Virtual Reality, Augmented Reality and the Future Of Entertainment

With several consumer virtual reality headsets hitting retail store shelves this holiday season, 2015 is the year that VR and its cousin augmented reality will tip into the mainstream. In fact, some analysts believe these industries will become a $150 billion industry by 2020, and some of the nation’s best content creators are now dipping into this exciting new space.

Essentially, VR involves total immersion of the user wearing a device such as an Oculus Rift headset or Microsoft HoloLens, two products that will become available to the public in a matter of months. With AR, a device doesn’t block the world, but enhances it, like with Google Glass.

Research from analyst firm Digi-Capital points to both categories becoming major players in the next five years, with AR taking a bigger chunk of the market. For content creators, the two fields are distinct in terms of the type of content that succeeds and how consumers use their devices.

“We think VR’s addressable market is primarily core games and 3D films, plus niche enterprise users,” Digi-Capital’s managing director Tim Merel wrote in the company’s April report. “VR could have tens of millions of users, with hardware price points similar to console. We anticipate consumer software/services economics similar to current games, films and theme parks but don’t expect substantial additional data or voice revenues from VR.”

However, AR is more closely linked to the mobile devices that have become ubiquitous over the past decade.

“We think AR’s addressable market is similar to the smartphone/tablet market,” Merel continues. “So AR could have hundreds of millions of users with hardware price points similar to smartphones and tablets. This could drive large hardware revenues for device makers.”

The concept of VR has been floating around for several decades and enjoyed a brief fling of popularity in the 1980s and early ‘90s. Why has this seemingly retro entertainment field suddenly grown so popular again 30 years later?

For one, we all expect high mobility out of our technology, which is one reason desktop computer sales have remained stagnant while smartphone sales have skyrocketed. With VR products like Google Cardboard transforming your phone into a VR device for less than $10, the VR space is seeing innovations in mobility, price and access like never before.

Another shaper of the market is video quality, a hurdle that has been jumped by the crystal clear image definition currently available on smartphones and other devices. And with the recent bump in press coverage and interest from Silicon Valley giants like Google and Facebook, there are a plethora of platforms, software options and startups working on new technology, content and hardware to boost the ease-of-use for consumers.

Most importantly, though, is that VR and AR provide a new medium of entertainment available nowhere else: complete immersion.

“Truly immersive experiences are magical, lifting the spirit and compelling users to want more,” Digi-Capital noted in a follow-up report. “This is crucial for Immersive VR and Mixed Reality. The keys to immersion are position tracking (spatial and rotational), jitter, object stability, audio quality and audio tracking (stereo vs. 3D).”

For creators, the new field represents near-limitless boundaries for creativity and valuable user experiences. With VR just breaking through, we’re at a time similar to when the first films appeared a little over a century ago or when the first television sets became available or when the first video game consoles brought the arcade to the living room. While VR and AR have been discussed for years, the next decade will see an explosion in quality, innovation and revenues in the space.

For now, it’s a matter of who gets in there first.

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