Building a mass-market for virtual reality headsets is taking longer than Facebook (FB) and other VR backers once envisioned. And from the looks of things, Mark Zuckerberg's firm is responding to this challenge by taking a more pragmatic approach to growing its VR business in the short-term.
On Wednesday, The Information reported that Facebook's Oculus VR unit has "signed deals for exclusive VR versions" of games from the Assassin's Creed and Tom's Clancy's Splinter Cell franchises. It added that Facebook is also looking to buy game studios to bolster Oculus.
The report comes two months after Oculus began selling the Quest, a $399 standalone VR headset, and the Rift S, a $399 headset that requires pairing with a PC (ideally one with a powerful Nvidia (NVDA) or AMD (AMD) GPU). The Quest generally received good reviews, while reviews for the Rift S were (though not terrible) a little more mixed.
The Quest improves upon Oculus' $199 Go headset, which launched in 2018, by packing a faster Qualcomm (QCOM) processor and a better display and motion controllers, and also by supporting positional tracking (i.e., the ability to track a user's movements around a room). The Rift S improves upon the original Rift, which launched in 2016, by featuring a better display and removing the need for external sensors to do positional tracking.
Facebook, which spent $3 billion to buy Oculus in 2014, told The Information that the response to the Quest and the Rift S has been "incredible." However, relative to smartphones, tablets or even smartwatches, VR headsets remain a niche market for now.
In June, research firm IDC forecast that global VR headset shipments would total about 7 million in 2019, up moderately from less than 6 million in 2018. Close to 5 million of these shipments are expected to go to consumers, and the rest are expected to involve commercial use cases.
For comparison, IDC estimated that 1.4 billion smartphones, 258 million PCs, 174 million tablets and 51 million smartwatches were shipped in 2018.
There are a few different culprits one can blame for the slow pace of VR adoption. One of the big ones, arguably, is that the image quality delivered by VR headsets still doesn't compare with what consumers are used to getting from their phones, tablets and TVs.
The closer a display is to a user's eyes, the higher its resolution needs to be in order to deliver a good experience. Given how close a VR headset's display(s) are to a user's eyes, many have argued that a resolution of 8K per eye is needed to produce high-quality visuals. And for now, consumer VR headsets tend to have resolutions of 2K per eye or lower.
There have been other impediments to VR adoption as well. Among them: Extended VR use can be mentally fatiguing and/or produce motion sickness; consumers can feel uncomfortable fully shutting themselves off from their physical surroundings for an extended period of time; and consumers can be self-conscious when using a VR headset in public environments.
But for all of its current limitations, businesses have begun finding practical uses for VR in fields such as worker education and training. And for consumers, VR has shown an ability to produce one-of-a-kind, immersive, entertainment experiences in fields such as watching live events, conducting "virtual tours" of famous locales and (with the help of external gear) simulating activities such as skydiving and roller-coaster rides at arcades and amusement parks.
Gaming, too, is an area where -- in spite of misgivings over issues such as image quality and the potentially fatiguing nature of extended VR gaming sessions -- a subset of consumers have taken a liking to VR due to the immersive experiences it can deliver. Sony (SNE) , which has reported selling over four million PlayStation VR headsets to PlayStation 4 owners, can certainly vouch for this.
In that context, Facebook's reported plans to double down on Oculus' gaming efforts via studio acquisitions and exclusive game deals is a sensible and pragmatic move. Such efforts are unlikely to lead VR demand to suddenly take off in the way that its biggest fans once viewed as inevitable, but it could help drive a measure of additional consumer interest in a technology that's still very much in its early stages.