Virtual Reality could be huge.
The biggest and best of the virtual reality (VR) offerings include Oculus’ Rift, Playstation VR, and HTC’s Vive. Oculus impressed enough that Mark Zuckerburg was willing to shell out $2 billion to acquire it back in March of 2014.
Since then it seems like Virtual Reality has been stuck, making some advancements while not really delivering on the holy grail of VR: fully immersive VR where you can actually move around.
There are two big issues that any investor in VR needs to be keeping tabs on. Cost and adoption. Solving the first problem will likely help with the second but any company that can do it will surely benefit from a mainstream VR explosion.
By far the biggest problem is that VR headsets are expensive. Not only do you need the $500 headset but you also need a machine to run it on. If you look at Playstation VR, you are looking at spending at least $1000 to enjoy VR gaming. That’s probably why Google is moving towards building independent VR systems, ones that work straight out of the box.
While VR was expected to be the next big thing, gaming research firm Superdata actually had to lower their 2016 estimate of Playstation VR sales from 2.6 million to under 750,000.
Playstation VR ended up moving 745,434 units. HTC Vive was second and only sold 450,083 units. Oculus Rift languished in third place with 355,088 units sold.
The thing is, any nascent industry can provide big returns if you get in early and it actually delivers on its promise. In 2016, the VR and AR (augmented reality) industry was worth about $6 billion in sales. $6 billion is a big number but compared to things that matter, it’s not a lot. Meanwhile Sony generates something like $3 billion in revenue from the Playstation 4 every quarter.
Market trends and forces aside, you want to know if you should invest in Virtual Reality.
The dirty secret is, there’s no real way to invest in a pure VR play – at least not for the average consumer. This nascent industry isn’t dominated by startups and underdogs. Instead it is the playground of schoolyard bullies. Sony, Facebook, Google and Samsung own nearly 60% of the current market. HTC is a close fifth but investing in VR means investing in these tech heavyweights. The average investor doesn’t really have a way to invest in smaller studios that might give you a 10x or 50x return on your investment if VR really blows up.
Sony is off to a good start in 2017, having sold over 400,000 units in the first quarter of 2017. That should allow them to smash their 2016 numbers and their competition. HTC sold half that number in Q1 2017. If you want to get a piece of VR it might be a good idea to simply invest in the big players of the tech industry and catch a ride on their tailcoats. That means Sony, Facebook and HTC.