By the Blouin News Business staff

FEATURE: Virtual reality to transform video games

by in Global Economy.

The Oculus Rift virtual reality headset. Source: Sergey Galyonkin/flickr

The Oculus Rift virtual reality headset. Source: Sergey Galyonkin/flickr

Virtual reality (VR) is poised to upend the video game industry this year when the technology first becomes available to the public. A wave of VR game developer startups have emerged recently, the latest being L.A.-based The Rogue Initiative, which announced its debut on Thursday. Despite high retail prices at the outset, the market for VR is expected to be monstrous: in January 2016 a SUPERDATA report forecasted about 38 million VR gamers by the end of the year, and in July 2015 Business Insider estimated VR headset shipments will grow at 99% annually between 2015 and 2020 to reach $30 billion.

Much of the focus so far has been on the top-end Oculus Rift VR, which has been available only to developers since June 2015. Last month, however, Oculus announced the Rift’s official ship date will be March 28, and it began taking customers’ pre-orders.  As with previous iterations of video game console wars (pitting the latest versions of Microsoft’s Xbox against Sony’s Playstation and Nintendo’s Wii), Oculus will have competitors. The other two heavyweights — at least initially — will be the HTC Vive VR (also to be released in Q1 2016) and Sony Playstation VR (hitting retail in Q2 2016).

The Oculus Rift’s $599 price tag would be expensive on its own, but it requires an advanced PC to run the VR programs, making the total price tag out of reach of many potential customers. “While there is a small segment of PC gamers who think nothing of dropping $2,300 on a high-end PC, $600 for the Oculus Rift plus an additional $1,500 for a PC capable of running Oculus VR games and entertainment is just too much for most of us,” said Mike Goodman, director of digital media strategies at Strategy Analytics.

However, Olli Sinerma, co-founder and project lead at Mindfield Games, did not think Oculus is pricing itself out of the market.  “The future of VR will not be determined by its current cost,” he noted, adding “What Oculus can ship, it will sell, and others will develop cheaper alternatives like the already available Google Cardboard. Rather than price, immersion will be the key factor in VR’s success.”

VR gaming will thus run the gamut from premium to mainstream. The cheaper mass-market approach relies on smartphones, which more and more people around the world own, and simple cardboard headsets with adapted lenses. Google Cardboard can be purchased online for about $5, and the user’s smartphone is placed inside the headset. Then VR apps and videos (of which many are now available) play from the phone and through the lenses in an immersive experience. The Cardboard was released in 2014, and has sold 5 million units so far.

A middle ground in both price and quality is also emerging.  In November Samsung began selling a $100 VR viewer that uses the company’s phones. And on Thursday the Wall Street Journal reported that Google plans to release an improved version of the Cardboard (plastic coated, with better lenses and sensors) later this year. The firm is also developing a stand-alone VR headset that does not require a smartphone.

The entire gaming industry (including mobile games) reached $88.3 billion in 2015, and it will grow to $104.6 billion in 2019, according to PwC. The number of mobile gamers has grown massively in emerging markets like Russia and China, driving the global industry. Therefore the market for cheap VR headsets using smartphones could have hundreds of millions of users around the world in the next decade. Inexpensive smartphone viewers can give users headaches, but people are likely to buy them anyway, particularly if the quality of lenses, sensors, and videos improve.

Moving forward, a growing focus will be on how much a user can do in VR. Looking around is one thing, but additional capabilities like realistically walking, fighting, and everything else in gaming (think Avatar) will require vastly more computing power, sensors, external cameras, and other gadgets. Developing that will be very costly, and the retail equipment will be as well. But that is the future of VR which people are most excited about. It’s coming, the only question is when.