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Decades after the hype over the technology first started to build, virtual reality is reaching the market this year. Within the first three months of 2016, investors poured $1.1 billion into the industry, even though virtual reality (VR) has yet to generate any revenues.
That’s expected to change very soon. As described in recent posts at ReadWrite.com and GeekWire.com, the first VR devices for the consumer entertainment market premiered at the Consumer Electronics Show in Las Vegas in January 2016. They include the following product releases:1, 2
- In late March, customers who pre-ordered the VR system began receiving the Oculus Rift headset; there’s currently a four-month waiting list for new orders at a price of $599, which includes an Xbox One controller and a pair of games.
- Also this spring, HTC plans to introduce its Vive VR headset, at $799.
- In October, PlayStation VR is set to hit the market, at $399.
- This year, Samsung is also offering a free Gear VR accessory to customers who pre-order the Galaxy S7 or S7 Edge; the Gear VR attaches to the smartphone to provide a virtual reality experience.
- Already, Google Cardboard headsets, made of cardboard, Velcro, and plastic, are available; they are so cheap that companies like Coca-Cola and McDonald’s have given them away for free to their customers.
Keep in mind that the cost of the headsets is only part of the actual price of the VR experience. For example, the Rift only works with a top-of-the-line PC, which costs at least another $900. Even the free Cardboard headsets only work when strapped to an Apple iPhone or Android smartphone, so the actual investment can be up to $700.
Virtual reality headsets typically resemble scuba masks that are opaque rather than transparent. And notably, they focus only on sight and sound, and do not support haptic or kinesthetic sensations. However, a high-tech treadmill called the Infinadeck can be combined with a VR headset to not only heighten the experience of moving around within a virtual scene, but also make exercising on the treadmill enjoyable.
While the consumer applications for virtual reality will focus on gaming and movies, it is the commercial potential that makes VR really interesting. After all, the technology behind games and movies is constantly being improved, and with relatively recent breakthroughs such as HDTV, digital animation, CGI, and 3D, entertainment has already become startlingly realistic. VR games and movies will take that realism to the next level, allowing viewers to enjoy 360-degree immersion in a scene. But, just as in the days of silent black-and-white movies or 8-bit video games, what will matter most is the quality of the content, regardless of how it is delivered.
Commercial applications of virtual reality, by contrast, are true game-changers. Consider a few applications that were recently cited by Fast Company:3
- Virtual reality tours of houses for sale: Real estate firms like Redfin have hired a California company called Matterport to develop interactive virtual walk-throughs of thousands of homes, enabling clients to tour homes and explore their features as if they were physically present. Matterport is also working with hotels to create virtual experiences of hotel rooms so that prospective guests can examine a room before they book it online.
- Virtual fashion shows: A company in New Zealand called 8i has introduced what it describes as “volumetric VR,” a technology that enables users to move around within a scene to see the clothes that people are wearing from various angles. The startup is said to be in talks to license the technology to fashion designers, who could use it to promote their apparel to customers across the globe. According to a separate Fast Company report, 8i has already attracted nearly $15 million in venture capital.4
- Virtual surgery: A simulation called the Virtual Surgeon, from a British firm called Medical Realities, enables medical students to learn to perform surgery by experiencing an operation from the perspective of an expert physician. Another company, VR Health Net, has created virtual reality training programs for nurses that allow them to learn how to master medical procedures by practicing on virtual patients, rather than real ones.
- Virtual combat training: Military simulations already represent a $9.3 billion business--and the hyper-realism of virtual reality is likely to increase the demand. Plextex, from the UK, is working on training modules to teach medics how to save soldiers’ lives on a virtual battlefield, which will more closely represent real conditions than any classroom demonstration ever could. Meanwhile, DoDAAM, from South Korea, recently released a VR simulation for paratroopers that can be used with the Oculus Rift.
Based on our analysis of this trend, we offer the following forecasts:
First, in the consumer market for virtual reality, it remains to be seen whether the Oculus Rift, at $599 and HTC Vive, at $799, will find a market at those price points.
Early adopters are always thrilled to be among the first of their peers to get their hands on new technologies. But most teenage gamers are likely to wait for the Nintendo offering later in the year; by saving $200 to $400, they will be able to afford more VR games. By the end of the decade, VR systems should follow the pattern of other consumer tech products and become both relentlessly cheaper and increasingly more powerful. At that point, adoption will be widespread, with experts estimating the worldwide market for VR in 2020 at $30 billion. That explains why Facebook was so eager to purchase Oculus in 2014 for $2 billion.
Second, the commercial market for VR is likely to be even larger than the consumer market.
In addition to the applications already discussed for medicine, military training, fashion, and real estate, the potential to engage prospective customers through virtual reality marketing is limitless. Consider one simple example. At the Consumer Electronics Show, the Select Comfort Company invited people to experience what sleep deprivation feels like via virtual reality. The company also used VR to promote its new Sleep Number mattress that enables users to adjust its firmness with a smartphone app. Within a few years, marketers of everything from car washes to African safaris will entice customers to buy their physical products and services by offering the opportunity to experience them through VR. Because it’s impossible to multitask while using VR, a marketer’s messages won’t have to compete with television programming, the Internet, text messages, Tweets, or other distractions that weaken their impact in the real world.
Third, when the cost of headsets plunges, virtual reality will revolutionize education.
Students located anywhere in the world will be able to use their smartphones and cheap VR headsets to take online courses that will bring boring subjects to life. Instead of reading about the Civil War, for example, they’ll be able to experience battles virtually. Rather than reading about how a star is formed, they’ll be able to create a star virtually from clouds of gas and dust that are spinning in space. Medical students will perform surgeries on virtual patients. Aspiring carpenters, automobile mechanics, and robot maintenance technicians will all learn their trades through virtual simulations. Corporate training will take place in a virtual workplace. Augmented reality (AR)?which overlays virtual simulations over the physical world rather than replacing it?will be even more practical than VR in the short term. While assembling or repairing a real machine, a worker wearing AR glasses will be able to see a virtual diagram of what the machine should look like. While performing a root canal on a real patient, a dental student will see a virtual simulation of each step in the procedure. Overall, education will become more interactive, learning will deepen, and graduates will emerge from their virtual studies ready to perform in the real world.
Fourth, virtual reality will add a new dimension to the film industry.
A virtual reality film is almost an entirely different art form than a traditional movie.5 According to Eric Greenbaum, who recently created the NYC Virtual Reality Meetup, “There’s going to be an entire rethinking and recreation of the standard videography and filming techniques for this medium. The standard ways that videographers use camera cuts, switching the views, and zooming in and out… is not going to work well for this platform.” And after the film is shot, editors will face their own set of challenges. As Greenbaum points out, “There’s no established workflow, there’s no dominant post-production software platform. You have to stitch it together.” However, that hasn’t stopped filmmakers from experimenting with VR. At the recent Sundance Film Festival, more than 30 virtual reality films premiered. Because VR provides an immersive, 360-degree environment, films will be more engaging and provide more intense experiences. Not surprisingly, the adult entertainment industry is already trying to capitalize on the potential for virtual reality porn. The New York Post reported that studios have already produced more than 1,000 VR porn videos.6
References 1. Trends Magazine, November 2012, “Governance Vs. Jurisdictional Competition.” ⓒ 2012 AudioTech Inc. All rights reserved. http://www.audiotech.com/trends-magazine/global-governance-vs-jurisdictional-competition/2. To access the report “Opportunity Urbanism: Creating Cities for Upward Mobility,” visit the NewGeography website at: http://www.newgeography.com/content/004562-opportunity-urbanism-creating-cities-upward-mobility3. The Atlantic, May 28, 2013, “Houston Is Unstoppable: Why Texas’ Juggernaut Is America’s #1 Job Creator,” by Derek Thompson. ⓒ 2013 The Atlantic Monthly Group. All rights reserved. http://www.theatlantic.com/business/archive/2013/05/houston-is-unstoppable-why-texas-juggernaut-is-americas-1-job-creator/275927/4. The New York Times, September 4, 2005, “In Manhattan, Poor Make 2￠ for Each Dollar to the Rich,” by Sam Roberts. ⓒ 2005 The New York Times Company. All rights reserved. http://www.nytimes.com/2005/09/04/nyregion/in-manhattan-poor-make-2-for-each-dollar-to-the-rich.html?_r=05. To access the report “All Cities Are Not Created Unequal,” visit the Brookings Institute website at: http://www.brookings.edu/research/papers/2014/02/cities-unequal-berube6. New Geography, November 22, 2010, “The Overdue Debate: Smart Growth Versus Housing Affordability,” by Wendell Cox. ⓒ 2010 New Geography. All rights reserved. http://www.newgeography.com/content/001887-the-overdue-debate-smart-growth-versus-housing-affordability
