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The status of Virtual Reality in 2017

I’m quite pleased to see that some of the glitz has come off the VR industry recently. News has started to appear of lower equipment sales than expected and we see some challenges for early stage VR-centric companies to receive funding. To me, this means that the industry is one step closer to a normal development curve and expectations will be closer to reality. However, it does not mean that we don’t believe in the industry’s prospect and ability to impact the video industry.

At Accedo, we did our first VR prototype in 2014 and have spent significant time over the past three years analysing user behaviour, establishing best practices and working with customers and partners to create prototype and demo video offerings on a wide variety of platforms. Our approach to this was very similar to how we approached the market introduction of Smart TVs and online game consoles about ten years ago. There is clearly no significant consumer market yet, but it has been vital for us to understand and learn already in the early stages to position us for the next steps.

One of the rules of the consumer electronics industry is that it will take about 5 years for a new type of mass market device to reach 10% market penetration and about 10 years to reach 50% market penetration in the target market. This was true of the TV, the VCR, the flat screen TV and the DVD player among many things. The few times when any equipment has been accepted faster than this has been when it’s been a follow-on technology from something which was well-established. One example is the smartphone, which was a big innovation in its own right, but was essentially just a step change in an existing use case.

Virtual Reality will not be any of those exceptions. I personally think that it will follow the standard acceptance curve, which would mean that about 10% of the target market will have a VR device around 2019-2020, if we, for simplicity, use CES 2015 as the major market introduction of VR technology. That doesn’t seem unrealistic to me. A 50% market penetration in 2025 seems more challenging, since it’s a combination of both new use cases and new device technology, but with an expected price drop on the device technologies along with continued investments and innovation in services it is certainly possible.

What remains to be done to get consumer uptake are attractive and defined use cases for different parts of the market. While we have seen some early success in the gaming market, there is so much more innovation to be done. At Accedo, we’re spending significant R&D resources to define and create new possible video-centric use cases. I touched upon 360 videos as an enabler in the short run in a previous blog entry, and we’re working both on enhanced 360 video prototypes and more advanced use cases. In particular, I’m very excited about our new partnership with HTC Vive, which I believe will lead to a number of exciting new services. HTC Vive is the undisputed leading high end VR equipment on the market, and is a possibility for HTC to regain momentum as a company after its failure in the mobile market the past couple of years.

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