The VR market slump is more than just a hiccup

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There is little doubt that the market for virtual reality (VR) has entered the trough of disillusionment and it will take real progress on the limitations of the technology before it comes out again.

IDC’s latest figures make rough reading, and I think it likely that even the one segment that is showing growth will soon run out of steam.

VR exists in three categories: screenless viewers that use a mobile phone, headsets tethered to a remote computer or console, and standalone headsets where the compute is embedded in the unit.

Both the screenless viewers (-59.1% YoY Q2 18) and the tethered headsets (-37.3% YoY Q2 18) are rapidly declining with only the very new standalone segment showing any growth (+417.7% YoY). However, because the standalone segment is so small (212,000 units) it has been unable to offset the impact from falling demand elsewhere, leading to an overall market that declined 33.7% YoY.

Hence, I think that once the initial demand for the standalone units is satisfied, it too will see a similar profile to the one being suffered by the tethered units.

This is because the main issues of VR are not close to being solved. These remain:

Price: Many of the devices cost several hundreds of dollars and also require a PC to run, further increasing the cost. To be fair, the Oculus Go does address this issue somewhat but it does so at the expense of raw performance and still costs $200.

Clunky: VR units are still large, clunky and uncomfortable to wear. In many cases they also make the user feel foolish when wearing one.

Comfort and security: VR cuts the user off from almost all sensory inputs from his immediate environment, severely limiting the situations in which the user would feel comfortable using one. Many units also cause feelings of nausea due to an imperfect replication of the real world compared to what the brain is expecting.

To bring VR to the mainstream, I think that these issues need to be solved with no compromises being made with regard to the user experience.

Standalone units do make a compromise on the user experience in my opinion. One possibility is to move the VR compute function into a remote unit and to stream the visuals wirelessly to a dumb headset. This has issues all of its own around latency (namely, it’s very intolerant to latency) and the very high bandwidth connection that is required.

Progress is being made on these with 5G and with video compression (eg NGCodec). However, this is still quite far away and there is still little sign of the other issues being fixed leaving me very cautious on the outlook for the immediate term.

Hence, I think that VR will remain ancillary to the propositions offered by the big ecosystems and incapable of influencing a user’s purchase decision on where to live his digital life. The result will be relatively low volumes and disappointment compared to the hype that regularly surrounds product demonstrations. I continue to believe that investors in this space need to have a very long-term horizon.

This article was originally published at RadioFreeMobile

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