What Needs to Come First for VR to Take Off, Mass Hardware Adoption or Compelling Content?

It's tech's version of the classic chicken-or-egg dilemma

Will hardware adoption drive content creation, or is it the other way around? Augusto Costanzo
Headshot of Marty Swant

Each January, tech experts at the Consumer Electronics Show in Las Vegas peer into their crystal balls and declare that “this is the year of something.”

For about 10 years, it was the “year of mobile.” After that it was the “year of connected cars,” which was then eclipsed by “the year of smart devices.” Now, some say 2018 could be the year of virtual reality. In fact, nearly 170 VR-related companies of varying types and sizes are expected to pitch their products on the crowded CES showroom floor, up from 70 last year.

At CES, the CEOs of Hulu and Turner will discuss the future of media, focusing in part on VR content.

While the annual electronics show is largely focused on hardware, on Wednesday the CEOs of Hulu and Turner will take the CES stage to discuss the future of media, focusing in part on VR content—what might it look like when viewers and stories are unbound from the confines of a two-dimensional screen?

“We’re calling this the ‘Race to the Center,’” says Turner CEO John Martin. “Traditional digital and tech players are trying to become much better at creating premium content, while premium content such as ours are trying to become better at creating technology.”

This “race” Martin references is also the make-or-break question the VR industry faces as it looks to hit a critical mass. But what needs to happen first is the “chicken-and-egg” question: mass hardware adoption or the creation of compelling content?

Will 2018 be the year they crack it?

The cost of pricey headsets

For Hulu, the search is on for a golden goose. Early this year, the company will release its first VR series Door No. 1, a choose-your-own-adventure program with sponsors Bumble and Nissan woven into the storyline. However, industry insiders admit VR has yet to have a blockbuster moment, and what exactly that will look like is a question that keeps execs up at night. In other words, VR hasn’t hit upon the kind of cataclysmic, traffic-driving event similar to how Snapchat drove the adoption of vertical video or Niantic’s mobile game Pokemon Go drove understanding of augmented reality.

“A headset is a paper weight without good content,” says Loren Hammonds, a programmer for the film and experiential selections at the Tribeca Film Festival, which has showcased VR material since 2012.

Oculus Rift

Although growing, the headset market is still relatively small. According to market research firm International Data Corp., headset sales are expected to increase from 9.6 million last year to 59.2 million in 2021. (The only company to release official numbers is Sony, which in December said it sold 2 million in 2017, doubling the 1 million mark it announced in June, but it’s less than impressive compared to the 344.3 million smartphones sold worldwide in the first quarter of 2017.)

Then there’s the cost, which remains a factor for a majority of would-be VR buyers. According to an IDC study, lack of content coupled with high costs stands as the main hurdle for 64 percent of potential headset buyers surveyed. For example, the price tag on an Oculus Rift is $400 while the HTC Vive sells for $600. Both require a powerful PC, adding another $600 and $2,000 for the privilege. However, the price barrier is beginning to drop. Last year, Facebook announced plans for the $200 Oculus Go (scheduled to hit the market early this year), with technology that allows for more freedom and interactivity than basic $100 models such as the Samsung Gear VR or Google View. Lenovo, which began selling a $200 mobile VR headset last year, is also working on a stand-alone headset of its own that runs on Google’s Daydream VR platform and is expected to debut this week at CES.

For their part, media companies, brands and ad agencies say they’d be willing to create more content if the audience were larger.

“When I think about VR, I think ‘is this the next smartphone?’” says Tom Goodwin, Zenith’s head of innovation. “There are going to be 2 billion or 3 billion [smartphones] on the planet. Is this the next games console? In this case, is it going to be covering 200 million [units]? Or is this the next Segway where it’s going to be 200,000? I think it’s probably kind of like the next console. It probably is going to be a significant platform.”

Media play the long game 

Such thinking has spurred media companies that were slow to move on new technologies in the past to plunge ahead. Chaki Ng, an executive at Viacom’s R&D lab, Viacom Next, says while his company waited five years to build its first app, it’s now churning out new VR concepts every few months rather than the typical one- or two-year timeline. Ng says even his venture capitalist friends investing in VR are prodding him, saying, “‘Chaki, you need to create more content.’”

That’s also true for Viacom-owned Nickelodeon, which is also amping up its own VR R&D. Chris Young, svp of Nick’s Entertainment Lab, says today’s VR market looks similar to the early days of the internet when there was a small group of people developing pages for a small audience.

“If you told people you were launching cartoons on cellphones, they would literally laugh you out of the conference room,” he says. “But that’s not the case today.”

"Dear Angelica," a VR movie from Oculus Story Studio
Dear Angelica

Experts are still debating whether hardware or content will be the trigger point for VR. Lewis Ward, IDC’s research director for gaming and VR, is in the content camp. “It is really critical for companies that have deep pockets and that are planning a long-term investment to plan services to show what’s possible, and then other people will follow,” he says. After all, who would buy a video game console without any games to play, or who would sign up for Netflix if there weren’t anything to watch?

Jason Rubin, vp of content for Oculus, says the goal is to evolve VR as much in five years as it took mobile to do in 10 or the PC era to do in 40. While the technology immediately impresses the user and offers “unlimited potential,” he says the question then becomes: What do you do with it?

“The devices to input virtual reality into you will get better,” he says. “Eventually it will expand past your eyes, which is what were focused on now, and your hands with haptics. Well do better with your ears and 3-D sound will sound better. Well start impacting your skin and you’ll feel things and well be able to simulate wind. And one day well actually get your inner ear and youll physically feel like youre moving, which is something you can’t do today.”

While VR’s time to mass market appeal remains an open question, one way to help jump-start it would be for a cash-rich company like Facebook or Google to take an Amazon-style approach, subsidizing hardware prices or giving it away, generating revenue from content and ads. (Monetizing VR remains an issue.)

After three years in the hype cycle, the VR industry is now under pressure to show results. Brian Blau, an analyst at Gartner, says VR needs “four legs” to stand on its own: accessible hardware, affordable hardware, quality content, and also an ecosystem like Apple and Microsoft, where hardware and software coexist. 

It’s not the case that quality content isn’t already on the market. While many of the TV networks are just getting started, some of the earliest VR standouts have already been released by indie producers and small production companies. Alejandro González Iñárritu’s “Carne y Arena,” a VR experience about immigrants crossing the U.S.-Mexico border, earned him a special Oscar in 2017. Gabo Arora’s emotional VR Experience, “The Last Goodbye,” shown at last year’s Tribeca Film Festival, allowed viewers to visit a concentration camp alongside a Holocaust survivor. At this month’s Sundance, former Pixar animator Jessica Shamash will premiere her VR experience for “Wolves in the Walls,” where the viewer gets to become an imaginary character inside of a fairy tale based on the Neil Gaiman children’s book.

"Carne y Arena" is a VR experience about immigrants crossing the U.S.-Mexico border.

This story first appeared in the Jan. 8, 2018, issue of Adweek magazine. Click here to subscribe.

@martyswant martin.swant@adweek.com Marty Swant is a former technology staff writer for Adweek.