Analysts Mixed on VR Post-CES

Some see a breakout year for the tech; others are still waiting for its moment

Following CES, the analysts at research firm Futuresource Consulting left Las Vegas feeling generally excited about what they saw in the virtual reality space and what they believe it means for the category in 2017.

Jack Wetherill, senior market analyst for Futuresource, seemed especially upbeat during an online, post-CES roundup on VR, even though all the major hardware players—Google, Facebook, HTC, Sony—had long since debuted their VR headsets.

“CES didn’t really fit into the release cycle of a lot of products, but there was some relevant tech unveiled, with some evidence of improved applications for the experience,” Wetherill said. He made special note of all the debuts of VR hardware that was untethered from mobile devices and PCs, what he called “the holy grail for virtual reality.”

There was Intel’s all-in-one Project Alloy (announced last August), which packs all the computing power and sensors in the headset itself, making it a standalone device, with no cords, and no outside cameras or sensors. They aren’t the only ones seeking that potential VR goldmine. AMD is hard at work on its untethered VR system, Sulon Q headset; Oculus also is working on a similar solution—dubbed Project Santa Cruz—which wasn’t seen at CES.

And while some VR hardware companies at CES told Next TV that they were disappointed with the lack of cinematic VR content announced, Wetherill said that he saw “evidence of increased content commitment at CES, from major content producers,” to satisfy his firm that content companies are behind the format.

Just before CES, entertainment research firm The NPD Group had already seen enough momentum in VR to expand its retail tracking service to cover sales of virtual reality headsets, giving both retailers and manufacturers data going back a full year. And during CES, NPD saw enough from the show to increase its 2017 forecast for the category, projecting augmented reality (AR) and VR hardware and content sales to grow to nearly $1.5 billion combined.

NPD saw U.S. sales of VR and AR devices increase 300% in the six months ended October, compared to the six months prior (Nov. 2015-Apr. 2016).

“We expect to see growth overall in large volume mainstream categories such as TVs and PCs driven by demand for premium products,” said Stephen Baker, VP and industry analyst for NPD. “We have seen and expect to continue to see categories based on exciting, innovative technology, such as drones, home automation products and virtual reality, accounting for a growing percentage of industry sales.”

DIFFERENT VIEWS

But then there were analysts such as Stephanie Llamas, VP of research and strategy and head of VR/AR for Super-Data Research, who found CES to be a mixed bag for virtual reality.

The good: Samsung announced it has shipped 5 million units of its Gear VR to date; the announcement of a slew of Google Daydream-compatible smartphones (including from HTC, ZTE, Asus and Lenovo) and VR con tent partnerships for the Daydream (HBO and Netflix) boded well for that tech; and everyone from Dell to NVIDIA to Asus debuted VRready PC hardware.

“A number of high-quality video content creators have come into the foray, with companies like NextVR and LiveNation leading the way for live VR events,” she wrote in an email. “Lenovo announced their Microsoft-compatible holographic VR headset, jump-starting the first push toward a new high-end VR competitor.”

The bad? Like everyone who attended Sony Electronics’ CES event, Llamas noted that the company didn’t share any sales figures for the PlayStation VR, and has been mum about the device since it teased a “hundreds of thousands” sales number in October.

“There’s no doubt consumer demand is there, but in an effort to come in under Oculus and Vive’s $600 and $800 price tags, PSVR announced a $400 headset sans essential supporting hardware,” she wrote. “PSVR sales will likely break 1 million units this quarter given the PS4’s than 50 million installs and the recent success of the Pro [console].”

And then there were the folks at Digi-Capital, who pointed Next TV to their post-CES analysis. The tech advisory firm didn’t find much for the virtual reality industry to crow about, and set its expectations for the VR/AR market at $108 billion—by 2021.

“Now [that] the market has actually launched, we’ve got 12 months of real world performance and major tech players’ strategies emerging. And that’s changed our views on VR/AR growth. A lot,” their report read. “Facebook (Oculus Rift) and HTC (Vive) had growing pains at launch, whether slower than expected shipping or order cancellations.… Samsung’s Galaxy Note 7 saw part of its mobile VR ambitions literally go up in smoke, as the new Gear VR was designed to be compatible with that flagship device. Magic Leap also received a boatload of speculation about the tech it used to raise $1.4 billion.”

Digi-Capital’s positive outlook for virtual reality centered around the PSVR and Google’s launch of the Daydream View hardware: “Sony’s Playstation VR launch and Microsoft’s upcoming Windows 10 VR headsets are the boosters VR needs, with consumer price points and performance that work for an ‘enthusiast’ (less than $400) market. Microsoft’s offering with inside-out tracking (inherited from Holo-Lens) is a game changer at a $299 price point. Plus it doesn’t need a brand new PC to run it, which makes it a genuine consumer product.”

AUGMENTED VIEW

But for the most part, the firm saw augmented reality as the technology that will rule going forward, following the 2016 success of Pokémon Go, and the fewer hardware necessities of the technology (for most applications, all you need is your phone).

Facebook’s investment in mobile AR technology, Microsoft and its HoloLens AR and mixed reality push, and, of course, Apple’s investments in the category bode well for AR in 2017, Digi wrote.

“Apple is the best placed of all major tech companies to potentially drive mobile AR, with its end-to-end ecosystem of hardware, software, app store, developers and retail,” their report read. “The company has been characteristically enigmatic despite Tim Cook’s stated enthusiasm for AR, but all it needs are a few additional sensors, integrated Metaio software and some serious intent. For Apple customers, there would be no marginal cost to buying an AR-enabled iPhone—they’re going to buy one anyway.”

Tech research and advisory firm Technavio backed up that assessment, estimating that the global AR market via mobile devices will grow at a compound annual rate of nearly 80% by 2021, pointing to the VR efforts of Facebook, Apple and Google.

“The adoption of mobile AR in enterprises will increase significantly due to the ease of use and convenience offered by mobile devices,” said Chetan Mohan, lead analyst for Technavio, in a statement.