Is the market ready for XR?

Published: December 28, 2019 2:32:18 PM

The rise of 5G and mobile computing is paving the way for a revolution, and XR is a much-needed answer to the competitive market

Money is always there with a sizable mass marketMoney is always there with a sizable mass market

By Vijay Karunakaran

Extended Reality (XR) is an umbrella term for all immersive technologies, the likes of which merges the real and the virtual worlds to create immersive and compelling experieces. It includes augmented reality (AR), virtual reality (VR) and mixed reality (MR).

The rise of 5G and mobile computing is paving the way for a revolution that is driven by cutting-edge technical solutions, and XR is a much-needed answer to the competitive market of today. But as with every new invention, here comes the burgeoning question of price and profitability. This article comprehensively deals with the scope of XR in terms of its profit-making capabilities.

Reach and Quality of Content
Creating a reach is, as obvious as it may seem, the most critical aspect of any business that desires to flourish. Money is always there with a sizable mass market. For this purpose, it is highly essential for companies to identify their target audience and define the problems they face, and find redefining solutions to tackle them all.

Going Mainstream
The potential for XR to go mainstream would be determined by factors such as prices, content quality, and funding. Let’s have a brief understanding of these pivotal factors:

  • Pricing
    According to Alex Macklin, an analyst with Greenlight Insights, lower prices factor most in building a mainstream user base for VR. The factor of price sensitivity will work in favour of mass XR adoption owing to the low cost of training and conducting operations.
  • Content
    XR’s capability of storytelling must be harnessed to realise its range of benefits and extend its reach. The key here is in going for stories based on “universally appealing” themes.
  • Funding
    Creators may not be in need of external content once they start profiting, but the creation of more and better content, at least initially, is determined by adequate funding.

The Hardware Drive
2019 was a great year for the hardware makers of the Immersive Domain, especially for Facebook as its newly launched Oculus range of headsets brought in a new dimension to the VR experience. Nielsen’s SuperData Research estimates that the Oculus Quest sold 1,80,000 units during the third quarter and has sold approximately 4,00,000 units so far (despite the $399 price tag). Smartphones are the most critical hardware of today, given its ubiquitousness.

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SuperData expects XR Revenues to reach $34.1 billion by 2023, which is a mammoth increase of 442% when compared to the 2018 record of $6 billion. The current ever-growing climate provides a firm foundation for hardware developers to make their foray into the market and be a part of a profitable yet competitive ecosystem.

The All-Important Engagement
While the importance of hardware sales and its numbers is not to be ignored or undermined, what matters more is quality and compelling content. Hardware is not more than a means to a need, and such a need can only be realized with engagement. Hardware is a one-time investment, but we need users and enterprises to log in and spend money on a frequent basis to harness the solution it offers. The quality and sale of the hardware matters, but only with the quality of experience.

Free-to-Play
The free-to-play concept, which found great success in the gaming platform, shows how consumers determine the methods on which content developers will succeed in. For example, Angry Birds bagged a revenue of $ 200 million and a user-base of 260 million in just two years of its launch. While they made a revenue of $1 million through advertising on the free version of their app, they earned six times of that revenue through in-app revenues. Pokémon Go, an AR-based game by Niantic, last year registered a revenue of nearly $800 million from in-app purchases alone, which if roughly calculated is around $2.2 million per day.

Ad-Based Models
Those of you who consume any medium would know that some of the major channels focus primarily on ad-subsidised content, subscriptions or upfront purchases. This provides the users with the option of either accepting adverts as a part of their experience for subsidized/free content or paying a premium for ad-free content. For example, most newspapers have ad-free content embedded in their services with an option to pay for an ad-free experience.

The existence of VR ad networks like Immersv and analytics platform like Retinad will help brands to get involved once they see potential ROI, the possibility of which is inevitable as advertising has penetrated all the digital spaces.

How about Indie Freelancers?
The XR platform lays the foundation for Indie developers to form deals with major players like Oculus and Sony to offer their services, especially games, exclusively on their platforms. This not only helps them in securing funds but guarantees exposure. A few are choosing to climb the ladder by hedging their bets on multiple headsets, as well as by exploring in-app purchases.

The Enterprise Advantage
To state in simple terms, enterprise is where the money is now. Statistics suggest that around 70% of all AR/VR services are adopted by enterprises, whose main grounds for investing in the same is productivity and competitive advantage. More than 50% of announcements made at AWE USA 2019 (AR/VR Conference and Expo) were enterprise-related. The big names in consumer tech are now entering the immersive tech space, primarily eyeing enterprise.

Corporate and Venture Capital Investment
Corporate investments and raising funds from venture capitalists play an important role in the extended reality ecosystem. The method is considered to be more important for the consumer reality ecosystem than the latter option, while both bears equal significance in the enterprise reality ecosystem.

Venture Capital (VC) investments would always be a major driver as it enables the emergence of Black Swans, the likes of whom may not reach the stage of escape velocity, or in other words exponential growth, without the support of these VC’s.

Summing it Up
The success of XR depends on the creation of killer experiences and apps that the consumers and enterprises want to be immersed and achieve efficiencies. At the consumer side, the profitability is based on critical mass, engaging content, and affordability. These factors, in fact, are the foundation for monetisation. The intersection of Artificial Intelligence and XR is really going to gear up the experience levels, leading to more engagement and adoption.

XR’s potential to bring in profits are enormous, provided the ecosystem is leveraged appropriately. Here is a technological medium that is transformative, and there is lots of money for all to be made.

The author is founder and CEO, TNQ InGage

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