Commentary
VR enters new phase amid tech sector restructuring
2023 marks a period of moving towards what is coined 'phase five' — ultra slim headsets with wireless or tethered technology, incorporating sophisticated haptics and eye-tracking technology.
April 24, 2023 by Kevin Williams
It would be easy to see the issues impacting today's virtual reality scene as a reflection of the "Tech-Jobs Apocalypse" hitting the sector. But the reality is that we are seeing a massive restructuring of a technology boom — some 10 years since the latest phase of VR which we coined "phase three," culminating with the launch of the HTC Vive headset in 2016.
Following this first emphatic phase of investment, we have seen Meta leading the charge, for what it has labelled the Metaverse. While at the same time, the vast sums invested in VR technology, content creation and patent securing have resulted in a mixed bag.
Expectations not met
The reality is that active users are calculated at 15 million on the leading VR headsets. Meanwhile, the hopes of creating a unified mainstream Metaverse environment have faltered.
Meta's hopes of retaining its 300,000 monthly users on Horizon Worlds have dwindled significantly, and its target of 1 billion active users on their VR platform by the end of 2024 now seems a pipedream.
This failure to hit expectations seems to pervade across the current VR landscape, a sign of instability of the promises and expectations of this technology.
New phase emerges
2023 seems to mark a period of moving towards what is coined "phase five" — ultra slim headsets with wireless or tethered technology, incorporating sophisticated haptics and eye-tracking technology.
Sony has released the sequel to its PlayStation VR2.
Likewise, Meta is positioning for an October release of its current platform with the Quest 3.
But storm clouds seem to be growing.
Tech industry layoffs have delivered considerable restructuring across the VR landscape. Originally with Meta's 10,000 layoffs, but also seen previously with Google and HP, all redressing their staffing, especially in the VR space.
At the same time, once popular multiplayer virtual worlds are being shuttered to make way for new developments, but also to address the need to see a business proposition from this investment. Most recently, this impact has been seen hitting not just the American tech companies but also the Chinese.
China responds
ByteDance, the Chinese corporation that owns TikTok as well as newly acquired VR corporation Pico, has held a round of layoffs that saw some several hundred leave the operation. This came just after reports that the new Pico 4 VR headset has seen less than estimated pre-orders. Some sources are suggesting the latest layoffs see the VR division cut by 30%.
The Chinese government has placed considerable faith in VR to develop its own, home-grown technology industries. This was called a new period of "explosive" growth, as defined by the Ministry of Industry and Information Technology in China during 2022, with promises to invest 350 billion yuan ($50 billion) in VR by 2026, creating sales of over 25 million VR devices in the country.
China-based Pimax Technology, known for its Kickstarters and development of a range of high-end PC VR headsets, secured a $30 million investment led by Beijing-based Danmu Capital. This investment will allow the corporation to continue development of a new generation of high-end VR systems for consumer and enterprise application.
Mixed reality awaits
In the shadows, one of the biggest developments to hit this phase of VR is lurking with the launch of mixed reality technology, mixing virtual objects and environments with real-world visuals.
This technology has seen Meta pivot towards launching the Quest Pro platform as a creative pathfinder general computing system. At the same time, Apple prepares to launch its MR headset in June.
MR now seems to have surpassed VR as the new hotness. Partnerships between Google, Samsung and Qualcomm have been announced to launch an MR headset in the coming months.
Meanwhile, other manufactures such as HTC and Canon have released their own platforms.
For VR, this transition to MR is not supported by a strong game following but more an enterprise ambition. And many are concerned that, like augmented reality previously, it does not have the legs to gain traction.
The continued shakeup of the sector was best illustrated during the Mobile World Congress held in Spain during February. The convention focused on smartphone technology and the latest connectivity tools. The show also offered a means to chart smart device trends, which have included VR and AR platforms, and the migration to MR.
AR evolves
AR, for its part, continues its own shakeup phase, which can be traced to 2013 with Google Glass and the hopes that AR would be the next tech goldmine. Following this, we saw Snap Spectacles in 2016 and Echo Frames from Amazon in 2017. Along with the vast investment of over $4 billion placed in Magic Leap, the Ray Bands partnership with Meta, or the launch of the HoloLens by Microsoft.
There were hopes that augmented glasses, offering superimposed computer visuals overlaying real world scenes, would become a mainstay of entertainment, social and commercial apps, foretelling dreams of millions of sales.
However, the overly hyped claims of what the AR market represented failed to deliver, and already reality has started to set in. Even though CES 2023 was still littered with AR glasses concepts looking to be adopted, restructuring has emerged.
Magic Leap has bailed out and been taken over by the Saudi Arabia sovereign wealth fund, consuming billions in debts.
Microsoft closed its HoloLens and MR operations, and there are other major layoffs across the scene from those who had once proclaimed AR as the next sure bet in mainstream technology.
Of all the hype, there is only one key example of AR receiving critical acclaim and success in a real-world environment: Pokemon Go!, the smartphone location-based game app developed by Niantic, a San Francisco AR game developer, said to have been downloaded some 500 million times during the first year, with an estimated revenue by 2020 of some $6 billion.
But it has proven difficult to recapture this "lightning in a bottle," no matter how hard Niantic has tried with other AR-based releases, even abortively partnering with Microsoft.
Niantic has since raised $300 million for development, and is now partnering with Qualcomm, to launch its own AR glasses called Lightship — supported by what it calls "Niantic real-world metaverse" based on the Lightship Positioning System.
Working with developers to populate its web-based technology, with rumors of a 2023 release date, Niantic hopes to establish as a tentpole in time to go head-to-head with Apple.
Meanwhile, several multiplayer competitive online VR game environments announced plans to shutter. Most notably was the Meta-owned studio behind the popular VR e-sports game Echo VR, revealing its intention to shutter its service.
The possibility looms that VR will be sidelined once again for a new vision of an immersive future.
(Editor's note: Extracts from this blog are from recent coverage in The Stinger Report, published by Spider Entertainment and its director, Kevin Williams, the leading interactive out-of-home entertainment news service covering the immersive frontier and beyond.)
About Kevin Williams
Along with advisory positions with other entrants into the market he is founder and publisher of the Stinger Report, “a-must-read” e-zine for those working or investing in the amusement, attractions and entertainment industry. He is a prolific writer and provides regular news columns for main trade publications. He also travels the globe as a keynote speaker, moderator and panelist at numerous industry conferences and events. Author of “The Out-of-Home Immersive Entertainment Frontier: Expanding Interactive Boundaries in Leisure Facilities,” the only book on this aspect of the market, with the second edition scheduled for a 2023 release.
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