Virtual Reality Goes Mainstream

There’s been a lot hype surrounding virtual reality devices ever since Facebook (NASDAQ: FB) paid $2 billion for Oculus VR in 2014.
What was has been missing until now, though, was a product or products that would appeal to the mass market. To date, virtual reality has remained a very niche and very expensive hobby.
But that is changing . . . with VR headsets coming to market with prices ranging from less than $100 to nearly $1,000.
In March, Facebook released its Oculus Rift VR headset (although without its associated Touch controllers). That was followed in April by Vive from Taiwan’s HTC, which is best known for its smartphones.
Now the battle is really heating up with the launches of Samsung’s Gear VR and the Daydream View by Alphabet (NASDAQ: GOOG) a few weeks ago.
And that’s not to mention the official unveiling today of the Playstation VR from Sony (NYSE: SNE).

Virtual Reality: Tremendous Potential

The virtual reality market is still small compared to the smartphone market, where revenues will total more than $400 billion this year.
The industry’s potential is certainly tremendous. Video game designer Jesse Schell told the Financial Times that this Christmas will be like the Christmas of 1978 when the debuts of Atari 800 and Apple II ushered in personal computers becoming mainstream.
We’ll have to see if that prediction pans out. Especially since respected forecasters disagree about virtual reality headsets mainstream appeal.
According to Juniper Research, VR market hardware sales will grow tenfold from $5 billion this year to over $50 billion by 2021.
IHS Technology has a more conservative forecast for VR headset growth. It says consumer spending will rise from $1.6 billion (4 million headsets) to $7.9 billion (81 million headsets) in 2020.

And the Winner Is . . .

Since the true size of this market and what type of virtual reality headsets will appeal to the masses is unknown, picking a possible winner among virtual reality stocks at this stage is just a guess.
Here’s my guess — Sony.
Its headset is priced in between the dirt cheap mobile headsets and Facebook’s Oculus Rift. It costs about 30% less than Facebook’s offering.
And there’s more than price at work here. The mobile VR headsets offer the lowest quality of graphics and motion tracking. PC-based headsets like the Oculus Rift give users a better (although pricey) experience. They also take up a lot of space.
Reviews on Sony’s Playstation VR’s headset say it’s less bulky and less tight-fitting. And it has a plus that makes VR seem less of an anti-social behavior. Graphics and sounds from inside the headset can be displayed on the TV set that the Playstation is plugged into. So friends and family can watch and play along.
And let’s not forget that Sony has a head start on the competition – its installed base of more than 43 million Playstation 4s. The Playstation VR also will have a decent range of software available at launch. Sony says that about 50 VR titles will be released by the end of the year.

Bright Future for Virtual Reality

But keep in mind that the industry is still in its infancy. As Google’s head of VR, Clay Bavor, told the Financial Times, “It’s going to take years and years and years for the technology to fully mature and for the content to get there.”
So while, in my opinion, Sony has the early edge, its Playstation VR may become outdated quickly. Sony will have to keep innovating. I’m sure Sony is well aware that Facebook is investing $500 million in content developers to ensure a steady stream of not only new VR games, but apps.
As Mark Zuckerberg said in a recent Silicon Valley conference, “Our industry has made more progress in the last couple of years than any of us could have rally hoped for.”
If anything, the pace of that progress will only accelerate in the years ahead. Stay tuned.