Venture capitalist Mitch Lasky, offered his opinions about the current state of virtual reality at the Casual Connect USA convention. The investor has been at the forefront of a lot of emerging and disruptive technologies over the past two decades and he wasn’t completely won over with the current media frenzy over virtual reality headsets.
GamesIndustry.biz captured some quotes from Lasky, who has invested in mobile before it was huge, Riot Games before they were bought out by Tencent, and Snapchat before it went global. According to the venture capitalist, he states…
“When I look at it more structurally, I’d say something that may sound a little strange: perhaps the Facebook acquisition of Oculus wasn’t the greatest thing for the development of virtual reality in the long-run,” […] “It set such a high watermark, and it rung the bell so loudly for the industry, that it sort of forced the hand”
It’s true what he’s saying.
A lot of developers and a lot of investors poured into the VR market before it even showed signs of being financially viable in the long run. So far, there has yet to be a VR app that has rocked the market. Most of the sales in VR are for the GearVR, a cheap $99 headset, and it seems to be used for porn more than gaming, virtual tourism or edutainment. Even then the GearVR has only managed a total of a million units being moved, but not much activity has followed with any specific software app, as reported by Fortune.
Lasky went on to say…
“A lot of game developers jumped in, a lot of venture capitalists jumped in. It’s a dramatically overfunded space, actually, from a VC perspective.”
Not just from a venture capitalist perspective, but from a consumer perspective as well.
The HTC Vive and Oculus Rift have both covered headlines from top to bottom across the web but neither has a killer app, despite both costing almost as much as a high-end PC.
Two of the best selling VR exclusive products for the Vive and Rift on Steam is Destinations and Eclipse: Defending The Mortherland. However, according to Steam Spy, both products have managed to move less than 40,000 units since their respective releases in May and June… and they’re free.
Lasky makes a good point about VR being talked up a lot by people who don’t understand the technology, claiming it’s going to be huge but not understanding why or how….
“ [They say it’s] “gonna work, it’s gonna be huge, it’s the next big thing, the next big platform. I’ve talked to senior executives at Facebook who’ve told me that it’s the next mobile phone. I don’t personally share that view.
“[…] the market is so nascent that we haven’t even figured out what we want to do with it yet. It kind of scares me as an investor.”
Lasky isn’t alone in that view. Market research analysts have been quietly and slowly changing their tune on VR. On two separate occasions Superdata Research has lowered their VR revenue forecasts by a total of 52% this year. First they lowered it by 30% in March, and then by 22% in April.
I think slowly but surely the market heads are starting to realize that there’s a real lack of incentive for consumers to go out pay $799 for a high-end VR headset, and the only thing compelling them to get the $99 headsets is porn.
Lasky also wasn’t impressed with the current crop of apps available, stating…
“I’ve seen 25 or 30 excellent demos. I haven’t seen a lot I would consider finished products, or even things that suggest finished products. And if it’s anything like mobile games, I started a mobile games business in 2000. It wasn’t until 2008 or 2009 that they really became viable as big businesses.”
Many gamers and even VR enthusiasts will admit that most of everything out there does feel like a tech demo instead of a finished product that really engages or makes great use of VR.
Wedbush Morgan Securities analyst Michael Pachter also shares a similar view as Mitch Lasky, noting that publisher profitability from the VR market is at least three to five years away. Some analysts believe that the PlayStation VR with its $399 price tag could be the key to the mainstream market when it launches this fall, but even then it still has a lot to prove with its limited library of mostly tech demos.
It will be fascinating to see how investors and publishers adjusts to VR as the slow uptake from consumers and the lack of worthwhile apps continues to become the unflinching reality for the virtual reality market.