2016 Will Be The Year Of Virtual And Augmented Reality (VR/AR)

  • The virtual and augmented reality market is continually progressing and expected to turn into the next big consumer electronics device.
  • Most leading vendors marked 2016 as the year to launch their devices.
  • As we are getting closer to 2016, more information is unveiled, and we can start putting the pieces together.

Smartwatches were considered the hottest niche in the wearables market and the most exciting segment of the consumer electronics industry. Many tech companies in all sizes released their smart wristbands or smartwatches in the last year in attempt to win that segment ahead of Apple’s watch release. Many vendors, varying from pure-play wearable startups like Fitbit and Pebble to tech giants like Samsung, LG, and Xiaomi released different devices with different features and fueled the hype around the smartwatches market, indirectly increasing the anticipation for the Apple Watch. However, as Apple recently launched its much-awaited Apple Watch, some of the hype and attention around the smartwatches industry has eroded.

Not far behind from the smartwatches market, the hype around VR/AR market is slowly getting traction, and it’s expected to take over the role of the “next big thing” in the consumer electronics market. There are three primary solutions that currently receive most of the attention: Sony (SNE) Morpheus, Microsoft (MSFT) Hololense, Facebook (FB) Oculus Rift, and Google (GOOG) Glass. However, lately, the tension around the VR/AR market is rising as the leading players get ready to release their solutions next year.

Also, see previous VR/AR articles: Google Invests Further In Steaming VR/AR Market and Google Is Playing a New Game in Virtual Reality Market.

VR/AR Devices Introduced

After the Facebook Oculus prototype was broadly tested on many occasions, and the Google Glass became available for purchase for a limited period, Microsoft finally released its Hololense prototype for the test. Hololense runs on Windows 10, and it is part of the evolving Windows 10 ecosystem that Microsoft is trying to build. Hololense is an augmented reality device that is expected to compete in the same category as the Google Glass and to provide similar capabilities used in the everyday life. However, unlike other technology markets in which technological advantages and features are the only important factors that interest the customers, the electronics market consumers give a significant weight to user experience and to the feel and look of the product. By these standards, as shown in the comparison photo below, Hololense is light-years behind Google Glass. It may seem like a small issue, but an augmented reality headset, which is supposed to be used by consumers in their everyday life and looks more like a VR headset, may be hard to sell to the general public.

Hololense vs. Glass

Unlike Microsoft, Google tries to win not only the technology enthusiast audience but also the general public by giving their augmented reality device a sleek and fashionable feel and look that will position it as a high-end consumer electronics device. In order to achieve that, Google signed a strategic alliance agreement (details of the Google Luxottica agreement) with eyewear designer and manufacturer Luxottica (LUX) to collaborate on the design and manufacturing of Google Glass. Luxottica will not only design and manufacture the next Glass generation but will also integrate it into their leading brands like Ray-Ban and Oakley. As we learned from previous launches of consumer electronic devices like smartphones, tablets and smart watches, consumers pay as much attention to the feel and look of the device as for its technologic specifications. While Google had that in mind from gen1 of Glass, Microsoft is thinking of functionality first and may not have enough time to close the gap as Google is rumored to launch the next generation of Glass either at the end of this year or the beginning of next year.

2016 Launch Date

Unlike Google and its 2016 Glass release date rumor, Sony officially announced earlier this year that it will release its PS4 VR-compliant headset, Morpheus, in 2016. Sony has taken a different approach to most of its rivals and has aimed at the gaming sector all along with its VR-headset, unlike other hardware companies, such as Samsung, HTC, LG, Huawei, and Motorola that target a broader variety of user cases for their devices.

Sony is not the only vendor planning to release its device to the market next year. Facebook/Oculus announced last week that the Oculus Rift will be available for pre-order later this year and will be shipped to customers starting Q1 2016. Oculus is not only one of the early players in the industry, but it is also considered by many as the vendor that will dominate this industry in the future.

For now, we cannot honestly assess how significant 2016 will be for the VR/AR vendors as the expected sales data is still vague. Even though the volume is unclear, we can get a pretty good idea of the selling price for a VR/AR device. After the first generation of Google Glass was sold for $1000, it is pretty clear that such an ASP is not sustainable for the long-term and was only used for the explorer program. Samsung Gear VR is currently sold on Amazon for $250 but requires a Samsung Galaxy Note 4 to operate the device. The Oculus second gen development kit is sold for $350 on the company’s website, but that is probably a discounted price to attract developers.

I believe that the typical VR/AR device will be sold in a price range of $500 to $700, which will position it as a high-end consumer electronics device targeted at tech enthusiasts, gamers, and military/medical institutions that are willing to compromise on the price to be part of the early adopters group. As we will get closer to 2016, volume estimations will probably become clearer. I will be able to quantify the impact of this niche in the vendors’ financials.

For a quick round-up of key fundamentals, you can check out Amigobulls' Google stock analysis, Microsoft stock analysis and Facebook stock analysis videos.

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Comments on this article and MSFT stock

user profile picture
giulio
bullish
I think the manufacturers of VR gear will have to do much better than $500 to $700 if they want to go mass market.
1 reply
user profile picture
lior-ronen
bullish
Giulu,
As a first generation of high-end CE device, $500-$700 is reasonable in my opinion. As market evolves prices will drop as happened with Smartphones.
1
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