Back to the future for mixed/augmented reality?

Back to the future for mixed/augmented reality?

Early in my VC career, in Los Angeles, the early-stage investing community was abuzz with excitement and energy about a technology in its third resurgence - virtual and augmented reality. 

The Big Four predicted a $24bn market by 2024; Hollywood studios were creating VR experiences; software application layers were being crafted, and VR-focused venture funds were raising money hand over fist.

Hollywood, reeling from the rise of streaming platforms and the growing risk of a declining theatre-going audience base, saw VR content's potentially higher unit price as a way to regain some margin. Creatives were also inspired by the incredible new level of immersion that VR offered and were coming (and still are) up with truly brilliant ideas. It was my first experience of art and technology coming together in almost perfect harmony. It was a golden period of energy and momentum, but sadly it was not to be. 

What went wrong?

The stone in VR’s shoes was those pesky mass customers who weren’t allowing the tech to cross the chasm of adoption. I think it was for a few reasons:

• The cost of the hardware to run VR adequately (to achieve a high enough frame rate to minimise motion sickness) was prohibitively high. 

• The lack of an install base slowed the content/app creation velocity. With circa under 5 million headsets in the wild made, the unit-level economics of creating a game, 360 content or an app is almost impossible. Aside from Beat Sabre, very few games could return the cost of production, let alone make a profit. 

• The form factor was a problem. Whether it was being tethered to a PC or just having a pretty heavy piece of hardware stuck to your face, the hardware experience isn’t great nor suitable for long periods of play. 

• It required a substantial amount of square metres to function. To create the necessary zone for the hardware to function, consumers needed circa 2-3m of empty space. If only everyone in the world had such luxury. Things have definitely improved with external cameras fitted to the modern-day headsets, but you still need a chunky bit of real estate to get the most out of it. 

• The VR arcade concept and its unit-level economics struggle (those bloody things!) made it hard for public awareness of VR to blossom. Plus, they had to resort to some “creative” means to generate immersion.

• The hygiene factor of strapping a communal headset to my face concerned me. Our eyelashes carry thousands of germs and bacteria, and I am not convinced that the old sanitary wipe was enough to prevent the spreading of ocular afflictions. 

Mixed/Augmented reality software saw massive growth from several platforms - Niantic Game’s Pokémon Go and many filters for social media apps that placed unicorn horns and sparkles around our heads. This software gave a tantalising glimpse into the future of AR/MR's potential, but the reality was that it was little better than a traditional mobile game. 

I started this piece before Apple’s WWDC VisionPro announcement, but based on my current reactions from this morning’s show, here is what I think may give it a fighting chance:

• The ability for others to see your eyes is not to be underestimated. It breaks the isolation factor of traditional headsets and allows others around you to communicate with you. This is a significant step forward from Vive, Meta and PSVR2.

• The familiarity of an Apple operating system for users will counteract the systems of the other headset manufacturers who didn’t invest enough into the software behind their technology. They seemed more focused on games and experiences than building a viable living and work space in augmented reality. 

• The integration of Unity will help game developers build new titles for this platform. Games sell systems for the mass market, which is a significant development. However, I hope Apple can mend the collapsed bridge between them and Epic as Unreal Engine 5 surpasses anything that Unity offers.  

• The hand gestures and eye tracking will remove the need for users to get used to the unnatural controllers of the past. The Vive remotes and the PSVR2 “hand pucks”, I feel, are not intuitive and natural to encourage human interaction.  

• The spacial computing platform will be a significant new step to creating an environment like what we saw in movies such as Her. 

• I look forward to removing the ugly large screen on my desk and shifting to a new augmented reality workstation with dynamic windows/tabs, immersive 3D photography and the ability to watch movies in a dramatic augmented environment.

Here are some forward-thinking projections at 7 am this morning:

• Apple will use some of its war chest to purchase a major player in the gaming sector, and I dream that they buy Sony or Valve to supercharge original title development and distribution.

• The first-generation headset will probably be a significant loss leader for Apple as they race to reduce the form factor and production costs. 

• At US$3,500, this will be a product for hedonists and tech aficionados. When you look at what it is partially replacing (high-end OLED monitors), it is a comparable price point but still a long way from crossing the chasm.

• The VR startups of the past will dust off their IP, come out from hibernation and start raising AR-first versions of their original ideas.

We had a tantalising taste of the future today and one that brings the hollow promises of VR from the last decade to actual reality. We watch this space with a healthy dose of curiosity and a moderate dash of scepticism.