The VR Ecosystem—It’s Bigger Than You Think

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2Q 2017 | IN-4529

In ABI Research’s recent virtual reality and 360° video ecosystem list, over 460 companies were included, and that sample size is just the beginning. Arriving at an exhaustive list is beyond the realm of pragmatism, and even if such a feat were undertaken it would still only represent a snapshot of the market in a relatively limited window of time. Companies within this market come and go through acquisitions and closures making it very fluid and dynamic—not to mention the 100+ mobile reliant HMD solutions in the China market alone (depending on which source you believe). In many respects, the virtual reality (VR) market looks similar to the early days of user generated content (UGC) video, where dozens (well over 100) of online video sites cropped up seemingly overnight after YouTube was acquired by Google—this time around it is Oculus and Facebook.

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Even in the Nascent Market 460+ Companies Are Still Just a Sample

NEWS


In ABI Research’s recent virtual reality and 360° video ecosystem list, over 460 companies were included, and that sample size is just the beginning. Arriving at an exhaustive list is beyond the realm of pragmatism, and even if such a feat were undertaken it would still only represent a snapshot of the market in a relatively limited window of time. Companies within this market come and go through acquisitions and closures making it very fluid and dynamic—not to mention the 100+ mobile reliant HMD solutions in the China market alone (depending on which source you believe). In many respects, the virtual reality (VR) market looks similar to the early days of user generated content (UGC) video, where dozens (well over 100) of online video sites cropped up seemingly overnight after YouTube was acquired by Google—this time around it is Oculus and Facebook.

If we view the VR market through the lens of the online video market, how might we expect VR to develop in the coming years?    

Watch the Big Companies

IMPACT


Amid all the excitement in the early days of the online video market, there were services devoted to almost every hobby or activity one could dream up. In addition, numerous services cropped up to help others (be it individuals or companies) to carve out a piece of this burgeoning market—parallels can be drawn to the VR market. While there is not as much diversity in terms of the types of services/content, there is a sizeable group of companies offering professional services to help other companies enter or take advantage of the interest in VR. On the content side, it is completely understandable to see many producers but few content distribution services, due to the online video space being already consolidated around a select few popular services. Select services will act as key 360° video platforms, as well (e.g., YouTube and Facebook).

Eventually, the VR market, like online video, will start to consolidate and coalesce around a number of key players, which likely favors the largest companies in the space. YouTube did not simply “win” because it was the first to make a splash; Google’s financial backing and presence certainly helped maintain its leading presence. While the same was not necessarily true of the social networking market, the dynamics of that market differ from online video and VR, which are far more dependent on content production than networking effects. Content production (be it video production or game development) will almost always favor the largest base of viewers with paid exclusives aside, which help offset market potential with cash incentives. A majority of those companies listed in OSVR’s Industrial Partners, for instance, put support for large players like Oculus, HTC, and Samsung ahead of OSVR.

The peripherals market is also seeing a burgeoning number of companies entering the sphere, hoping to make the VR experience increasingly immersive. And while there are some innovative products, software support remains a limiting factor. This is particularly true in the mobile market where peripherals lagged the tethered HMD segment—Google’s Daydream and Samsung’s Gear VR introduced peripherals but without any haptic feedback and controls for only one hand. Software developers, when confronted with the decision to support the more functionally limited but more pervasive controllers versus the more advanced, albeit much smaller base of users, will go where market potential is greatest. Once the largest mobile VR platforms offer more advanced peripherals, the gulf between user interfaces (UIs) will fall enough for some crossover between the first- and third-party peripherals—this might not occur for another year or two, though.     

It Takes Money to Make Money

COMMENTARY


Ultimately, funding—or the lack thereof—could decide the fate of many of the smaller companies in the list. Those companies with the most innovative solutions (and patents) or ideas will become acquisition targets, and those without the means to create these layers of protection face a highly uncertain future—imitation might be the greatest form of flattery but in business it also has the impact of crippling smaller competitors. Therefore, large players will continue to have the greatest input in shaping the future of the VR market. Other market movers like Apple, which will back augmented reality (AR) first, will also have significant bearing on how the overall AR, mixed reality (MR), merged reality, and VR markets develop. To this point, even Samsung, which is currently championing VR, is also working on AR. Additionally, Facebook, which acquired Oculus, is not ignoring the opportunities in AR. Gaming powerhouses, like Epic Games (which is responsible for the Unreal Engine), also see a market years (possible 10+ years) from now that looks more homogenous than disparate. However, by that time, the market will look dramatically different than it does today. There is a substantial number of these early VR pioneers failing to reach their end destinations, but in many ways, they will still become part of the fabric of the industry.  

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