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Will Virtual Reality Technology see a second generation?

Posted by on March 27, 2017.

2016’s slew of Virtual Reality devices are now being considered ‘Generation 1’ in terms of VR. This isn’t an entirely accurate viewpoint. Even discounting earlier attempts at Virtual Reality not created for the mass market and the VR machines intended for use in arcades, the gaming market has seen an earlier entry in the form of Nintendo’s ill-fated Virtual Boy. This may seem at odds with the generational model of home-gaming consoles, but even they had a ‘Generation 1’ which began after the technology had already been used. The first generation of video game consoles is generally accepted to have begun in 1972, with the release of the Magnavox Odyssesy – but this was not the first video gaming device to be produced or released. As well as the non-commercial prototype ‘Brown Box’, created in 1967, an early version of Pong had been invented as early as 1958.

2016’s VR devices may not be as close to their earliest technologies as home consoles were, but they do mark the first time VR has established a competitive, consumer-centric industry. However, another problem with the term of ‘Generation 1’ is that it presumes that there will be a ‘Generation 2’ to follow. Has Virtual Reality succeeded on enough levels to sustain itself beyond its current state, or will we have to wait another decade or two for the next ‘Generation 1’?

Many tech bloggers and gaming journalists were quick to declare VR gaming as a sure-fire success, the next big thing and the future of gaming, but the response from gamers was more muted than expected. At the Consumer Electronics Show at the beginning of 2017, Virtual Reality tech had very little to show for itself, and tech journalists and bloggers are no longer unanimous in their enthusiasm for VR.

VR devices have been marketed primarily as gaming devices, but game developers always operate best when hardware is standardised – for example, the Xbox One and the PS4, which share a certain amount of common system architecture, have a wide variety of games available on both systems. The more unique (and therefore less standard) Wii U, meanwhile, has depended heavily on first-party software from Nintendo and most non-exclusive titles are stripped down or compromised versions of their PS4/XBOne counterparts. VR has a noticeable dearth of high-profile games, with even fewer of those being VR exclusive; most big-budget games like Resident Evil VII are designed with VR capability, but also to run on more standard hardware.

It’s been a disappointing start for developers as well as users. Before its release, Palmer Luckey, the creator of the Oculus Rift declared that the $600 price for the Oculus Rift would not provide a direct profit on the hardware. It’s not uncommon for gaming hardware to sell at a loss, but this means the developers depend on software sales to recoup expenses. This system works reasonably well for standard game consoles, but according to game developer Dean Hall, the market isn’t yet strong enough for games to make a profit for their developers either. In order to merely break even, developers need to accept funding from VR companies in exchange for exclusivity; this subsidy allows game developers to recoup their losses, while game sales do the same for the hardware companies. This is a much shakier economic footing than the broader gaming industry enjoys.

Despite this uneven start, Virtual Reality can by no means be called a failure. Taken as a whole, the industry may have brought in much less revenue than the predicted $5.1 billion, but the estimated $1.8 billion for 2016 is still a good figure for emerging technologies, according to Both Sony and HTC have confirmed that their VR devices are being sold at a profit on the hardware level, so there is potential for more profitability in the industry, even though it hasn’t been realised yet.

While it is too early to call a ‘winner’ among the first wave of VR devices, it is noteworthy that the PlayStation VR has, according to Sony’s CFO, managed to stay on track for its sales predictions, despite the VR industry as a whole falling short by about 29%. This is somewhat surprising, considering the PSVR has noticeably less hardware power and flexibility than the Oculus Rift or HTC Vive. This could be an important indicator for the future direction of the industry, as it shows that Sony’s strategy of focusing on affordability and lower hardware requirements can encourage user adoption.

While the VR industry didn’t end 2016 in as strong a position as many had hoped, it is in a much stronger position than any previous VR products have achieved. It’s unlikely at this point that the technology will disappear from the radar again, and HTC and Microsoft have already confirmed that they are working on new devices and technology, though whether Virtual Reality follows console gaming’s model of distinct generations, or if the technology will branch off in more lateral directions, remains to be seen.

HTC, the company behind the Vive, has announced that it is pulling out of the entry-level smartphone market in favour of its more upscale products, as well as a continuing focus on Virtual Reality. This includes a new mobile VR device due for release this year, possibly as a companion product for their upcoming U Ultra phone. While this new product will be a mobile device, HTC claims it won’t be as simplistic as current mobile VR such as the Samsung Gear VR.

One of the biggest clues as to the future direction of VR may be Microsoft’s mysterious Project Scorpio. Very little is currently known about the device, except that it is Microsoft’s next gaming console, with considerably more power than the Xbox One. Releasing in the Christmas holiday season of 2017, the Scorpio is coming surprisingly quickly after the release of last year’s Xbox One S. If Project Scorpio is simply Microsoft’s next home console, it gives the Xbox One a remarkably short life-cycle; roughly half that of its predecessor, the Xbox 360.

Microsoft has also said it wants to introduce ‘Mixed Reality’ headsets in 2018, so the Scorpio may be being designed with this in mind. None of VR’s 1st generation devices have stood on their own in terms of hardware; the Rift and Vive require a high-spec PC to run, the PSVR requires a PS4 and mobile VR devices require a smartphone. While the timing of Microsoft’s VR projects after the Scorpio’s expected release indicated that the Scorpio won’t be a VR device, it may be that it will allow for more flexibility and power for Virtual Reality, or aim to introduce a new element to advance the technology.

Mixed Reality is a likely contender for this new element, but it’s not yet as widely known as either Virtual or Augmented Reality. All it is, essentially, is a mixture of the two – AR’s technology superimposing digital graphics onto a display of the real world combined with VR’s headset and immersiveness. It may seem like an obvious idea, with both of these technologies rising to prominence in 2016, but it looks as though we won’t be seeing a practical application of it – or its effect on the VR market – until 2018.

Perhaps it will take AR’s potential for engagement that games such as Pokémon Go have shown to unlock the full potential of VR. Many outlets are hyping the importance of MR quite significantly – though it’s interesting to note that a lot of the language being used is the same as that being said about Virtual Reality a year or two ago. ‘The most important technology of 2017’ is beginning to sound familiar by now. In any case, it’s clear that Virtual Reality needs to improve in terms of technology, profitability and affordability before it can become the world-changer that was predicted, but it has finally established a foothold in the consumer market – its most secure one to date.

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Submitted in: Expert Views, Josh Townsend |