HTC Virtual Reality – Repeated history

Reply to this post

HTC Vive loses out to Oculus.

• While penetration of VR units in the gaming community remains pathetically low, Oculus has edged out HTC potentially spelling the end of a once great smartphone company.
• The latest data from Steam indicates:
  • First, penetration: this remains very low at 0.14% of all PCs surveyed.
  • In reality, this is likely to be far lower as the survey is conducted on Steam users only (all gamers) and it is opt in.
  • Hence, only users most engaged with the platform are likely to participate and it is these users that are most likely to be early adopters.
  • Hence, I suspect that real penetration of PC gamers is much lower, probably below 0.1%.
  • Second, market leader: Oculus is now the market leader on Steam with 47.3% share with the HTC Vice now in second place on 45.4%.
  • This is significant as HTC is using Steam’s own IP for the Vive which should have given it a significant advantage on its home platform.
  • However, it looks to be repeating its history in smartphones, having again ceded a dominant leadership position.
• With less than 0.1% of the market addressed by all makers of VR units, there is still clearly everything to play for, but HTC’s performance unveils a worrying trend.
• A VR unit is only as good as the content that is created for it, and here the advantage has now clearly passed to Oculus.
• Developers will now have a greater opportunity to sell their games by prioritising Oculus which combined with Facebook’s much greater capacity to invest in the platform, puts HTC on the back foot.
• This is further exacerbated as HTC does not have exclusive access to the Steam VR platform meaning that if it were ever to take off in a big way, there would most likely be a flood of competing, much cheaper devices made available.
• For VR itself, take-off remains the big issue as:
  • Price: Many of the devices cost several hundreds of dollars and also require a PC to run, further increasing the cost.
  • This is beginning to fall but still needs to go further to bring it into the range where real volumes might be sold.
  • Clunky: VR and AR units are still large, clunky and uncomfortable to wear.
  • In many cases they also make the user feel foolish when wearing one.
  • Comfort and security: VR cuts the user off from almost all sensory inputs from his immediate environment severely limiting the situations in which the user would feel comfortable using one.
  • Many units also cause feelings of nausea due to an imperfect replication of the real world compared to what the brain is expecting.
  • Content: Both games and content remain in short supply and of poor quality.
• The net result is that VR is clearly still far from ready prime time and there remains a lot of work to do before volumes will really take off.
• This will compound the very difficult position that HTC finds itself in and I continue to think that HTC will not make it in its current form.
• Hence, I think that Oculus will continue to chip away at HTC’s weakening position in VR, leading to a further deterioration in HTC’s financial performance.
• HTC has recently sold its smartphone expertise to Google and I will not be surprised to see the rest of the company follow to another large ecosystem wishing to get in on the possibility of next generation video games.
• Facebook has now moved into pole position and should be able to stay there if it executes and invests well.