Tuesday, December 15, 2020

When will virtual reality take off? The $100 bet.

About four years ago, Professor Daniel Lemire and I made a $100 bet on how quickly virtual reality would reach a broad, mainstream market. Specifically, my side of the bet was, "Virtual reality hardware (not counting cardboard) will not sell more than 10M units/year worldwide before March 2019." He bet that it would.

In early 2020, we decided to wait settle the bet because it looked like there was some chance VR would reach 10M units/year in 2020. Because of COVID and people looking for entertainment at home, Valve's release of Half Life Alyx, Supernatural (the VR exercise program), and big pushes on consumer VR by several companies, we wanted to wait and see if it was off by just one year, if 2020 was the year.

At this point, the results are in, and it is clear VR has not reached far beyond early adopters and enthusiasts. Estimates of total hardware sales vary depending on what is considered VR hardware, but most estimates I've seen have worldwide unit sales at around 5-6M in 2020.

Barron's has a nice summary: "We’ve been talking about virtual reality for decades, but it’s gone pretty much nowhere. Despite all of our advances in tech, VR hasn’t been able to bridge the physical and digital realms in any substantial way." TechCrunch adds, "There are signs of growth though it’s clear [VR] is still a niche product."

So what went wrong? Looking back at VR hype in 2016, there were a lot of reasons to be optimistic: HoloLens from Microsoft, Sony entering VR with Playstation VR, Valve pushing hard on VR in the Steam store and with their own products, Xbox looking like it might do VR, Google showing interest in VR, and, though it always seemed like vaporware to me, there was a lot of excitement around the promises made by heavily-funded MagicLeap. It looked likely that someone would make a must-have game or other compelling use of VR that might attract tens of millions of people.

Speculating a bit, I think the issue here goes beyond just needing more time, so beyond waiting for gradual acceptance of VR and growth. I think the problem is that the non-virtual-reality experience is close enough for most purposes, making VR uncompelling to set up and use.

For example, take the virtual tourism experience of visiting the International Space Station in Google Earth. It's fun and compelling enough without virtual reality, so VR in virtual tourism only a little bit of wow to the experience. Half Life Alyx seems to me to suffer from the same problem, a fun game with some compelling content, so great to try, but not a must-have. Exercise programs like Supernatural or Beat Saber fall in the same category, fun, cool to try, but not something without okay substitutes or alternatives.

At the time we made the bet back in 2016, I said something similar about why I might lose the bet: "There are several wild cards here. For example, it is possible that much cheaper units can be made to work. It's possible that someone discovers very carefully chosen environments and software tricks fool the brain into fully accepting the virtual reality, especially for gaming, increasing the appeal and making it a must-have experience for a lot of people. As unsavory as it is, pornography is often a wild card with new technology, potentially driving adoption in ways that can determine winners and losers. A breakthrough in display (such as retinal displays) might allow virtual reality hardware that is much cheaper and lighter. Business use is another unknown where virtual reality could provide a large cost savings over physical presence. I do think there are many ways in which I could lose this bet."

Unfortunately, I don't think such must-have, compelling VR experiences exist. Perhaps at some point it will. Chris Pruett, who runs part of Oculus, speculated about that, saying: "My guess would be something that is highly immersive, that involves active motion of your body, and ... it's probably going to be something that you either play with other people or is shareable with other people." That sounds plausible to me, though, more broadly, I think it has to be a must-have experience without okay substitutes in non-VR, which is a high bar. My prediction now in 2020 would be that VR will continue to struggle for years to break out beyond enthusiasts and early adopters, at least until it has a truly must-have experience.

I think Daniel Lemire took the harder side of this bet, so I'll match his $100 donation to Wikipedia to settle the bet. Back in 2016, I did add a couple ways of making my side of the bet even harder, saying I doubted even over three years in 2016-2019 that VR would sell a total of more than 10M/units, which appears to be close, and that Google Cardboard-like devices wouldn't go beyond being just a toy, so not regularly used by tens of millions, which looks like it was correct.

And I want to thank Daniel for making this bet. Whether you are betting with the hype or against it, along with conventional wisdom or against the flow, it's hard to publicly take a stand and one way or another and be willing to be wrong, especially when big company money is betting against you. This was an interesting bet.

If you enjoyed this, you might also be interested in our 2012 bet about whether tablets will replace PCs.

Update: Daniel Lemire has a post up on his thoughts on the bet, "Virtual reality… millions but not tens of millions… yet".

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