Market Analysis: Solid Footing Continues to Elude 2019 XR Market
2019 XR Market: Overview Analysis
Serious Insights stopped covering VR and AR aggressively a couple of years ago. It’s time to explore the 2019 XR market. As the nascent market continues to churn, several developments have occurred recently that reinforce some of our earlier analysis.
Fortune magazine’s July 2019 issue was awash in vibrant VR 2.0 typography. The version numbering is completely ridiculous given VR’s long history. VR, like people over 39, should be given the nod that a version number is no longer needed. It just is what it is and let’s accept it for that.
Fortune Magazine’s July 2019 was awash in vibrant VR 2.0 typography. The version numbering is completely ridiculous given VR’s long history. VR, like people over 39, should be given the nod that a version number is no longer needed. It just is what it is and let’s accept it for that.
But the pundits are stirring again. Looking at the huge investments over the last decade, the stalwart hardware makers who continue to shrink and untether—the software that seems almost, about to…
The 2019 XR marketing continues to seek solid ground amid its virtual ambitions. And it still isn’t finding solid footing.
2019 XR Market: moving away from mobile
The Google Cardboard, Cardboard-like headsets and Samsung Gear VR markets have collapsed. Headsets now litter discount stores and sit on shelves at donation retailers like Value Village and Goodwill. Nintendo brought low-end “VR” to Switch, but it isn’t clear anyone cares. These surface-level VR devices, meaning that they don’t support six-degrees of freedom, surround viewers but they do not permit them to explore the visual field—to tap, touch—to travel inside, to move without magic (like transporting from one scene to another). Google and Samsung have pulled back from their products after years of touting mobile VR as a reasonable use case for a smartphone.
The problem: untethered headsets still can’t compete with those tied to high-powered computing resources. And the physics isn’t going to change. No matter how small or how good standalone devices get, they won’t have the graphics and processing power to process the polygons needed, the storage for large models, nor will they have the staying power as even the most efficient processors drain batteries. The heat streaming off the overworked CPUs and GPUs is all the physical indication an electrical engineer needs to diagnose an underpowered and overworked piece of hardware.
The quest, however, isn’t without its rewards. The push toward more efficient graphics, lower power consumption, and innovative use cases isn’t lost on general consumer device improvements. That direct link between VR and mobile devices though is likely on its last legs as Samsung and Google move away from mobile VR as an active investment. It is likely that any future work from those firms will look more like the HTC and Facebook models: teams and projects focused on use-specific devices. In that future, feedback to other product teams will arrive more from the periphery when good knowledge management practices bring it to the fore, rather than directly from integrated development efforts. Innovation will bifurcate. The lack of cross-pollination, lower budgets by category and fragmented attention may well slow overall mobile device innovation.
The 5G conundrum
And then there is 5G, which promises the speed to deliver immersive experiences to mobile users. 5G may well deliver broadband-like experiences, including the swap of bandwidth for storage, but it will not do so broadly for at least five years. Significant deployment may take longer. There will likely be a lag between bandwidth availability and applications that can leverage that bandwidth in an innovative way. 5G does not solve any of the computer, data modeling or power issues associated with VR—what it does do is buy time for XR firms as the failure to progress gets planted on slow 5G deployments rather than fundamental XR development issues.
According to forecasts, the XR market always looks poised for a step function leap in revenue, often ten times or more in a five year period. XR has never fostered that type of explosive market. Serious Insights does not foresee an event that accounts for exponential growth rates. Given the uncertainty surrounding XR, the mythical killer app to propel growth cannot be completely discounted, but it remains highly unlikely.
The more conservative view would be incremental growth driven by niche applications that provide clear value. XR may look more like the industrial IOT market than the smartphone market. It will incorporate a huge diversity of solutions spread across a wide roster of providers.
There may well be winners among headset manufacturers and software platform developers that drive development innovations. Those companies may well own significant market share. But that market share will fit in the context of a market that remains smaller than anticipated, smaller perhaps by an order of magnitude.
What’s in a name
This is very simple. Virtual Reality (VR) completely immerses people in an experience. Augmented Reality (AR) places objects, widgets and other artifacts into the visual field of a user. There is no difference between Mixed Reality (MR) and Augmented Reality (AR) except Microsoft’s attempt to differentiate itself through marketing speak. Even the most primitive AR relies on some coordinate in space or on the ground as an attachment point for its visualization. All AR blends some of reality into its experiences.
XR, which we adopt for the title of this analysis, treats the X as a variable. X can either stand for a single value (A or V) or multiple values when there is overlap. XR can also represent the market as a whole.
Serious Insights adopted XR as an inclusive category. When we write about VR or AR we will continue to use those abbreviations with appropriate context. We will refer to the overall market as XR.
What’s the problem with virtual visualization?
There are two big problems with any kind of virtual visualization, be it deployed in AR or VR. The first is data. Good visualizations require massive models that integrate with one another. Gaming proves relatively easy because game developers control all of the infrastructure represented in the game. They control the constraints and can, therefore, choose what matters and what doesn’t. Game developers set participant expectations.
Game developers control the constraints and can, therefore, choose what matters and what doesn’t. Game developers set participant expectations.
In implementations that seek to mimic the real world or overlay on it, the designer doesn’t own control over expectations because they essentially compete with the real world. If I take a hammer to a wall and expose what lies beneath, I will find insulation, wires, plumbing, etc. A visualization that doesn’t include those things when applying a hammer to a wall will fall short of expectations even if the designer explicitly says he or she isn’t designing for a lower level of detail.
Asking the question of what matters and doesn’t in the visualization of real-world scenarios, therefore, matters initially to a designer—but once people inhabit a model they will not only want to explore places they already know, they may well want to repurpose the intent to their own needs. In fully immersive XR, initial application constraints may prove too limiting, constraining not only the experience but the relevancy of the application.
In fully immersive XR, initial application constraints may prove too limiting, constraining not only the experience but the relevancy of the application.
To use an industrial maintenance example, a good AR solution would require knowledge of the equipment being maintained and all of its components, how the components are related, how they are attached to each other (including models for the attaching hardware), the environment within which the equipment resides (to manage access clearances and other physical constraints) and models of the tools that may be used during a maintenance or repair operation. In some instances, sensor values may also be useful, bringing heat, vibration and other values into the model in real-time to reflect the state of the equipment.
Visionary AR demonstrations also include instruction manuals, access to live coaches via chat and video. The models and the relationships in the real-world need to be interpreted and mimicked for AR to provide meaningful guidance.
Industrial maintenance applications usually fall short on many of these levels but may still be deployed with some value. Anything less than full integration with the real world, however, ultimately delivers a subpar experience. Like many demonstration applications, users will want more in order to buy in, but often with little promise that their desires will be met.
An emerging challenge to XR comes from the rampant growth in hacking. Exposed vulnerabilities like those recently reported in a VR Chatroom by security researchers (see Hackers Hijacked VR Chatrooms to Manipulate Users’ Reality at Motherboard) will likely become more common. As with all security-related matters, developers and users will need to be aware of threats, and diligent in containing them.
2019 XR Market: consumer adoption analysis
The next frontier for consumer adoption may lie in online shopping. But shopping may also do more to highlight the limitations of the technology and missed expectations for consumers. For every person who figures out that a table from Amazon or Ikea complements their room and fits in the space available, there are others who see giant versions of the same table completely obscuring the view into the room. Pinching and zooming places the table in an awkward space, sometimes just in space.
The recent Consumer Technology Association reporting on consumer intent finds entertainment and media as the top drivers for fully immersive VR (read the summary here. Reports are available to CTA members. Non-CTA members can buy full reports). AR for shopping and navigation top the list. Keep in mind this is intent, not adoption. Some of the people answering the question may not have experienced XR technology first-hand.
In moving higher-end technology down the price point, products like the HTC Vive Focus and Facebook’s Oculus Quest trim-out with on-headset cameras. This enables those headsets to track objects in the real world and sense space, eliminating the need for base stations or other technologies to create the edges of virtual reality experiences.
Unfortunately, they also offer less power and lower resolution.
There are also other issues that continue to deter VR adoption, like VR sickness and appropriateness of fit.
One appropriateness for fit example is a virtual reality application for new car buying ( Audi launches virtual reality-enabled car-buying experience). Marketers need to ask: Is an XR application a better choice for selecting vehicle configuration choices than a 75-inch screen and a tablet a better? Alternatives exist to many of the marketing or consumer engagement scenarios for XR that are less expensive, do not require the overhead of headset wearing, and solve the problem as efficiently or more efficiently than the XR version. Is the novelty, marketers must factor, worth the investment over a more effective process?
Some features of AR, like Apple’s rumored FaceTime tweak in iOS 13 that will apply ARKit so callers appear to be maintaining eye contact even if they aren’t (see 9to5Mac story here) hint at not just a simulated future but a constructed future. AR may enable a future that not only augments reality but misrepresents the truth. It is highly likely that Apple’s Memoji will evolve into avatar-based FaceTime, which will create fun but increasingly disconnected experiences that put technology in the way of authentic person-to-person interaction.
With the rumored Apple ARKit Facetime feature that tweaks a gaze so it appears a person is making eye contact when they aren’t, AR may enable a future that not only augments reality but misrepresents the truth.
Less existentially worrisome are applications like Smithsonian Apollo 11 AR app which makes for a nice game if you like crashing the command/service module and the LEM on the moon. Here it is necessary to ask if the application is really AR. Why? Because good AR around the moon launch would include some maneuvering thrusters, a team of scientists to help guide the spacecraft and perhaps even some math to inform the would-be astronauts as to the burn required for lunar orbit acquisition. As it is, the Apollo 11 app is little more than a visually appealing trial and error tap app. It does nothing to teach its users about how to calculate trajectories.
Serious Insights forecasts that gaming will continue to drive XR adoption among consumers. The shopping experience, which may continue to improve, will not reach the vision set out by their developers because of the limited ability to deliver persistent scenes, the shared standard models across providers (for products, for bodies and for spaces) and the awkwardness of holding handheld devices during the experience.
Sony, with PlayStation VR remains the firm leader in VR gaming, with a platform people know and an experience that truly does augment the gaming for those intrigued by immersion.
2019 XR Market:
What’s Holding Back Consumer Adoption?
All XR implementations face similar issues for consumers, which include:
- Using the technology isn’t comfortable, and it is often unwieldy.
- For people with glasses, most solutions fail to adequately accommodate the variety of frames, the safety of the glasses in the headset or the subtleties of prescriptions.
- The high-end experiences often require additional in-room equipment to define boundaries and track users/controllers.
- XR remains expensive for any decent experience.
- Even with smartphones and tablets, which offer some good AR experiences aren’t designed for long stints of holding the device up at arm’s length.
- Environment models do not persist. This is an issue for shopping. Because a good home model builder does not exist, it makes it difficult to see new furniture or home decoration purchases in context. This issue hits empty rooms as much as it does overstuffed abodes.
- Lack of standards. Related to the item above, if a consumer wants to compare an Ikea table to a Houzz table they cannot currently bring both pieces of furniture into the same model.
- There is very little advantage that XR offers that can’t be more easily and more cheaply delivered via other technologies.
- The failure of hardware and software companies, along with the pullback by major consumer players, signals a lack of readiness to serve the market and fulfill promises. Trust erodes and risk increases. Not a good formula for a successful market.
While Facebook’s Oculus Quest doesn’t address all of the issues listed above, it does tackle the price point issue, with a fully realized, standalone gaming headset coming in at only $499. That price includes the headset, two controllers, a power adapter, AA batteries, a charging cable and a frame for better accommodating those who already wear glasses. The uptake of Quest will indicate if the price/feature balance shifts the adoption curve.
2019 XR Market: commercial adoption
Consumers require apps that just work. Businesses, however, are more patient when it comes to prototypes and more complex experiments. They know for the most part their technology didn’t arrive fully formed and ready to deliver. For emerging technologies, enterprises are willing to learn with a market if they believe it will eventually yield value—even if that means taking on some of the risks when it comes to partners who might not be around for the long term. Businesses are not just commerce engines, they are also learning factories. The use, adoption and even failure of XR experiments will generate data points that inform strategy and future tactics.
The manufacturers of XR hardware know that the near future for learning will derive from a diversity of use cases, and that the opportunity for sustained revenue will arrive from commercial applications as much as from gaming.
On July 1, HTC VIVE announced a new business unit called VIVE Enterprise Solutions to focus on XR-based business applications like:
- Training and Simulation
- Design and Visualization
- Virtual Collaboration
- Location-Based Entertainment and Attractions
This follows last year’s release for the VIVE Pro. Not all business situations require the most sophisticated hardware, so HTC is layering its offerings to meet technology needs and fit within customer budgets. Beyond the VIVE Pro, the new unit will also sell VIVE Focus, VIVE Focus Plus, VIVE Pro Eye and VIVE Sync-based solutions.
HTC, along with HP and Dell, have realized that the business market has the budget and the patience for XR solutions and have refocused their XR business on those segments.
The consumer enterprise crossover point
Unlike horizontal software, no applications cross between commercial and consumer markets. No spreadsheet or word processor has yet emerged for commercial applications that also serve a broad consumer set of use cases.
Marketing could be called an exception because it taps into consumer game scenarios. An example of what HTC calls “Location-Based Entertainment and Attractions” sits in the Austin Park n’ Ride amusement center.
A virtual roller coaster at the amusement center, a joint venture between American and Chinese entrepreneurs, offers an extreme example (See an Austin Day Break report here). A multi-degree-of-freedom rotation experience supported by custom headsets (at least custom straps) and software that tracks the movement to one of many roller coaster environmental simulations.
Virtual roller coasters were common early “cardboard” VR experiences. Because of VR sickness concerns, researchers often caution against the combination of a completely immersive headset tied to severe motion. That did not stop Samsung, in years past, setting up enormous demonstration centers at CES that tied their Gear VR product to motion-based seating (see the VR Scout video from YouTube below). Virtual thrill-seeking where mechanical apparatuses and headsets meet, however, remains a draw for marketing and entertainment developers.
San Diego’s Comic-Con often proves a demonstration destination for ambitious VR-based activations, such as Amazon’s Jack Ryan-based terrorism experience in 2018 (see BestEntertainmentReviews.com story here). This year’s Comic-Con will host The Batman Experience that brings VR to indoor skydiving and a headset in the style of a Batman cowl.
In the 2019 XR market, AR has supplanted VR in many instances as the technology of choice for brand experiences. Examples include the Asos virtual catwalk, Gucci’s shoe try-on app, the Toyota C-HR augmented reality feature reveal and L’Oréal’s Modiface.
Toyota’s vehicle reveal tool designed to enhance the buying experience by showing potential buyers what a car looks like on the inside. This is a good example of XR being applied where a more physical, real-world experience may better create a visceral and emotional connection to the buyer (like opening the hood and showing the engine versus showing a simulation of the engine that is just feet away). It also calls into question the investment at this scale for the few buyers such a system might convert. If a buyer doesn’t like how a car feels, or how it drives, showing them what’s under the skin isn’t likely to transform a potential customer into a buyer no matter how cool the technology may be.
Keep in mind that while it is common to demarcate the boundaries between consumer and commercial applications, those boundaries are not that clear. All consumer applications represent hardware and software development spun toward a non-business use—a use that nonetheless attaches revenue goals. For those businesses, like Sony or HTC, or the game developers on their platforms, the game as the product is their commercial play.
On the other hand, consumer-facing marketing applications which typically enhance customer experiences with the hope of driving sales (through engagement or by opening new channels), increasing customer satisfaction or providing more valuable experiences may look like games, but their motivations go well beyond entertainment.
Although many commercial XR applications look like games, they are not games. The following list of purpose-built VR will never find their way into the consumer realm, although the lessons will continue to inform the industry about what is possible. That may lead eventually to more practical consumer solutions.
Additional commercial applications of XR
The following list points to some recent examples of XR use in the commercial setting. We do not explore these solutions in-depth or explore their efficacy. The variety and range, however, speak to the ongoing potential of XR and the use cases available where constraints and capability converge.
Links will guide readers to more detailed stories about the applications from other sources.
- The Pentagon is exploring the use of VR for preparing the military for nuclear war (nextgov story here).
- Washington River Protection Solutions employs virtual reality to help prepare Hanford workers for waste cleaning tasks without exposing them to the toxic sites (see NBC story here).
- Walmart is exploring VR simulations for hiring middle managers. The application simulates irate customers or underperforming employees. Recruiters watch how those being interviewed react to the situations (see the WSJ story here).
- VR training at Keesler Air Force Base complements lectures by bringing immersive demonstrations of concepts and simulated operational situations to those learning new jobs (see the Air Force story here)
- Atlantic City police use VR to help police officers learn how to handle situations that may be rare in the real world, but when they do occur, require split-second decision making. VR helps them run through those scenarios so they can hone their reactions if and when a similar event happens in the field (read the Press of Atlantic City story here). This example parallels practice for rare medical cases that use VR to prepare surgeons for when they are actually presented with a rare case.
- LA Dodgers employ VR to help Corey Seager injury recovery (see LA Times story here).
- Treating phantom limb pain with VR (see the Clinical Pain Advisor story here).
- VR used to distract patients from pain and the hospital experience (see the Observer-Report story here).
- Desensitizing people to ailments like PTSD through prolonged exposure to the very things that frighten them—in a controlled manner (see the SCNow story here).
- An Israeli firm brings augmented reality to fight oil spills (see World Israel News story here).
Manufacturing deploys XR for a variety of applications. Assistive systems provide complex assembly instructions using head-mounted displays (HMDs). AR also supplements the training and development of workers to address skills gaps by delivering expert assistance and support in manufacturing operations through telepresence solutions. (see the Financial 24 story here).
The 2019 XR Market: who to watch and what to watch for
HTC Vive Focus for enterprise applications
Perhaps more important are the several early players once on the list of companies to watch including Meta Company, Osterhout Design Group (ODG) and Blippar which recently ceased operations. Some of these firms were very early to the market, and others failed to navigate the unrealized market that drove their investors.
For now, watch Sony and HTC in the game space. Although Oculus gets the price-point entry issue, it isn’t clear they understand the marketing and customer engagement models required to build a passionate base for a hardware product.
If pratical toolsets don’t emerge for building applications at scale, the market will continue to flounder in a sea of promise amid waves of disappointment.
Beyond the 2019 XR market all of the other companies, including the commercial wing of HTC, will need to create deeper, more resonate applications in industrial, medical and training settings. New applications need to move beyond demonstration and bespoke development to repeatable and scalable solutions. If practical toolsets don’t emerge for building applications at scale, the market will continue to flounder in a sea of promise amid waves of disappointment.