The State of The Industry | Eric Romo

Let's talk about what's going on in the industry as far as development. So we'll talk specifically about some of the companies in a second, but right now, basically, hardware's finally starting to ship. So we've been talking about these new headsets since basically in September of 2012 was a Kickstarter from a company called Oculus that was a year and a half later acquired by Facebook. And we've been talking about these headsets since then. And that company and a couple of others have shipped developer kits. Which a very small number of people, like literally maybe 100,000 or so people out in the world, have gotten. And people have been using those developer kits to create content, but now finally consumer hardware is starting to ship. So Samsung started shipping their product last November, Oculus and Facebook are gonna ship in March, HTC's gonna ship in April, and so you're starting to see actual hardware hitting the market, but it hasn't hit the market yet. So we still don't really know what people wanna do with this stuff until it actually gets out there, but it's starting to. Basically, all development that you hear about, you read about, is going to be in 2 camps. It's either going to be games, which there's a ton of work in games. It's an obvious thing to work on for VR. Or it's going to be in entertainment. There's a lot of work, and a lot of investment dollars have flowed into things like 360 video, and sitting courtside at the Warriors game on opening day, and being able to look all the way around. Things like new kinds of movies, where you are actually inside the movie, rather than— In the theater. Participant on the sidelines. So these kinds of games and entertainment are sort of the 2 big camps, but I would posit, and we could talk more about it later, but that VR is going to hit quite a few different industries as far as when you think about what you could do with this being able to immerse people in a computing environment. So what we in particular work on is communication, which is totally different than those 2 fields, and we think this is going to change the way that people communicate online in a dramatic way. So, Tim, you mentioned that you're working on a VR headset. So VR will be more than useful just for games. People think about it on the fringe because the companies that drive the technology are largely gaming companies. People think about it as a games platform. But increasingly, it will be seen as a computing platform. When Facebook acquired Oculus, they talked about it as the next computing platform. And that's the way we tend to see it as well. So diving into some specifics on some of these companies for a second. There's kind of a few divergent approaches to how people are bringing VR to the market. And so maybe we should talk about that for a second. So on this side, you've got Facebook Oculus and HTC Valve. And these are 2 approaches where they're focused on really high end, OK? So the best experience, the best graphics, the lowest latency, the best of the best hardware. And these experiences need to be connected to a gigantic gaming PC. Right. OK, so we're talking— they like to say marketing speak, oh, it's a $1,000 PC. The reality is $1,500 to $2,500 PC is what you want to make that work. And so it's a gaming desktop PC, no laptops, no Macs, no Linux. It's a big honking thing that a very small number of people actually own. And that's the HTC and Facebook approach. And their philosophy is that only the best will do. The best, most high-end experience is what we're looking for to drive people. and so therefore, we're going to focus on the highest of the high end. OK, that's their approach. Most of what they do is games, because Oculus is through and through a games company, and Valve, of course, is a games company, which is in partnership with HTC. And so most of the content you'll see them support is on the gaming side of things. OK, so on the total other end of the spectrum is Google and what they've done with Cardboard. OK, and so Google Cardboard started as a— the rumors are— I don't know if these rumors are true, but the rumors are this started as a project where Facebook acquires Oculus for $2 billion, and Google says, well, we can just do that with a piece of cardboard, not $2 billion. So, but I don't know if that's true. But anyway, so the kind of thesis behind Google's approach is that you have an Android phone in your pocket. It's got a processor. It's got a great screen. It's got all the sensors that you need to do VR. Why not drop that into a frame, Cardboard being the first frame that they've released, but there's a bunch of other stuff that folks have put out on the market, where now I can use that frame to look around? So the difference between this experience and that experience, obviously, is a huge amount of computing power between the two. And so the experience feels different. And what that results in is that with something like Cardboard, you want to design an experience that's maybe 2 or 3 minutes. So somebody's going to pick it up, look around, and then they're going to put it down. That's going to be it. It's very bite-sized and hit. Where something like HTC Valve and Facebook, we see users stay in products like that for 3 4, 5 hours at a time, well beyond the recommended specifications of those 2 companies, by the way. But that's what we see. So it's a real divergent use case. So the things that you would use VR for 3 minutes for are very different than the things you would use it for an hour for, on the other side. Somewhere in the middle, we have Samsung and Sony. So Samsung has taken also the approach of, I'm going to mash my smartphone into something. But what they've done is they've made a lot of optimizations around the sensors that are in the thing I'm mashing the phone into, and the optics, and the form factor, and made it something that it's not 3 minutes anymore. It's probably not an hour. But it's, you know, maybe I'll use it for 15 or 20 minutes at a time. OK? So they've kind of made it a bit better experience than what you get from just dropping your phone into a piece of cardboard, but not quite as good as what's on the high end. The real difference, by the way, just to— Get into the details for a second— between the super high end and something like the Samsung product is things like positional tracking. So as I move my head around, does it track where my head went? These do that extraordinarily well. That does it OK. This does it really poorly. That's kind of the spectrum there. That also, for most people, correlates to whether or not it makes you uncomfortable to use. So you will see an incidence of motion sickness go up pretty rapidly as you go towards something like that. which is why you only want to use it for 2 or 3 minutes at a time. And then somewhere also in the middle is Sony and what they've done with PlayStation VR. And so this is a headset that you plug into your PS4. Really good thing about Sony's approach is that it just works with a PS4. If you happen to already be a PS4 owner, it's going to be a few hundred bucks. You plug it in, it's good to go. The challenge with that is that Sony's console approach is that consoles live for a long time. PS4's life— been around for 2 and a half years already. It'll be around for another 2 and a half or so. something before they replace it. And so the processing power you have available in a PS4 is somewhat limited. And so there's only so much you can do as far as how good the graphical fidelity of that experience can be. And so it's not going to approach something like this, where you have a $2,000 PC. It's going to be something less than that. And so for those of you, again, who resolution means anything to, these are close to 1440p resolution in the headset, whereas the Sony is a 1080p. And so it's about a 75% difference in the number of pixels that you might get in front of your head, which is noticeable when you use the experience. But from a market perspective, it's a pretty easy sell if you already have a PS4. Yeah? But the experience on the Sony is better than the Samsung? It is. Yeah, so it is in a lot of dimensions. Actually, the screen on the Samsung is much nicer than the one on the Sony. So the screen's nicer here. The tracking's better here. So it's a bit of apples and oranges. Yeah. OK. There's going to be a ton more people in this space. I mean, I think by this time next year, basically anybody that makes a cell phone is probably going to have something on one of these spectrums, OK? Either something I mash my phone into or something that I plug into a PC or just some kind of cardboard clone. So you'll see a lot of entrants in the space over this next year. You'll probably see some startups in the space as well. I think it's fair to say, though, given the huge range of form factors and user experiences here, that nobody's quite got it figured out yet, you know, as far as what's going to work in VR, what tens of millions of people are going to use. I mean, the best-case estimates from some people that you read are, you know, this year, this is like hundreds of thousands of people on this end, maybe low single-digit millions. Samsung is maybe a few million people. Google gives these things away like candy, and so they say they have 5 million people out there. I would doubt if 5 million people have actually used the thing. And then Sony's got an installed base of like 35 million PS4s, and so depending on the attach rate there, they'll get probably a few million people as well. But it's not an iPhone launch, right? When the iPhone came out, they sold 1.5 million units a month for the first 18 months. It's not that. We're not there yet with VR. Thank you.