Is high-end VR a dead end?

The current generation of virtual reality is not dead, but it's not exactly full of life, either. What once was a pulsating buzz has faded into the background of an industry, not because there are newer, shinier toys to play with, but simply because for all the newness and shine of VR, there has been little evidence that a significant audience exists for the experiences we can deliver at this time.

Earlier this week, Oculus instituted a temporary $200 price cut of the Rift, dropping the headset and its Touch controllers to a $400 bundle that comes packed with seven free games (including Lucky's Tale, Medium, Toybox, and Robo Recall) and an Xbox One controller for good measure. That's in addition to the $200 price cut Oculus rolled out in March for the headset and Touch combo, meaning the company has slashed the price by 50% in just four months.

On its own, this could actually be an encouraging sign, but taken in context of the rest of the news coming out of the VR sector, it's more concerning than convincing. For one, Oculus looks to be bringing up the rear among the three major high-end VR options on the market, despite being a first mover and having the significant financial backing of Facebook. Through the first half of this year, tracking firm Superdata put the Rift's installed base at just 383,000 units, compared to HTC Vive's 667,000 units and PlayStation VR's 1.8 million.

"The shuttered Story Studio was exactly the sort of investment in a potentially disruptive medium you would expect a company with long-term ambitions to keep"

Even ignoring its relative sales position, Oculus is already in a tough spot in the enthusiast VR fight, technologically a step behind the more expensive Vive, but still more expensive (when considering the cost of a VR-capable PC) and less mass market than the PSVR. That's a difficult problem for marketing anything, doubly so when what you're selling is an experience that by its nature needs to be experienced to be fully understood, triply so when you're drastically scaling back the number of demo units in retail locations where interested customers could get their first taste of VR.

I also question Oculus' decision to shutter its in-house Story Studio, which was set up with Pixar veterans to show how VR could shift the medium of film as much as it could games. The studio's Henry won an Emmy in 2016. Its follow-up, Dear Angelica, premiered at Sundance earlier this year to rave reviews and has been submitted for Emmy consideration at this year's awards, which are still a few months away. In short, Story Studio was exactly the sort of investment in a potentially disruptive medium you would expect a company with long-term ambitions to keep. Instead, they cut it loose, with head of content Jason Rubin essentially saying it was time for external filmmakers to pick up the narrative VR ball (albeit with some $50 million in funding from Oculus).

There's a bit of a theme there. Just a couple months before closing Story Studio, Rubin pointed out for GamesIndustry.biz at GDC that Facebook--and by extension, Oculus--isn't a content creation company.

"Facebook's not a media company," Rubin said. "So there may be a day where Facebook says we're going to head towards our core competency... That's why I don't have internal teams. I have exactly one group of three people besides Story Studios because that didn't exist outside."

Facebook didn't pay $2 billion for Oculus in 2014 because it wanted to make games. It wanted VR to be a popular thing it could leverage for its social network. If HTC Vive or Sony or Microsoft can make VR work better than Oculus, that still gets VR where the social network wants it to be. That's not ideal for Facebook, but after the Rift's slow start, the hundreds of millions it already owes in court judgments, the hundreds of millions more it might be made to pay in the future, and seeing the face of the VR revolution leave under a cloud of controversy, one could understand if the company's commitment to VR began to waver.

"I'm not sure I want to bet the future health of VR on Sony's continued support for a market that is (for now, at least) peripheral to its core business"

Speaking of the competition, I'm not terribly optimistic with what they're bringing to the table. Sony's PSVR is leading the pack, but I'm still skeptical whether the company's interest in the hardware will be any longer lasting than its support for Vita, or Wonderbook, or PlayStation TV, or Move, or EyeToy, or stereoscopic 3D. Sony's E3 conference featured some promising games in Polyarc's Moss, two titles from Until Dawn developer Supermassive, and Skyrim VR, but little that stands out as a system-seller the way that Resident Evil 7, or even the prospect of last year's Batman and Star Wars VR experiences might have. When asked at E3 about whether that lineup would boost PSVR adoption, Sony's Jim Ryan was unsure.

"I think we are still really just learning about VR," Ryan said. "When hopefully we meet in a year's time, I will be able to give you a better answer to this question. It still won't be a perfect answer, but I'll know more."

That's not exactly an overwhelming vote of confidence from PlayStation's chief marketer. I'm not sure I want to bet the future health of VR on Sony's continued support for a market that is (for now, at least) peripheral to its core business.

The situation with HTC and the Vive underscores another issue when trying to establish an emerging field like VR. Vive launched at the cutting edge, but since then has rolled out object tracker peripherals and a wireless adaptor, respectively giving developers more options and addressing a key complaint around high-end VR. In both cases, they would be better served as being part of the core hardware package rather than optional add-ons for what is already the most expensive option on the market. For the next generation of VR, perhaps they'll be standard.

"Who will invest in the next generation of enthusiast VR--on either the consumer side or the manufacturer side--if this generation disappoints?"

But who will invest in the next generation of enthusiast VR--on either the consumer side or the manufacturer side--if this generation disappoints? How long does a VR generation need to be before someone who spent $800 on a Vive (not to mention the cost of a VR-capable PC) feels they got their money's worth and would re-up for a successor? How many great games does it need to have? How many generations does an HTC or Facebook need to take a bath on before the business turns around and justifies the continued investment?

Then there's Microsoft, which will enter the fray this holiday season with its "mixed reality" VR headsets for Windows that are cheaper and require less of a set up than Oculus or Vive, but appear to make compromises on the technical side to get there. It's telling that even with Microsoft launching the high-end, VR-capable Xbox One X this year, it is foregoing any sort of console VR push and relying on higher resolutions and better frame rates for Xbox One games as the sales pitch for a One X. Phil Spencer told us at E3 that VR was still years away from the mainstream for gamers, suggesting the company was waiting to launch its console VR until it had a proper wireless solution ready.

At this point, it seems more likely to me that the current enthusiast VR market is an expensive R&D exercise that won't produce successful systems, but will lay the groundwork for the actual mass market VR, which will instead evolve both in audience and use-cases from the mobile VR world. (We call it mobile VR, but I don't think I'm alone in having never once seen someone using a mobile VR headset on the subway, in the security line at the airport, or in the waiting room at a dentist.)

A number of the VR developers I've spoken to have mentioned wires, price, system-selling software, and installed base as key issues VR needs to tackle to become truly mainstream. As Google Daydream and the Oculus-powered Gear VR have shown, the first two are all but solved problems in mobile VR thanks to the use of existing smartphones. As for the other two, when your system is only $100 or so, the definition of a system-seller changes dramatically, which then has plenty of beneficial implications for the installed base. (Promotions like Samsung giving away Gear VR with new Galaxy phone purchases don't hurt, either.)

All mobile VR really needs are better interfaces and more powerful phones. The Gear VR motion controller is a good first step for the former, and the latter is improving all the time. If VR is really going to go mass market, doesn't it make more sense for it to grow not from the high-end early adopter market who would have dropped $600 on a PS3, but from the masses who made a compelling novelty like the $250 Wii a phenomenon?