How PlayStation VR could ignite the mainstream virtual reality market

Sony is about to bring the third weapon to the high-end VR fight, and it could have a major impact on the market.

Above: PlayStation VR looks cool, and it has some neat games.

Image Credit: Sony Interactive Entertainment

The impressive-but-sometimes-rickety PlayStation VR headset is due out October 13 for $500, making it one of the most affordable ways to jump into this new technology — especially for the 49 million people who already own a PlayStation 4. The device enables you to enter simulated worlds in games like Batman: Arkham VR, Until Dawn: Rush of Blood, and SuperHyperCube. The combination of content, pricing, and simplicity may mean that Sony could take a dominant position in the market over competition like HTC and Oculus.

To figure out exactly what Sony’s entrance into this next-gen battle means, GamesBeat turned to a few market analysts to get some answers. And while they have confidence in Sony, the experts are taking a wait-and-see approach along with a lot of the gaming public.

VR for everyone

While the HTC Vive and Oculus Rift debuted earlier this year, their market share has grown slowly. But now, it seems like Sony could convince a lot more people to spend their money on a head-mounted display.

“Sony’s Shuhei Yoshida and his team are whip-smart,” Tim Merel, founder of tech adviser Digi-Capital, told GamesBeat. “They saw their pure gamer strategy for PS4 win the current console market. PSVR is playing the same game, as it has the purest focus of any of the current consumer VR headsets. It’s all about games and nothing else.”

For months now, experts have claimed that the VR industry could generate as much as $40 billion in revenue by 2020, but that’s if you include business applications, productivity tools, and everything else beyond gaming. But Merel points out that Sony is ignoring that wider potential to focus on its core consumer base of people who love PlayStation.

“Together with PS4’s healthy installed base, PSVR is set to do for current generation of high-end VR what PS4 did for current generation consoles,” Merel said. “This is helped enormously by Sony’s internal games development capabilities — leading lights like Magic Lab’s Richard Marks — and the strong community of existing PS4 game developers.”

SuperData Research founder and analyst Joost van Dreunen agreed that this is a sign that the consumer market is primed to jump on VR, but he cautioned the medium still has a long way to go.

“It’s important to remember that it is early adopters that are currently buying the device,” said van Dreunen. “What characterizes the introduction of any new platform is the initial zeal from a subsegment of the consumer market to try the new hardware, but the large majority are still in ‘wait-and-see’ mode. Sony has set itself up properly by providing a well-priced package, a demo that can easily be shared, and the scheduling of half a million in-store demos. But without published numbers on total units, the future of consumer VR is not yet set in stone.”

But while the future for all of VR is still foggy, Wedbush Securities analyst Michael Pachter sees this as a major opportunity to expand that fabled “consumer VR” space.

“I think ‘consumer VR’ is an apt description,” Pachter told GamesBeat. “PSVR is likely to perform better than the other entries because it doesn’t require any ‘special’ hardware. At least 49 million gamers can buy it because they already have a PS4, compared to only a handful of gamers — maybe 10 million, probably far fewer — who already have a sufficiently powerful PC to power Oculus or Vive. In addition, the PSVR price point is a lot lower than the others, making it more affordable as a holiday gift for a PS4 owner — still very expensive but cheaper than the other [options].”

PlayStation VR’s potential

While they are hesitant to promise big results for PSVR, the analysts do admit that the peripheral could catch on in a big way. If that happens, the potential is sky-high.

“PSVR should see rapid adoption with the size of the PS4 installed base as the limiting factor,” said Merel. “If the 49 million-plus PS4 installed base has a 25-percent adoption rate, that’s a ceiling of 10-plus million users. If it sees an even stronger 50-percent adoption rate, that’s 20-plus million users.”

SuperData’s van Dreunen says that the PSVR’s fate through the holidays will depend on its reception this month. The initial shipments for PSVR have sold out, so plenty of consumers are about to flood social media and forums with their opinions, and that word of mouth will matter.

“The initial popularity of the VR experiences that are currently available will set the tone for the holiday season,” said van Dreunen. “If that resembles what we saw during the introduction of the Wii, for instance, we can expect console VR to quickly blow past its PC counterparts.”

What it means for Sony

PSVR is a major initiative for Sony Interactive Entertainment, but the company has more than just a headset in the works. Next month, the publisher will also release the PlayStation 4 Pro, a $400 4K-capable version of its console. It’s possible to see a future where PSVR doesn’t take off, and Sony considers shedding that business.

But van Dreunen is confident that Sony can handle some slow growth for console VR.

“As a consumer electronics company, Sony is no stranger to the initial slow adoption rate of new hardware and has experience with the necessary rollout strategies,” he said. “With an install base of around 49 million PS4s worldwide, it will look to quickly establish that precarious balance between consumer demand and third-party support. Its games division has been a keystone in the Sony empire, so the company will no doubt be subsidizing both sides of the market to drive long-term revenues.”

On top of that, it’s unlikely that Sony will lose a lot of money even if PSVR doesn’t sell well beyond its launch.

“I am sure Sony is profitable on PSVR,” said Pachter. “So I think it can afford a slow launch. I really see few obstacles other than content, which will depend mostly on third-party development. If the installed base grows quickly, developers will chase it.”

Sony’s risks

Sony seems like it could sweep in and take over the spotlight, but it will also have to avoid repeating some mistakes of similarly flashy technologies from the past, according to Pachter.

“The biggest risk I see is that VR in general may be perceived as a fad,” said Pachter. “The worst thing that could happen is that VR will be like Kinect, interesting at the outset but never fully embraced by users. My view is that VR is pretty versatile for education, healthcare, and commerce in addition to gaming, so I expect it to succeed.”

Van Dreunen echoed that sentiment.

“The biggest threat to the PSVR is the lethal combination of a lack of consumer interest and the absence of third-party support,” he said. “PC and mobile-based VR also live in this universe — even if these three audiences don’t overlap all that much.”

Finally, Sony could potentially trip itself up.

“The timing of PS4 Pro may limit interest in PSVR to people who intend to upgrade to the more powerful console,” said Pacther. “I can envision that many PS4 owners will be paralyzed for some time as they try to determine if they need a PS4 Pro in order to effectively use PSVR.”

But while the risks are real — as they are for any new product — faith in Sony is strong, and PSVR could reach an audience that PC-based VR headsets cannot. And that means it could truly kick off the virtual reality revolution that changes the way people interact with computers forever.