Facebook Inc with Sony and Samsung is looking for ways to fully unlock the potential of the lucrative virtual reality market
Facebook Inc (NASDAQ:FB) with its Rift headset, Sony Corp (NYSE:SNE) with its upcoming Playstation VR and HTC with the Vive as well as chipmakers like Qualcomm and Nvidia are all making aggressive plays at the virtual reality market which according to Forrester will be worth $30 billion by 2020. While Facebook may be among the first movers, it is Sony which is expected to be the biggest beneficiary in the near term thanks to its gaming focus.
Facebook has already released its VR device; a $599 headset that needs a PC with around $1500 worth of high end specs to work and is unlikely to be well received as a mass market product. Facebook’s device was one of the earliest VR releases and reception is expected to be mildew with the Street guiding for between 0.5-2 million units sold within a year of the launch creating a $1.2 billion revenue stream. Of course Facebook would also monetize off content brining in another 100-300 million from games which are the hottest area for VR. Facebook has not guided on the profitability of its VR business and its strategy might be focused on a social virtual platform in the long run.
It is Sony with its upcoming $399 PlayStation VR which will be one of the fastest growing companies in virtual reality. Analysts project sales of 50 million by the end of the year due to the inexpensiveness of the device with no attached expenses and will be making $50 per unit seeing instant profitability. The PlayStation VR will not be the only point of monetization as Sony can roll out a range of VR centric accessories such as controllers and of course users will be paying for the content adding around $24 incremental profit per user. If Sony only sells 10 million units this year, they still stand to gain $1.25 billion with $625 million operating profit; making it one of the most profitable segments for the company.
HTC, like Sony, hopes that its affordable $200 Vive will help grow its earnings but the main hurdle for the company is the lack of brand awareness. Samsung’s device, the Gear VR is by far the cheapest with its $100 price tag and uses Qualcomm’s powerful mobile technology giving Qualcomm a leg in to mass market VR technology. Qualcomm chips have had success in reducing lag in collaboration with developers thanks to the release of its SDK and the company is working on solving the biggest VR related issues. Fellow chip maker Nvidia meanwhile has a partnership with HTC on the Vive, and is hoping that its server grade chips will create more computer vision centric VR advancements that would create a VR experience independent of the need of accessories and other inputs. However these companies are all betting on a still young and undeveloped field and while the possibilities may seem endless, there are a huge range of risks.