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This Is the Year of VR, Right? Maybe Not

By Tim Brugger - Mar 28, 2016 at 7:30PM

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All signs point to a breakout year for virtual reality, but there’s just one small problem: Are consumers ready?

Estimates vary, but by most accounts, 2016 is expected to be the year virtual reality (VR) goes mainstream. Facebook's (META 1.70%) Oculus Rift headset is being shipped to folks who pre-ordered the much anticipated device, and HTC's Vive headset will hit the streets a week later. Gamers, VR's initial marketing target, are all chomping at the bit to fully immerse themselves in the latest, greatest virtual game, stoking the VR expectation fires.

So, what could go wrong?

It turns out, while the tech community is clamoring to support VR -- there are twice as many developers focused on the platform than just a year ago -- consumers may not be quite ready to jump onboard. At first glance, the sky-high market estimates make sense, but according to a recent survey of 3,000 U.S. adults, the VR hype is premature.

Image source: Oculus.

Survey says
Despite the hoopla surrounding Rift, Vive, and Samsung's (NASDAQOTH: SSNLF) Gear VR mobile device, among others, Horizon Media asked 3,000 U.S. adults about VR, and "fully two thirds of consumers are unaware of the [VR] technology." That's a surprisingly large segment of the population unfamiliar with virtual reality, given the amount of press it has received.

The two-thirds of uninitiated U.S. adults could represent a marketing opportunity for VR vendors, but it's also indicative of VR gaining more media attention than consumer interest: at least for now. The lack of VR knowledge among potential users hasn't prevented industry pundits from projecting explosive growth, however.

One estimate puts the VR market at $30 billion in just four years. Other forecasts aren't quite as generous, but they still expect virtual reality will become a multibillion-dollar business by 2018. One thing that's common among the market estimates -- and that's borne out in the recent survey -- is that VR is at least a few years from really hitting its stride.

More mountains to climb
Consumers' lack of awareness is a concern, but the survey's most intriguing result was how many are willing to shell out the necessary funds to buy VR headsets. Of the men and women asked, a combined 36% said they were interested in purchasing a virtual reality device -- not exactly inspiring. And that's not the biggest hurdle to full-fledged VR adoption.

Of those who were interested in a device, just 25% said they were willing to spend more than $250 to immersive themselves in a virtual world. That's fine with Samsung since its mobile Gear VR is an affordable $99 and requires nothing more than a newer version Galaxy smartphone. But penny-pinching consumers could prove to be the biggest hurdle for Facebook's, HTC's, and Sony's (SONY 1.14%) new PlayStation VR console, which is expected to hit store shelves later this year.

The money problem is twofold. First, the Rift is listed at $599, Vive at a whopping $799, and Sony's VR iteration will start at $399. Though for consumers without a console camera, another $100 is needed to enjoy Sony's VR experience. Gear VR is certainly affordable, but it isn't expected to provide the same level of immersion as full-fledged devices.

The second challenge Facebook and HTC must overcome is the computing power needed to use the VR headsets. Today, less than 1% of the world's 1.43 billion PCs have the juice needed to utilize Rift or Vive because of the graphics computing power required.

Most PCs are set up to handle 30 image frames a second, but VR requires three times that processing power. To buy that power, consumers would need a $1,500 laptop, or to significantly upgrade existing PCs. Or, with the purchase of a Rift, Oculus can set VR users up with a $1,000 PC thanks to its "special pricing" bundle. Not exactly a bargain, either way.

To no one's surprise, women aren't nearly as interested as men in VR. Gamers are largely male, and that's the initial target market for VR manufacturers. Until VR expands beyond the gaming community, the Rifts of the world will miss out on about half the population.

Despite the challenges, virtual reality will become a significant market: just not as quickly as some pundits have forecast. For investors, virtual reality will still help drive revenue for Facebook, Sony, Samsung, and the others, but it appears more patience will be needed than originally thought.

Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.

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