Fun with Data – AR/VR
As always we take long-term estimates for new CE products with a grain of salt with the understanding that rarely are products out substantially ahead of timelines and volume estimates exceeded, but we understand the necessity for some to extrapolate earlier growth rates in order to stimulate interest or sell products. The AR/VR product space has been just such a new product sector, falling short of promises made as far back as 2013 when Google (GOOG) Glass (AR) appeared as well as the Oculus Rift VR headset, with pundits forecasting that the global population would soon be walking around wearing AR glasses, no longer having to pull out a smartphone or ask for directions, while those at home would spend their days gazing at endangered species in Africa or climbing the Alp, virtually of course.
As far as consumer products go, AR/VR headsets and associated accessories are small potatoes, and despite the exhortations over 27% y/y increase in VR unit shipments this year, the total count is likely just under 14m units, and at a average ASP of ~$400, it’s a $5b market as compared to the TV set market of ~$100b or the smartphone market of $520b. That said, there are many that see the growth of the AR/VR space, led by the still somewhat nebulous Metaverse, as the next mass market CE product, and one that will spread like wildfire across the globe.
While they wax poetic about AR/VR, there are a number of obstacles in the way of such mass adoption, despite the notion that Apple (AAPL) will be joining the AR/VR headset world in the ‘near’ future. VR headsets are uncomfortable and even the most ardent supporters admit that they fatigue rather quickly in the VR environment, while AR glasses are considerably less so and are nearing designs and capabilities that are near acceptable norms. Progress has certainly been made toward bringing down the weight and bulkiness of VR headsets over the last few years, while improvements in optics and display design and capabilities continues to improve ‘wear-time’, but smartphones allow you to communicate with the world and TVs allow you to access a vast repository of information, entertainment, and content, while VR headsets allow you to play games. We are not criticizing VR gamers, but there is very little VR content outside of games and the ability to create VR content is limited to a relatively small segment of the global population.
So what is missing are applications. Not FP shooters, MMOs, or BC miner games but applications that provide that enhance that connection folks desire from their phones, their TVs, or social media. Yes, one day there will probably be enough content that one could spend hours a day prancing through Transylvanian castles alongside Dracula or tending a curio shop on some obscure exoplanet, but VR needs a killer application that adds to an individual’s ability to communicate with others, and despite the pitfalls of social media and the low quality offerings of most streaming services, the estimates won’t really matter until such an application is found. The success of Twitch (AMZN) or Tik Tok (pvt) prove out that isolating folks in a VR world, no matter how interesting, is really a distraction to the desire to stay connected to friends, family and the world in general, and the direction that VR application developers need to go. AR is far less isolating, and applications that allow AR glasses wearers to share what they see with their friends should be relatively easy to create, and some of the AR applications that we have mentioned in the past, particularly face-to-face language translation give AR a place in the real world, but if one is looking to forecast units, it should be based on applications as an application that becomes popular will drive the improvements in hardware faster than any government subsidy or industry-sponsored development program would. Sort of “if you build it, they will come” for the application and “If they come, you will build it…” for the hardware.
As far as consumer products go, AR/VR headsets and associated accessories are small potatoes, and despite the exhortations over 27% y/y increase in VR unit shipments this year, the total count is likely just under 14m units, and at a average ASP of ~$400, it’s a $5b market as compared to the TV set market of ~$100b or the smartphone market of $520b. That said, there are many that see the growth of the AR/VR space, led by the still somewhat nebulous Metaverse, as the next mass market CE product, and one that will spread like wildfire across the globe.
While they wax poetic about AR/VR, there are a number of obstacles in the way of such mass adoption, despite the notion that Apple (AAPL) will be joining the AR/VR headset world in the ‘near’ future. VR headsets are uncomfortable and even the most ardent supporters admit that they fatigue rather quickly in the VR environment, while AR glasses are considerably less so and are nearing designs and capabilities that are near acceptable norms. Progress has certainly been made toward bringing down the weight and bulkiness of VR headsets over the last few years, while improvements in optics and display design and capabilities continues to improve ‘wear-time’, but smartphones allow you to communicate with the world and TVs allow you to access a vast repository of information, entertainment, and content, while VR headsets allow you to play games. We are not criticizing VR gamers, but there is very little VR content outside of games and the ability to create VR content is limited to a relatively small segment of the global population.
So what is missing are applications. Not FP shooters, MMOs, or BC miner games but applications that provide that enhance that connection folks desire from their phones, their TVs, or social media. Yes, one day there will probably be enough content that one could spend hours a day prancing through Transylvanian castles alongside Dracula or tending a curio shop on some obscure exoplanet, but VR needs a killer application that adds to an individual’s ability to communicate with others, and despite the pitfalls of social media and the low quality offerings of most streaming services, the estimates won’t really matter until such an application is found. The success of Twitch (AMZN) or Tik Tok (pvt) prove out that isolating folks in a VR world, no matter how interesting, is really a distraction to the desire to stay connected to friends, family and the world in general, and the direction that VR application developers need to go. AR is far less isolating, and applications that allow AR glasses wearers to share what they see with their friends should be relatively easy to create, and some of the AR applications that we have mentioned in the past, particularly face-to-face language translation give AR a place in the real world, but if one is looking to forecast units, it should be based on applications as an application that becomes popular will drive the improvements in hardware faster than any government subsidy or industry-sponsored development program would. Sort of “if you build it, they will come” for the application and “If they come, you will build it…” for the hardware.
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