The Virtual View from CES 2017 / by Stephanie Llamas

The VR living room @ CES

For photos and updates from CES, check out my Twitter @stephinaners.

As we all weed through the news, anticipate new announcements and (for those of us at CES) navigate through the monstrous show floor mazes, virtuality is moving full steam ahead despite the pessimism fueled by a slow start in 2016.

The biggest thing I learned at CES this year is many people still don't get how the VR industry, or media development in general, works. If people expected some magical new invention that would turn 2017 into the year they'd hope 2016 would be for VR, they set themselves up for disappointment-but that doesn't mean it's not on track.

Mobile VR is undoubtedly the consumer front runner for the next year, and Google Daydream VR will lead the march. If compatible phone manufacturers offer compatible headsets for free with the purchase of a phone, adoption and awareness will hugely expand, getting more content creators and brands to see the medium's true value. Brands in particular have been hesitant simply due to the lack of eyeballs viewing the tech and, consequently, their brand, and this could be a key way for developers to monetize.

So with the announcements of several new Daydream compatible phones, plus Samsung's staggering 5M Gear VR unit sales, there's no reason to assume mobile consumer interest could not increase dramatically in the next year.

Accessories and supporting hardware also showed impressive developments. Although no one really reinvented the proverbial wheel, the new innovations like Vive's Tracker (an attachment that makes almost any item a controller for developers) and Ricoh R (a spherical 360 camera that can stream live for up to 24 hours) will be the tools that catalyze growth over the next year.

No, 2017 won't be the year of mass consumption for fully immersive VR. But this year shows we are on schedule with the 5-10 year timeline that we need to anticipate. Don't get hung up on the trough of disillusionment, guys...

Here are some highlights from the show and what they mean for the future of the industry:

Virtual Reality trends summary:

  • Mobile and enterprise applications will be this year's VR stars as VR's small but powerful showing brings new hardware and developer capabilities. 
  • 2017 will be the year of Google Daydream VR as several compatible phones are announced and Samsung's 5M Gear VR units sold proves consumers are ready for mobile VR.
  • Chip and hardware manufacturers are going all in with VR-ready laptops, with new innovations pushing technology past the speed of Moore's Law.
  • HTC Vive continues to open up VR, providing new easy-to-use hardware and software capabilities to developers, pushing the idea of the 'VR living room' and giving consumers a subscription service for their Viveport app store. 
  • Gloves, guns and magazines will be the must-have peripherals as Vive's new Tracker turns anything into a controller.
  • Eye tracking will be an enterprise staple, with FOVE and Tobii debuting new capabilities -- but it likely won't be a consumer technology for now.

Samsung Gear VR outsells expectations, confirming 5M units sold year-to-date -- but 2017 will be the year of Google Daydream
The announcement has quelled fears of fallen consumer enthusiasm after Samsung recalled exploding phones, twice. Outselling each of its competitors by at least a factor of 5, Samsung has proven there is demand for affordable mobile VR, even driving consumers to purchase a headset exclusive to one smartphone.

The Daydream's late release in 2016 and compatibility only with the Pixel phone caused sales to come in under that of any of the major high-end headsets. However, with the announcement of several compatible phones from ZTE, Lenovo, Asus and HTC shows tremendous promise for consumer adoption. Furthermore, Google has announced content partnerships with the likes of Ubisoft, EA, Netflix and HBO, to name a few. They have been bullish in funding new content, with the promise of more compelling experiences to come. So as Samsung stays part of Oculus's and its own closed ecosystems, Google Daydream's accessibility will make it the industry leader this year.

Asus is a frontrunner for mobile VR in 2017 with their Google Daydream and Tango-compatible ZenFone AR
Asus's mobile VR FOMO is being quenched with the announcements of the VR-ready ZenFone and VivoPC X. ZenFone is one of a number of Google Daydream View compatible devices being released, not only fueling predictions that mobile VR will be the driver for consumer adoption in 2017, but also demonstrating Asus's bullish push for virtuality.

New VR-ready hardware debuts from Dell, Asus, Intel, AMD and NVIDIA, but 2017 won't be the year PC VR becomes affordable
VivoPC X is Asus's $799 VR-ready PC and is one of the lightest, smallest and cheapest devices supporting the technology. Not to be outdone, Dell showed off their latest VR-ready notebooks Inspiron 15 and Alienware Aurora, ranging in price from $799 to $1,299. Meanwhile, AMD, Intel and NVIDIA announced their new components to power VR hardware, but with prices still so high consumers won't be ready to go all-in this year.

HTC continues to make VR open, accessible and high quality, announcing a Viveport subscription service and an audio headstrap
HTC's app store Viveport will offer a monthly subscription service where users can access over 1,000 applications for one price. HTC has been open about their drive to forward VR as an industry and not just for the Vive itself, and is now focusing on helping both developers and consumers experience the most innovative experiences possible. Similar to Google's efforts make content for smartphones and VR accessible, HTC is taking an open approach to content and creation, as opposed to Oculus's closed ecosystem. HTC will use this to attract even more talent and pull many away from exclusivity with Oculus. The same goes for consumers as these new tools, along with their new audio headstrap, continue to make experiences even more immersive.

HTC Vive wants to help you transform your living room into a VR hub with their new Vive Tracker
HTC is encouraging developers and supporting hardware manufacturers to make VR experiences more living room friendly by announcing its new Vive Tracker. The Tracker lets developers turn just about anything into a controller, whether it's your hands, your phone or even a magazine that comes to life as you interact with it. Personal favorites included the fire hose used for the FLAIM TRAINER fireman trainer, The Noitom Hi5 gloves and the shockingly realistic VR-15 Gun Controller. As PC-makers make high-powered hardware more compact, they are likewise encouraging consumers to use them as entertainment hubs much like what Sony and Microsoft have been doing with their consoles. The hope is to make VR more family friendly, especially with collaborative content like a new game from developer Master of Shapes that lets people outside of VR use their phone as a controller to play with friends who are using a headset.

Qualcomm aims to make mobile VR and AR high-end with Snapdragon 835
Qualcomm's chip is touted as adding high-end features to mobile like foveated rendering support to help increase battery life and improve visual fidelity by up to 25%. The chip will be used not only in mobile devices but in dedicated headsets, tablets and PCs. They expect Snapdragon 835 devices to be released before the fall, with Google's OS and Windows 10 support. As virtuality capabilities grow at Moore's Law speed, the real killer feature here is foveated rendering, which allows software to make up for hardware's shortcomings and speed up innovation even more. We will likely see this feature crop up in other devices like Vive and Oculus in 2017 as well.

High quality eye-tracking has arrived as FOVE's headset release shows promise in enterprise, and Tobii aggressively goes after the consumer market
As one of the lucky few who has tried the headset, I can say its eye-tracking is remarkably accurate and satisfying. But don't expect this to be a consumer-driven product: FOVE is going to be best-suited for enterprise applications this year. Given the acquisitions of competitors The Eye Tribe by Facebook and EyeFluence by Google, and their standing as the only major eye-tracking hardware out there, our prediction is that they'll get snatched up fast - potentially by a notable enterprise-focused leader in the industry.

Tobii, which offers eye-tracking integration with other hardware, has partnered with several big manufacturers to capture the gaming market. Acer and Huawei have both announced compatibility with new products, and Tobii has added Rise of the Tomb Raider and Dying Light to its impressive portfolio of gaming integration. But if VR is having a hard time with adoption, it doesn't look like eye-tracking will be a priority for the consumer market any time soon.

Several Microsoft-compatible VR headsets and Intel's Project Alloy standalone headset jumpstart the first push toward new high-end headset competition, with mixed reactions
Dell, Acer, HP, Lenovo and 3Glasses all announced headsets that will be compatible with Windows 10, just as Microsoft promised a few months ago. Price tags range between $300 and $400, undercutting its PC and console competitors. However, rumor has it it's not possible to manufacture a headset for that price that offers the same quality as the big three. Intel also threw their hat into the ring with a demonstration of their Project Alloy standalone headset. The company claims it offers "merged reality," or what the rest of us call mixed reality, that allows the headset to scan the room and turn real objects into elements of the user's virtual experience. Intel somewhat jokingly furnished their audience with barf-bags, and reviews came in mixed. It has much more interactive potential than traditional VR, but the experience was a bit clunky and not as smooth as on the Oculus or Vive.

ODG shows off their R8 and R9 mixed reality glasses, but consumers aren't ready for it... yet
The glasses, which run on the Snapdragon 835 chip Qualcomm also announced at CES, include access to content from the likes of Fox and National Geographic. But it's unlikely consumers are ready to shell out $1,000-$1,800 so early in the virtuality game, no matter who is providing content. After all, even if it's better than Google Glass, people still remember they've been burned before.

User-generated content is the next frontier for VR consumers
A number of high quality video content creators have come into the foray, with companies like NextVR and LiveNation leading the way for live VR events. RICOH R touts 24-hour live streaming capabilities, and is currently only available as a dev kit, so companies broadcasting live event in VR will have even better access. There's no doubt Ricoh will come out with a consumer product -- likely this year -- allowing consumers the ability to release their own spherical 360 content. Ricoh's Theta is already one of the most affordable, handiest and true spherical photo and video cameras out there, so this will strengthen their lead. On the interactive side, Linden Labs wants to take things a step further and let consumers build virtual worlds. Unsurprisingly, the company was founded by Philip Rosedale, creator of Second Life, and they released Project Sansar to creators in August. Though that's technically not a CES announcement, Ricoh's new camera only strengthens the upcoming wave of user-generated content for 2017.

Gap and Google show consumer-ready VR retail is on the horizon and are giving people one more reason to shop from their couch -- which could be VR's dark horse for adoption
Instead of fighting the move to digital shopping, Gap has decided to embrace it as yet another retailer to innovate for VR. Ikea and Alibaba have all taken a stab at VR shopping, and car companies like Audi are looking to give consumers a way to experience customized products before they buy. But online shopping can be a big problem for clothing retailers in particular since people will often over-purchase and then send what they don't like back, costing the retailer money to pay for return shipping and restocking. Gap is hoping to offset this by giving consumers the opportunity to try before they buy - much like Ikea and Audi - and this may actually be the dark horse for VR adoption as we all get too lazy to just go to the mall.

What's missing: PSVR sales figures
Ever since Sony announced on their October earnings call that PSVR sales were in the "many hundreds of thousands" there's been radio silence on how the headset is doing. There's no doubt consumer demand is there, but in an effort to come in under Oculus and Vive's $600 and $800 price tags, PSVR announced a $400 headset sans essential supporting hardware. Bundles, which included the headset, move controllers and camera, sold out early and have no since been restocked, suggesting Sony's initial launch was a test drive to gauge demand while they further develop content. PSVR sales will likely break 1M units this quarter given the PS4's more than 50M installs and the recent success of the Pro.

What's missing: Magic Leap
Magic Leap has had a rough year. The company, which has raised over $1B in funding, has been under fire after The Information revealed they tacitly failed to mention their Weta Workshop video "Just another day in the office" was not an actual experience available on the device. They are also yet to reveal an actual product, leading many to believe the technology is not worth the hefty investment. I was hoping to see something at CES but their absence only gives competitors like Microsoft and ODG the upper hand, potentially leaving Magic Leap in the dust of disillusionment.

What's missing: "The next killer app"
It wasn't really missing - it's just really a matter of setting expectations. Virtuality is not a new gaming console or type of smartphone - it's a new medium. New media have never subscribed to the killer app adoption model, and VR/AR/MR are no different. The industry will need to realize that it will take getting many killer technologies and many killer apps into the hands of professionals and consumers so they can grow accustomed to its potential. But there will be no magic wand that will make that happen sooner.

Stephanie Llamas is VP of Research and Strategy at SuperData Research, where she leads the company's Virtuality efforts.