It’s OK to be confused about what the hot markets will be for digitally extended reality. Because figuring out which uses will become popular next — whether that reality is augmented, mixed, or virtual — is almost as complicated as defining the technology.
Yes, games are hot for sure, especially as destination entertainment. And maybe education. But beyond that, the future isn’t visible.
Let’s first get the terminology out of our way. Think of reality as a path, starting with analog real life and ending with fully digital representations. The first step on that path is “augmented reality” (AR), overlaying digital information and elements on top of the live, real world. About half-way down the path is “mixed reality” (MR), in which digital objects are embedded into the real world as though they were a part of it. At the very end of the path is “virtual reality” (VR), in which the real world is shut out and you’re inside a fully digital environment.
All of these increasingly huddle together under the umbrella term of “extended reality” (XR), covering all steps along the “virtuality continuum.”
So from a practical standpoint, the smartphone game Pokemon Go is AR. Moving a virtual digital chair around your real living room is MR. And Ready Player One‘s The Oasis is VR.
(Though industry players may, and do, quibble. Microsoft likes to think of the entire continuum as the “mixed reality spectrum” probably because its HoloLens sweet spot is MR. It’s a kind of Microsoft Reality.)
As a result, tech giants like Microsoft are placing very different XR bets. HoloLens is a premium ($3,000) headset product, though Windows MR headsets from other manufacturers are on the market for $300-400. Apple is now heavily promoting the iPad as a platform for AR. Google Cardboard costs less than $10 for VR, but requires a hundreds-dollars-each smartphone.
At the full (and more expensive) VR end of the continuum, the early large-scale attention, action, and adoption seems to be for fun.
Futuresource Consulting, which tracks technology markets, says there is significant growth already this year for location-based VR — that is, virtual reality experiences inside arcades, multi-player venues, VR cinemas and VR theme parks. Consumer spending on LBVR is expected to reach $299 million in 2018, and $809 million by 2022. The biggest current growth is in “VRcades” with roughly 4,000 worldwide, most of which are in China.
Importantly, this location-based VR also lets people sample what virtual reality is like before investing in consumer hardware.
“The consumer VR market is growing but at a gradual pace,” according to Futuresource’s Michael Boreham. Costs are coming down, thanks in part to the launch of lower-cost Windows-based headsets late last year (not to mention this year’s promised release of a $200 Oculus Go headset). But Boreham said, generally, “It remains a high cost to undertake for the mass market.”
Futuresource reports games are the early dominant content market for consumer VR, and expects that dominance to continue, with games to represent close to 95 percent of $9.4 billion in VR content spend by 2021.
Yet if entertainment is consuming the most consumers and dollars, others are hoping different markets can break though somewhere else along the XR continuum.
One frequently cited is “education,” a broad brush that covers K-12, college, and workplace training.
Some think the corporate setting has the money to spend. At the edtech industry’s ASU+GSV Summit this month, speakers described how AR was good for groups doing work together, while VR simulations were able to both compress training time and have that training be retained as well as instruction delivered by more traditional methods.
Futuresource’s Ben Davis, who follows education technology, tends to echo that thinking. “There will be some strong use cases in simulation, mostly in higher ed and corporate training,” he told me.
But K-12 is different. “VR content will be a differentiator for publishers and hardware will be sold to schools as a sweetener for larger technology deployments,” Davis said. “But this practice is not expected to become widespread outside of key markets like the US and China.”
In other words, look for XR to be used by Microsoft, Google, and Apple to help give themselves an edge as they seek to push everything they offer even deeper into K-12 schools.
That edge appeared to be on the mind of Jay Paulus, Microsoft senior director of Windows education marketing, when he and I spoke earlier this year. He said he’d like to see Windows Mixed Reality headsets in a high school’s computer lab, or a few in the school or college library. “The right curriculum (such as organic chemistry) can justify this investment,” Paulus said. “You don’t need to build a planetarium anymore. You can use a virtual planetarium.”
Still, some tech companies are making a go with XR in the education and corporate markets with approaches that don’t rely solely on immersive or expensive headsets, clearly hoping that will crack markets open wider, sooner.
ZSpace, founded 18 years ago with an investment from the CIA, now sells its own Windows 10 computers with untethered 3-D glasses and a stylus to combine elements of AR and VR. Users can manipulate virtual objects from butterflies to engines as though they were real, in the real world with other users. Apps from zSpace partners cover subjects ranging from physics to anatomy, and the company says its systems are now in more than 500 K-12 districts, career and technical centers, medical schools and universities.
“We believe that K-12 is most likely to move toward widespread implementations,” said Mike Harper, zSpace chief marketing officer, taking a global view. “China has made AR/VR technology part of its national education strategy, and research in the United States has clearly demonstrated the educational benefits.”
Harper said key to zSpace’s success is that it makes it easy for the user to switch between XR and real life. “The approach that will penetrate early markets is one that focuses on augmenting an existing platform and does not require a cumbersome or isolating headset,” he said.
Similarly, startup Doghead Simulations is approaching the corporate and higher education markets with VR collaboration tools for a “social presence” for remote meetings or instruction. Its Rumii software simulates a meeting room with avatars and interactive projection screens.
While the company said the collaboration software is best experienced as VR, it also can be used without headsets on desktops or mobile devices. It’s an approach one company exec called “VR enhanced,” which gives customers the flexibility to move between devices.
“We’ve seen tremendously positive adoption in instructor-led, distributed education and workforce training,” said CEO Mat Chacon. “I will say that I don’t believe that the two-dimensional screens in front of us will seamlessly merge with the three-dimensional world around us any time in the next three years … but they will eventually. We’re all working very hard to make this a very real and normal part of our daily lives.”
Chacon said the two-year-old startup already has monthly, recurring revenue, and that’s a sign of traction.
Gamers will put up with a lot to be put inside a game. That’s not always the case for those uses that have existing real-world alternatives, especially if those alternatives are already accepted, understood, and entrenched.
It could be that the next markets to broadly adopt XR, at any point along the reality spectrum, may be those in which it’s easier to gracefully slide into the technology, rather than abruptly tip.