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Virtual Reality - The Road to Mass Adoption

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Virtual reality is only in its first release but shows a lot of potential already. In the next 5-10 years, that potential will be realized. What is the road to mass adoption? What needs to change in order to get there? How and when will it happen? This presentation explores that question.

For more details, see our VR content at RT Virtual Reality (www.rtvirtualreality.com).

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Virtual Reality - The Road to Mass Adoption

  1. 1. © 2017 Reverse Tide LLC The Road to VR Mass Adoption What Needs to Change & Improve
  2. 2. © 2017 Reverse Tide LLC • Virtual reality has been disappointing to a lot of people. They heard all the hype, understood the potential, and saw our biggest tech companies investing billions in it. But sales were mild for a major tech breakthrough. And rightfully so. As bullish as we are on virtual reality, the current version has a lot of flaws. • This is predictable for any technology’s first version. When we think about the first PCs or mobile phones, it’s not surprising to see a mediocre release in terms off mass adoption. • We have identified flaws across three main areas: hardware, software, and optimization for the mass customer. For each of these categories, we assess what the flaws are, how they need to be fixed, and how long we predict this to take. That way businesses can develop a more refined perspective on how to best make a virtual reality investment. To maximize ROI on a VR investment, you want to time it around mass consumer adoption. • We predict 5-10 years to achieve mass consumer adoption. However, businesses need to make earlier investments to ensure they seize initial opportunities, build their infrastructure and expertise, and build presences before their competitors (not just existing competitors but new entrants seeing an opening). • This presentation will focus on the stages toward mass adoption. However, RT Virtual Reality does a lot of work on how/why to invest in VR, specific VR use cases and ideas, and much more. Refer to the presentation’s concluding pages for more information. Executive Summary The Road to VR Mass Adoption What Needs to Change & Improve 2
  3. 3. © 2017 Reverse Tide LLC Hardware challenges come first. The technology is fascinating today but not quite useful enough to make it worthwhile for the mass buyer. As we hit major hardware advances, this will change rapidly. This section details the most important things to solve in subsequent upgrades. I. Hardware The Road to VR Mass Adoption What Needs to Change & Improve 3
  4. 4. © 2017 Reverse Tide LLC A. Pricing The Road to VR Mass Adoption What Needs to Change & Improve 4 VR is simply too expensive. The top headsets cost a lot, require a $1500 computer, and that’s before software. That prices most people out of the market. No wonder VR headsets haven’t sold well. Prices MUST come down or it will never hit mass adoption. We would use the mobile phone market as a good example. Apple or Samsung mobile devices are quite expensive. They are so useful to the average person, however, that people are willing to spend $500-$1000 for them. But remember how they first came out? They were subsidized. The phone manufacturers reduced the cost to $200 and sometimes gave them away free if you signed a contract with their telecom partners. This was smart. It created a mass market, which had the effect of enticing developers to build the software that made mobile phones pertinent to our lives. VR manufacturers are considering this same strategy. Samsung is giving away their Gear headset to those that purchase their most expensive mobile phones. That has resulted in the Gear being the most widely purchased headset on the market. Apple is making their computers VR compatible and are rumored to be entering the augmented reality market. Google is betting on stand-alone headsets and a laptop-like price being acceptable to consumers. Everyone knows prices need to come down and are strategizing how to make that happen and still profit elsewhere. Headsets themselves will probably have low margins like other big electronics. However, there are many ways to profit in higher margin areas. Accessories, software, warranty/support, cross-selling, and data accumulation are all interesting ways to profit. In the short-term (1-3 years), prices will come down slowly. We’d estimate a range of $200- $1000 depending on headset features. In the medium-long term, prices will eventually be affordable to the masses. We would estimate a $100-$700 range. History tells us that these companies are smart enough to figure out the right way to make that happen. What Needs to Be Fixed? Our Prediction
  5. 5. © 2017 Reverse Tide LLC B. Stand-alone Unit The Road to VR Mass Adoption What Needs to Change & Improve 5 Right now, all VR units require either a computer or mobile phone to run. You download the software first and then it plays through the wired connection or the inserted mobile phone. The issue with this is two fold. First, it’s expensive as we mentioned. Second, it weakens the experience when you have wired hardware. Nobody wants to take the headset on/off to download and launch new experiences or adjust volume. Nobody wants to trip over wires in room scale VR. The good news is this will be solved quickly. The newest Google Daydream headsets manufactured by HTC and Lenovo are rumored to be stand-alone. HTC Vive is going stand-alone. This will be solved in the short term. Since the first stand-alone headset is due to be released in later 2017, we assume others will be quick to follow. Oculus and other manufacturers, need to figure this out or will be quickly uncompetitive (since it costs 2-3x the price with the mobile or computer requirements). So it’s unlikely this will be an issue beyond 2018. What Needs to Be Fixed? Our Prediction
  6. 6. © 2017 Reverse Tide LLC C. Motion Sickness The Road to VR Mass Adoption What Needs to Change & Improve 6 Too many VR users are still experiencing motion sickness. Some can’t use VR at all, while others say it varies by game/experience. That’s a core problem to solve. Nobody will use a VR headset if it makes them sick. This is a problem that needs to be solved through better hardware and software. The issue comes from a mismatch in senses. You might be moving in the game but be sitting idle in your seat outside the game. We can get technical… VR experiences can increase the frames per second, improve eye tracking, and eliminate lag. However, the key point is that more work needs to be done on safety issues. Motion sickness is the big one but eye strain is another big consideration. As we said, every company in VR is acutely aware of this problem and every company is working on it. Just like people still get dizzy with certain movies or 2D video games, it can’t be solved 100% of the time. But it can improve from today’s experience. This will get better every year. This isn’t a problem that makes VR unusable right now. However, it needs to improve. And with so many people working on this non-negotiable problem, the percentage of people experiencing motion sickness and eye strain will likely decrease each year. What Needs to Be Fixed? Our Prediction
  7. 7. © 2017 Reverse Tide LLC D. Headset Comfort The Road to VR Mass Adoption What Needs to Change & Improve 7 Headsets today are uncomfortable. We mentioned wiring and eye strain already. What we didn’t mention is that current headsets are heavy and uncomfortable. It’s fine to use it for 15 minutes but lacks appeal for anything longer. Other electronics have made comfort and usability a core design priority. Mobile phones are lighter, thinner, and have user friendly keyboards. Bluetooth technology and speaker phones were created to eliminate holding the phone to your ear. Laptops were created for the PC to be more mobile and friendly for resting on your lap in the commonly seated position. Monitors, keyboards, and the mouse were adapted for ergonomic considerations. In future generations of headsets, usability needs to be a core consideration. The first generation is uncomfortable and deserves a pass because it’s such a complex technology. However, mass adoption won’t happen until this is solved. Every headset will get more comfortable. Entire engineering teams are dedicated to all the concepts mentioned: weight, comfort, eye safety, motion safety, wiring, and more. Like we said with connectivity, VR won’t be slowed down by discomfort. It will improve every year until it’s fully optimized. What Needs to Be Fixed? Our Prediction
  8. 8. © 2017 Reverse Tide LLC E. Spacing For Room Scale The Road to VR Mass Adoption What Needs to Change & Improve 8 HTC Vive and Oculus Rift allow for experiences in room scale. This means you can walk around in your room and you’ll simultaneously be walking around in your simulation. This works great in a store or convention with plenty of space. However, in the average home or office, most don’t have the open space to accommodate this core feature. One option is to create outdoor spaces for virtual reality. However, today’s devices make this impossible. It has to be connected to a computer or mobile device, power outlet, and strong internet. The motion sensors need to be set-up above head level (and thus must be mounted on the wall or on a ledge). And things like sunlight or rain are damaging to the headset. The end result is that most people can’t utilize this feature. And as VR experiences improve, this will be central to what makes VR special. Spacing is a difficult one to solve. It’s less of a VR manufacturing, engineering, or programming issue and more of a consumer one. The VR companies are trying to eliminate the need for sensors, improve connectivity, and eliminate reliance on external hardware. This helps. But space limitations still will exist for the majority. VR companies will do what they can. The upcoming Daydream and Vive headsets are rumored to be working on better tracking technology built into the headset. And even if they don’t figure this out, someone inevitably will down the line. We predict that the hardware constraints will be solved in the next 2-3 years. Then it’s a customer responsibility to start designing spaces more creatively. Think about it this way. Homes and offices are built around televisions and computers. You have desks, tv stands, and furniture all positioned around these devices. In a world where VR is your primary electronic device, people will reconfigure as necessary. This might change construction, interior design, and office facilities management. What Needs to Be Fixed? Our Prediction
  9. 9. © 2017 Reverse Tide LLC F. Connectivity The Road to VR Mass Adoption What Needs to Change & Improve 9 This is a dual issue. First, wireless speeds need to improve substantially. VR requires the capability to download large files, view 360 video with zero lag, display intense graphics, and facilitate experiences that can bring people around the world into the same simulation. With all these requirements, speeds need to be substantially greater than they are today. Second, the headsets need to include the wireless technology that supports it. The good news is that such capabilities are right around the corner. A lot of advances are being made with wireless technology and forecasts are commonly assuming speeds exponentially higher. Wireless technology will keep pace with other hardware advances. In other words, VR won’t be slowed down by slow connectivity. However, this isn’t necessarily true in locations with weak internet speeds. What Needs to Be Fixed? Our Prediction
  10. 10. © 2017 Reverse Tide LLC Only after hardware challenges are solved can software follow. This is when a mass market of developers realize this is the best field to concentrate efforts on (compared to web, mobile, machine learning, etc). This section discusses the software challenges needing to be solved. II. Software The Road to VR Mass Adoption What Needs to Change & Improve 10
  11. 11. © 2017 Reverse Tide LLC G. Usage Variety (Beyond Gaming) The Road to VR Mass Adoption What Needs to Change & Improve 11 With over 90% of current content in the gaming space, VR won’t hit a mass audience. Gaming systems like Playstation and Xbox do quite well but companies like Facebook and Google aren’t investing billions to become gaming companies. They know it has far more potential and that gaming will likely comprise less than 10% of usage when it’s all said and done. The key to more variety is profits. Non-tech businesses, developers, and investors won’t waste time on an unprofitable industry. And given the hardware constraints we’ve already listed, too much needs to be solved before that changes. This is going to be really interesting to witness. At some stage, hardware will overcome its current problems. We’ll have great connectivity, graphics, comfort, safety, and pricing. And developers will realize the cash cow they have in front of them. We think it happens quite quickly. Think about how quick the IPhone came out and then a litany of amazing apps were developed. We see a similar progression once the must-have headset is released. When will that happen? We approximate 3-5 years for that amazing headset (from mid 2017). And immediately after, some amazing use case stories will emerge. Then the floodgates open for spectacular innovation. VR will quickly become the go-to medium for commerce, social, information, communication, entertainment, and more. What Needs to Be Fixed? Our Prediction
  12. 12. © 2017 Reverse Tide LLC H. The VR Browser The Road to VR Mass Adoption What Needs to Change & Improve 12 We don’t think VR can become a dominant medium distributed through an app store on a PC or mobile phone. First, it can’t be reliant on a second device. In fact, it will eventually replace these devices. Second, an app store is an awful way to distribute content. Virtual reality shouldn’t be a series of apps (like gaming is today) that exist in silos. It should be a social experience that combines features and immerses you into a new world. Compare it more to the Internet being created than the mobile universe adding on to it. Eventually, we think VR needs its own browser. Similar to Chrome or Safari, there needs to be a default place where you can navigate around the virtual world. We don’t see it resembling today’s Internet browsers where you type a URL and see webpages launch on a flat screen. It will probably look different and have much different features. But this “VR Browser” will be the home when you launch your headset and enabler of everything you do on it. Each headset will have its own operating system. And we assume each operating system will have its own browser that allows you to access its connected features (social, communication, etc). And then it will resemble the Internet from there. Our prediction is that a few dominant browsers will come into existence and create a better user experience. We think this will happen in the next 2-3 years and then improve over time. What Needs to Be Fixed? Our Prediction
  13. 13. © 2017 Reverse Tide LLC I. Search The Road to VR Mass Adoption What Needs to Change & Improve 13 When there are so many VR experiences, worlds, applications, and features, search will become an important part of the experience. You can search distributors like Steam today but there are so few apps that it doesn’t help much. When the virtual world eventually has millions of applications/experiences and starts to replace our traditional internet in many ways, search will be a vital part of it. We assume Google, Microsoft, and Facebook will be all over this. However, we question whether Internet search is the same as VR search. In VR, you will search for information, people, videos, and more (like the internet). But you will also be searching for simulations, experiences, worlds, personal rooms, and many other new features. Might a different search algorithm be better? We think so. Search will always be part of any release. Nobody will put content into a non-searchable location. However, we predict that a replacement for Google’s current search dominance emerges in 5- 7 years. That will really accelerate content, as it will be easier to find than ever before. What Needs to Be Fixed? Our Prediction
  14. 14. © 2017 Reverse Tide LLC J. Non-Video Game Graphics The Road to VR Mass Adoption What Needs to Change & Improve 14 Animated graphics are great for video games. However, it is not ideal for virtual reality. VR relies on tricking your brain into thinking it’s actually there. And nobody will be tricked into believing they are in animated world. Some simulations might be better with these graphics. However, they need to improve. We envision future virtual experiences where you can actually transport to a real world. Transport to a new city, sporting event, concert, bar, or imaginary world. You can broadcast movies or events shot in the real world with modern cameras. However, creating an imaginary world that looks the same as the real world is beyond today’s graphics capabilities. This one will be tough. But we see demand for it. We aren’t graphics experts and couldn’t forecast a timeline for when the virtual world is an exact replica of the real world. However, it will undoubtedly happen at some stage. If we had to guess, real events and entertainment will be regularly broadcasted over VR within 2-3 years. It will become the dominant medium for this within 5-7 years. And it will be a perfect replica in fantasy worlds in 10 years. But these are merely guesses, as the technology must exist first. What Needs to Be Fixed? Our Prediction
  15. 15. © 2017 Reverse Tide LLC Optimization is the final stage toward mass market virtual reality. This is when virtual reality has hit a more mature consumer stage and people are focusing less on the technology and more on making it worthwhile to commerce, lifestyle, investment, and more. III. Optimization The Road to VR Mass Adoption What Needs to Change & Improve 15
  16. 16. © 2017 Reverse Tide LLC K. Mass Investment The Road to VR Mass Adoption What Needs to Change & Improve 16 At some point, there will be some initial success stories. Someone will do something big in e-commerce, search, social, communications, entertainment, and other categories. And those big successes will spur even greater investment than we see today. It won’t be confined to the major tech companies and a few early VC successes. It will resemble today’s investment in software, mobile apps, and other online businesses. The same thing happened in other technologies. That’s where the tech bubble of the late 90s came from. That’s where today’s venture capital boom came from. Investors and founders see those success stories and want in on the action. And with mass investment comes even better technology, content, and VR experiences. We see it happening in waves. The first mass investment will probably happen in about 5 years. It will focus on the low hanging fruit of this new medium. Things we already mentioned like search, social media, browsers, e-commerce stores, etc. As the software scene explodes, we will see a lot of very successful investment and a lot of very poor investments. In the 10-15 year timeframe, we see investors shifting away from content and into advancing the technology. The integration with robotics, AI, and brain interface VR are the longer term future but are all much further off. What Needs to Be Fixed? Our Prediction
  17. 17. © 2017 Reverse Tide LLC L. Mobile The Road to VR Mass Adoption What Needs to Change & Improve 17 We now understand how important mobile features are to the public. Many more people use mobile phones than traditional computers. The same thing applies to virtual reality. For complex things (business, movies, etc), people will be ok with using it in the home. However, they will also want to use their product outside. They want convenience. VR mobile might include: • Mixing augmented reality features where your headset can be used to create imagery scaled into the real world. Using this in real world settings (outside the home) will only add to the functionality and appeal • Wearability and style. If VR is capable of going mobile, it needs to be light- weight, stylish like sunglasses, and desirable to take in public. Given the processing and graphics power needed for VR, this is no small feat • Mobile features. If you’re using VR while on the go, you’ll want to receive calls and messages like today. Plus music, navigating, ride apps, payments, etc These are the things that really optimize an already great device. We think this is probably 7-10 years away and the second wave of VR mass adoption. AR technology needs to mature and then needs to be capable of merging into a single device. Mobile connectivity will need to be possible. And VR will need enough adoption to replace mobile phones (where those features are merged). Our prediction is that all these things happen but later than everything else we’ve discussed. What Needs to Be Fixed? Our Prediction
  18. 18. © 2017 Reverse Tide LLC M. Accessories The Road to VR Mass Adoption What Needs to Change & Improve 18 These are already popular in virtual reality showrooms or store demos but will only grow in popularity. The easy ones to envision are steering wheels, seats that move with the VR’s action, and handheld equipment. However, accessories can grow beyond that. The big accessory being contemplated now is whether the controllers are optimal. The answer is almost definitely no. Engineers are experimenting with gloves that match real hand and finger movement. Once this “glove controller” is in place, what about the rest of your body. Might we see a body-suit that accurately tracks all body movement for true immersion? Probably. Then comes touch and smell. Engineers want to have all senses accounted for in virtual reality and are researching effective ways of doing this. The list goes on for any type of experience. There isn’t much to predict here. Accessories will be a big part of virtual reality’s optimization. They aren’t essential but definitely improve the experience. So we expect they will improve each year and some will eventually become must-have. Accessories will be popular in businesses and public VR spaces. And then the essential ones will catch on from there. What Needs to Be Fixed? Our Prediction
  19. 19. © 2017 Reverse Tide LLC N. Replacement of Screens The Road to VR Mass Adoption What Needs to Change & Improve 19 Virtual reality’s true heyday will come when it replaces all the common screens we have. When you take a step back, you’ll realize that screens are really sub-optimal. Why should we watch a sporting event or action movie from a box? In current technology limitations, it makes sense but it doesn’t hold a candle to immersive solutions. Why should we squint and have back, wrist, and finger pain from huddling over our mobile phone? Again, it’s sub- optimal. Sunglasses that create the same image as a hologram in front of you are much better. So is there potential to replace screens? Definitely. It will happen at some stage. The technology is a definite impediment, as a single device needs to be capable of all VR’s features, current smartphone, PC, and television features, and also be mobile. We’re not close to that. And then secondly, it needs such mass market purchasing and societal acceptance that people stop buying screens. We’re probably about 10 years away from that in highly developed markets. But in lower income or remote locations, our best screen-based technology hasn’t even fully penetrated the market. So it probably won’t eliminate them altogether for a very long time. But companies like Apple, Toshiba, LG, Dell, and other tech companies that fully rely on screens ought to consider more imminent VR/AR shifts. What Needs to Be Fixed? Our Prediction
  20. 20. © 2017 Reverse Tide LLC O. Integration with Other Tech The Road to VR Mass Adoption What Needs to Change & Improve 20 We have less expertise on the progress of other futuristic technology. However, we track it enough to understand its implications on the VR market and society more generally. As the VR market matures, these other things will integrate and make virtual reality that much better. A few examples… • Augmented reality will give you the opportunity to use virtual elements in real world settings. We see a smaller market compared to virtual reality and thus demand to blend the technologies into a single headset. • Artificial intelligence works hand in hand with VR. It allows for better simulations, more customization, and even for auto-programming based on machine learning. Virtual reality creates an entire universe of new data, which helps AI gain better traction and more use cases. • Robotics are potential accessories in the VR/AR world. If both human and robot are programmed into the same scenario/experience, there are wide- ranging use cases. Other emerging technologies like drones, 3D printing, biotech sensors, and Internet of Things devices may exist primarily in the physical world but have definite network-based integrations. We are on the verge of another technological revolution in more than just virtual reality. Obviously they will complement each other in many ways. AR and AI integrations are probably 5-7 years away, while other integrations are potentially >10 years out. What Needs to Be Fixed? Our Prediction
  21. 21. © 2017 Reverse Tide LLC These predictions were aimed at the mass consumer. So what should businesses do while the tech companies are working on virtual reality technology and products? Business Conclusions The Road to VR Mass Adoption What Needs to Change & Improve 21
  22. 22. © 2017 Reverse Tide LLC Business Conclusions 1. Don’t try to time the market • Your competitors will be working on a great virtual reality strategy and building their capabilities to achieve it. And new market entrants will use VR to compete in different ways. • If you wait for mass adoption, you will fall way behind. Try to make your business case longer term so there aren’t immediate ROI demands. 2. There are many early opportunities • The average profitability is a bit low right now. However, this also gives you a strong opportunity to seize market position when few competitors have entered. • Consider entering and experimenting now. You might achieve really big success and even better future positioning. 3. Focus on capability & infrastructure now • While the technology is improving, start building your team. Start equipping yourself with the best talent and make initial infrastructure investments. • When the ROI gets stronger (due to mass adoption), your positioning will be exceptional 4. Get help from those in the industry • This is an entirely new medium with very different thinking. Work with the people that understand the industry and know what it takes to be successful. • By mixing internal talent with industry experts, you’ll get both strategy and execution right. The Road to VR Mass Adoption What Needs to Change & Improve 22
  23. 23. © 2017 Reverse Tide LLC Work With RT Virtual Reality Market Overview Workshops • Current technology • Industry leaders • Case studies • Profitability Business Case Development • Costs/revenues • Timeline • Profitability and growth • Competitive advantage Company Use Cases • Marketing • Product • Information • Processes How To Create VR • The technology needed • Investment/infrastructure • Skills needed to create good apps and experiences Long-Term Strategy • How VR tech will change • Building infrastructure • How VR will change society Elements of Good VR • Common user feedback • What the best apps have • What customers have demanded (wish list) Development • Product, design, process, and content requirements • Project management from idea, business case, development, implementation • What portions to keep in- house vs outsource to experts Distribution • Pros and cons of different distribution channels • Maximizing effectiveness for internal VR uses • Marketing We provide business services to help you define and execute your virtual reality goals Entry Strategy Creation For more details or to contact us: Rtvirtualreality.com The Road to VR Mass Adoption What Needs to Change & Improve