen the HoloLens demo, check out the video below from the official Xbox YouTube channel to get a look at potential software applications for the exciting upcoming hardware.
Future uses for HoloLens extend far beyond gaming. The device was first unveiled in January with a video depicting a holographic user interface and navigation reminiscent of the one depicted in the 2002 science-fiction film Minority Report. However, pairing the technology with Minecraft is a brilliant way to encourage adoption and experimentation with the device. The game is one of the most popular in history -- still going strong after having sold more than 60 million copies as of October 2014 -- and its appeal reaches across traditional demographic divides.
Microsoft's HoloLens is expected to cost more than an Xbox One or a PlayStation 4, which would put its price somewhere above the $400 range. However, the fanatical devotion among Minecraft's most dedicated players establishes a built-in audience in an industry that has had a big impact on technological progression.
Gaming hardware and software helped propel tech trends like high-speed Internet, HDTV adoption, and streaming video -- and interactive entertainment looks to have an especially big impact on shaping AR and VR technologies. These technologies, HoloLens included, probably won't have widespread commercial appeal until pricing comes down and the tech sees hardware and software improvements. But promising apps like Minecraft are promoting a display revolution to eager and influential consumer segments.
Microsoft partners up to ensure Windows and Xbox are part of the VR push
The other big component of Microsoft's victory at E3 was the spotlighting of partnerships with Facebook and Valve, two companies at the forefront of VR technology. Microsoft was confirmed to be working with Facebook and its Oculus division prior to the E3 expo; however, its deal with Valve was fresh news. This points to an emphasis on making Windows the go-to platform for VR and AR technologies, rather than a purely hardware-oriented strategy.
With Microsoft teamed up with Facebook and Valve, and companies like Sony and Samsung readying their own head-mounted display devices, breakthroughs in consumer adoption of the technology are looking like a matter of when, not if.
Why HoloLens could be special
Microsoft's key partnerships suggest that it will be a big player in the development of VR technology, but its HoloLens technology also provides key points of differentiation that could pay off in big ways. One of the big philosophical and design hurdles of virtual reality technology is that, in some ways, it's inherently isolating, separating the user from the physical world.
This runs somewhat contrary to current, mobile-oriented trends in tech, which encourage the use of non-obtrusive computing devices in public and social situations. By contrast, the AR technology of HoloLens keeps users oriented in the physical world, which not only mitigates the isolation issue, but also expands potential applications for use in business communication, health care, and manufacturing scenarios.
What's more, the headset is a natural fit for the pending Internet of Things revolution, and Microsoft's cloud architecture and analytics platform. Specifically, HoloLens and other AR devices offer a way to visualize and navigate inter-device connectivity, while encouraging cloud uploads, and providing a wealth of visual data for analytics.
With early promise in sectors like gaming, and the potential for strong synergies with its cloud platforms and IoT technologies, augmented reality technology could produce very real wins for Microsoft and investors.
Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.