The most authoritative VR and AR report: it represents the future

Goldman Sachs recently released the industry report “VR and AR: Interpretation of the Next Universal Computing Platform”. For this purpose, we have finished the report and finished it for reference by the industry insiders.

After the original report was Chineseized, the full text reached nearly 30,000 words. To facilitate your reading, the VR dimension made an excerpt of the report and presented you with the essence version of about 3,000 words.

text:

First, what is VR and AR? What is the difference between them?

VR and AR have different application areas, technologies, and market opportunities, so it's important to distinguish between the two.

VR puts the user in an imagined or recreated world (such as games, movies, or flight simulations) or simulates a real world (such as watching live sports). The main hardware manufacturers in the VR field are Oculus, Sony (PlayStation VR), HTC (Vive) and Samsung (Gear VR).

AR puts the digital imagination world on top of the real world. The main hardware includes Microsoft (HoloLens), Google Glass, and Magic Leap.

A simple way to distinguish between VR and AR is that VR needs to use an opaque headset to complete the immersive experience in the virtual world, and AR needs a clear head-mounted device to see the real world and the information and images that overlap.

From the current observations, AR is more suitable for serving enterprise users, and VR is applicable to both consumers and enterprise users. In some cases, there will be overlapping markets between the two. For example, most of the current games are based on VR development, but Microsoft also used HoloLens to recreate games like "My World."

Although VR and AR have different application spaces, both technologies will promote HMD devices (Head Mounted Display) as a new computing platform.

Whether in the consumer market or the corporate market, VR and AR technology is currently difficult to convince people to buy additional HMD devices in addition to desktops, laptops, tablets and smart phones.

In addition, VR and AR are controlled by head and gestures. This kind of gesture-based manipulation is very intuitive and I believe it will bring new changes to the computing ecosystem.

II. Analysis of Current Market Status of VR/AR

Currently, VR technology has received widespread attention in the industry, but this is not the first time. Back in the 90s of the 20th century, there were already 3D games on the market. VR also caused similar attention at the time.

For example, games include Virtuality's VR game system and Nintendo's Vortual Boy game. Movies include Lawnmower Man, Virtuosity, and Johnny Mnemonic. There are "Snow Crash" and "Disclosure".

However, the VR technology at the time did not keep up with the media's unrealistic imagination. For example, 3D games have poor picture quality, high prices, time delays, and insufficient device computing power. Ultimately, these products ended in failure, because consumers are not satisfied with these technologies, so the first VR boom faded.

By 2014, after Facebook acquired Oculus for 2 billion US dollars, similar VR fever hit again. In the past two years, 225 venture capital investments have been made in the VR/AR sector, with an investment of US$3.5 billion. So how is the current VR fever different from the failure in the 1990s?

The answer lies in technology. The computer's computing power is strong enough to render the virtual reality world. At the same time, the performance of mobile phones has been greatly improved.

In short, current technology has solved many of the limitations of the 1990s. It is precisely for this reason that some large technology companies have begun to get involved.

Third, the future of VR and AR

With the improvement of technology, falling prices, and the birth of related applications (whether for businesses or individual consumers), it is expected that by 2025, the market size of VR and AR will reach 80 billion U.S. dollars, and it may be like the emergence of PCs. It has also become a disruptor to the rules of the game, but it is expected that VR/AR will be used at a slower rate than smartphones.

VR/AR is most likely to take the lead in implementing the nine major areas of application: video games, live events, video entertainment, healthcare, real estate, retail, education, engineering, and military. Among them, in the VR / AR applications, video games will be the core area of ​​this year.

User experience, technical limitations, content and application development, and pricing are major obstacles to VR/AR adoption. Among them, the user experience is the most important factor, and the improvement of technology will improve the mobility of VR/AR equipment, expand its application space, and promote its popularity.

As for content and applications, it is a chicken and egg problem: If the number of VR/AR devices is not high, developers are also wary of developing VR/AR content and applications. Over time, Facebook, Google, Sony and Microsoft will solve this problem by supporting hardware and content/software. In the end, the decline in prices will promote the widespread adoption of VR/AR products.

From the current perspective, VR is more likely to be successful than AR. This is mainly due to the advancement of VR technology and the initial formation of the ecosystem of vendors and partners.

At present, the technologies of VR and AR need to be further improved, but AR faces more serious challenges, including screen technology, real-time processing and real-time physical environment calibration.

But at the same time, once the AR technology is mature, we will see more examples of enterprise applications, especially considering that AR allows people to see the real-time physical environment, and this is what VR can't do.

VR/AR technology will be as ubiquitous as smartphones. Part of the appeal of smartphones lies in the ease of use provided by touchscreen interfaces, and VR/AR technology has the potential to achieve this popularity, thanks to its gesture control and 3D interface.

Many technologies have evolved from the initial niche products to mass platforms. For example, the iPod dominates the music industry, and joining the communication function becomes the iPhone. Soon, third-party applications emerged, creating a new market for commercial and consumer applications.

In the long term, VR/AR products will eventually become as lightweight as sunglasses. By then, multiple devices can be integrated into one product to replace current mobile phones and PCs.

IV. Status of current VR business development of major technology companies

Google

Google is one of three AR hardware vendors. The other two are Microsoft and Magic Leap. Google launched its AR product, Google Glasses, in 2013 but stopped the business in 2015. "The Wall Street Journal" and other media predict that Google will launch a new version of Google glasses, but has not yet been confirmed by Google.

Google's efforts in the VR market will enable the company to enter the VR advertising market. Just like the Facebook App, Google has launched an interactive 360-degree viewing angle movie on YouTube to further attract users. Currently, Google has distributed 2 million sets of Google Cardboard to promote the popularity of VR.

Last year, Google provided 1 million sets of Cardboard free of charge to New York Times subscribers. Because it is an entry-level product, Cardboard's user experience is less than Oculus. We have not yet seen signs of Google entering the high-end VR hardware market, but we do not rule out this possibility.

Facebook

In March 2014, Facebook acquired Oculus, a VR technology company, for $2 billion. Company CEO Mark Zuckerberg said at the time that VR games will be developed first. However, the strategy was further expanded. Today, the direction is the communication platform.

Oculus launched its first developer tool kit for Oculus Rift in 2012 and launched the second version in 2014. The consumer version of Oculus Rift was booked in January 2016 and was priced at $599. It is expected to be shipped in March this year.

By developing an Oculus application ecosystem, Facebook will easily enter the VR advertising market. Like television and the Internet, mobile phones have changed the way companies communicate with customers. We expect that VR will also bring innovation to the market, and Facebook will become one of the core manufacturers of this innovation.

Facebook’s efforts in this area mainly depended on Oculus Rift, and the company has stated that it will sell the product at a cost price, which means that Oculus Rift may affect Facebook’s profitability.

Facebook's current gross margin is 83%, and we expect Oculus Rift to dilute Facebook's gross profit margin by 100 to 200 basis points. However, in the long term, the advertising opportunities brought by Facebook will offset the dilution of gross margin.

GoPro

As a leader in the content creation and capture device market, GoPro will enter the VR market and benefit from it. In April 2015, GoPro acquired Kolor, a French VR software developer whose technology can integrate photos and videos into interactive media files.

GoPro's equipment plus Kolor's software provides users with highly convenient solutions for capturing, creating, and sharing 360-degree content. In addition, GoPro announced last year that it will cooperate with Google to develop a VR video production platform.

The platform consists of 16 GoPro cameras that capture panoramic video. After the original video shot is uploaded to the cloud, it is automatically merged into a VR video using the software. You can see the VR effect using Google Cardboard.

HTC

HTC and PC game platform developer Valve jointly developed the VR HMD device HTC Vive. HTC applied its development experience in the smart phone market to the design of HTC Vive, and Valve mainly provides software technology.

Valve's online platform, Steam, has more than 100 million users and sold 35 million PC games. With Steam's PC gaming channels, distribution capabilities and a large user base, HTC will benefit from the video game business in the short term.

Microsoft

Microsoft has great potential in the AR market. The main application case of AR is in the enterprise market, and Microsoft has a wide user base in this market.

Currently, Microsoft has partnered with companies such as Autodesk to develop an engineering AR application. In addition, Microsoft will soon release its own AR product HoloLens, which has launched the developer kit this year.

Samsung

Gear VR, an HMD device for use with its Galaxy high-end smartphones. In cooperation with Oculus, Samsung released the Gear VR in September 2014. Gear VR utilizes the Galaxy phone's processor, screen, and Oculus software to provide VR functionality.

Unlike the Oculus Rift and PlayStation VR, the Samsung Gear VR does not need to be connected to a computer, but powered by a smartphone. Gear VR for Note 4 only supports Galaxy Note 4 phones, while Gear VR for S6 only supports Galaxy S6 and Galaxy S6 Edge. Gear VR uses a mobile phone as a processor and display device, providing a 96-degree viewing angle and 360-degree panorama.

Gear VR helps increase product loyalty. At present, the price of Gear VR has been reduced from the original 199 US dollars to 99 US dollars. The price of Gear VR itself is not high, the key is that for non-Samsung users, to use Gear VR must support the Samsung high-end smart phone, which is a big burden.

From this perspective, Gear VR will help Samsung's smartphone business attract new users. Therefore, at the current stage, Gear VR is, to a large extent, a product that enhances the loyalty of Samsung smartphone users.

We expect that Gear VR will have limited revenue contribution to Samsung in the next few years, but it may become a product that prevents Samsung's high-end mobile users from turning to other platforms.

Sony

As a leading provider of audio and video products, Sony began offering VR products very early, beginning with the Glasstron sound image glasses of the 1990s. By connecting with a PC, Glasstron can provide the feeling of watching a 52-inch TV screen.

In the first half of this year, Sony also plans to launch a VR helmet PlayStation VR for use with the PlayStation 4 game console.