The technology industry has been flirting with the idea of virtual reality for quite some time, but when will that flirting turn into something serious? It’s obvious that we are on the cusp of this happening as big names like Facebook have taken an interest in it.
Deutsche Bank analysts think early adopters could start picking up VR devices as soon as next year, with mainstream adoption coming in a few years from now.
Mass acceptance of virtual reality on the horizon
People have been playing around with the idea of virtual reality since at least 1968. The Deutsche Bank team said that’s when the first head-mounted virtual reality display was created. At that time though, it was so heavy that it had to be hung from the ceiling. Now fast-forward to today when major tech players are diving into the virtual reality industry. . Here are some of the key events which have happened to bring virtual reality tech to where we are today:
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At this point in time, VR is expected to become the next big operating system platform, and companies are racing to be the first to come up with the most widely adopted platform in the space.
Finally the technology needed to create virtual reality devices of a good size is in existence, and developers are creating 3D content and apps for use on these devices. Also prices for VR devices are starting to come down, setting the stage for mass adoption by consumers.
How Facebook is taking a bite out of virtual reality
Arguably the biggest step into VR technology made by a major company so far is Facebook’s acquisition of Oculus VR, the maker of the Oculus Rift virtual reality headset, for $2 billion. The first consumer version of that headset is expected to begin shipping in the first quarter of next year, and Deutsche Bank analysts estimate that Facebook will sell about 1.5 million of them in 2016. That would represent approximately half of the total desktop virtual reality market.
At an average selling price of $350, which is how much the developer version sells for right now, Facebook could see about $600 million in revenue from the Oculus business next year. That’s only about 3% of the social network’s total revenue. They expect the lion’s share of that Oculus revenue (about $500 million) to come from sales of the hardware.
According to Deutsche Bank, Facebook could see as much as $100 million more from paid downloads and in-app purchases and subscriptions on the Oculus platform. This would amount to about $50 in average revenue per user for the VR business.
Why virtual reality is close to going mainstream
The analysts provide three main reasons they think we aren’t too far from VR going mainstream. First, they note that there have been significant developments in the technology. Virtual reality moved slowly in the 1980s and 1990s because of the lack of components for such devices, but that’s changed now. OLED displays and high-tech sensors are making VR devices possible.
Second, they note that developers are making more content available for virtual reality, and the quality of that content is much higher now.
Also when SEGA, ATARI, and other VR pioneers dove in decades ago, the focus was entirely on gaming, but now, content makers are moving beyond gaming to make the technology appeal to a broader audience.
Smartphones at the tipping point for virtual reality
And third, there are signs of virtual reality moving into smartphones, which could be a key step in mass adoption of it. The Deutsche Bank team sees this as being “the biggest tipping point” for VR going mainstream because it eliminates the need to spend money on gaming consoles to use the devices.
Also incorporating VR into smartphones makes the tech appeal to a much broader audience than just gamers. Even only a 1% penetration rate of virtual reality among smartphones in Western markets suggests 3.5 million mobile users of the tech.
Images in this article are courtesy Deutsche Bank.