The Curious Relationship Between DVDs and VR

By June 15, 2017Technology

INTRO:

A little over a hundred years ago, the light switch was invented in the sleepy suburb of Lynbrook, New York.  If this fact isn’t enough to convince you of the terrifying speed at which ideas and technology move, here’s another:  A hundred years ago, the first supermarket was opened in Memphis, Tennessee.  As I said, terrifying.

You can’t help but spend your waking hours thinking about small facts like these when you work in a nascent field like VR.  Whereas in other industries, you’re confident you’re making a difference, technology is always a bit of a toss up.  It moves so fast that it’s hard to tell if the newest gadget is just a fad or a meaningful contribution to society.  Sure Nike’s new self-lacing shoes are cool, but it’s hard to say they’re going to have quite the impact on us as…  Oh, say, the vaccine for Polio.  

VR, of course, is a different beast, or so I tell myself.  It’s not a passing fad but an eventuality.  One day, we will all regularly consume media through head mounted displays, just as we all watch television today.  Six out of seven days a week, I firmly believe this.  But on that seventh day, I start to wonder if we as an industry aren’t just throwing billions of dollars at proverbial fidget spinners.  I genuinely worry about the staying power of VR as a technology – this supposed innovation we’re delivering.  But then I like to remind myself of the parallels between VR and the good ol’ DVD Player, which just turned 20 a few months ago.  Like I said, the speed here is terrifying.

 

DVD PLAYER:

The DVD Player is one of those rare instances of true international cooperation.  Ten companies ranging from JVC to Time Warner came together to create the DVD Forum, whose sole purpose was getting this technology to consumers.  Time Warner’s involvement here is crucial, as its influence shaped the technology into the perfect medium for the entertainment industry.  Because of their input, a single DVD was capable of holding 95 minutes of footage (encompassing the runtime of 90% of films) all for a retail price under $20.  In 1997, the first DVD player was released in America.

 

DVD MARKET PENETRATION:

Perhaps you remember when you first went out and bought your own DVD player.  It was exciting, right?  To be the first among your friends to be able to watch Blade Runner in surround sound at your home?  But the DVD player wasn’t an immediate success in its early years.  I like to think of those CEO’s – those titans of industry – twiddling their thumbs as they wonder why consumers aren’t buying their players.  “It’s the future,” they say.  “An eventuality”.  And then, maybe in the back of their heads, the more doubting of them think, “Well, it’s not a vaccine for Polio”.  I like to imagine all these thoughts ran through their heads as they looked at their first year sales.  With a hefty price tag of $700 or more, only 349,000 players were sold that first year.

 

AN UNEXPECTED ALLY:

While the DVD player had a truly laggard start, there is something curious about how quickly it caught on in the new millennium.  In 2002 alone, 17.6 million players had been sold, up thirty percent from the year before.  This success even lead some industry executives to worry that consumers’ long term interest in the technology might quickly wane.  And to explain at least a small portion of this sudden success, I’m going to look at another piece of technology at the time, Sony’s Playstation 2.

The PS2 was released in October 2000 with a $299 price tag, roughly $400 by today’s standard.  While Sony competed in the home console space with several other companies, such as Sega and later Nintendo and Microsoft, what made the PS2 stand out was its built in DVD player.  At the time, DVD players still cost an average of $201, and for an extra hundred bucks, consumers could buy a PS2 and have a game console on top of that.  Seems like a pretty good deal, right?  Apparently so.  By 2002, the PS2 made up a total of 32% of all DVD players in America.  And that’s a conservative number.  On the higher end of the spectrum, the PS2 might have commanded up to 47% of the market – accounting for 21 out of the 44 million DVD players sold in America.  All of this after only being available for two years.  That’s impressive.  That’s terrifying.

CORRELATION AND CAUSATION

They say hindsight is 20/20.  Did Sony’s Playstation 2 cause DVD players to become a breakout technological hit?  Of course not.  Correlation doesn’t imply causation, psychologists tell us.  Moreover, it was the future, the CEO’s tell us.  They’re both right.  If anything, the PS2 only hastened the spread of a technology that the American public was more than ready to adapt.  By the start of 2002, 73% of American households expressed a strong desire to purchase a DVD player, and 43% stated a desire to purchase one within the next year.

 

VR SALES & APPETITE

Working for a small VR company can be a little nerve racking.  Technology moves fast, and nine out of ten start-ups inevitably fail.  These aren’t always comforting facts, but there are lessons to be learned from the success of the DVD player.  Although hard numbers are difficult to come by, it’s clear that VR headset have already far outpaced DVD player in first year sales.  By 2016, a total of 6.5 million high and low-end headsets were estimated to have been sold.  No doubt, VR is off to a strong start, selling 18 times as many DVD players in its first year, but it’s yet to hit the rapid adoption and market penetration the DVD player saw in the early Millennium.  So, like those CEO’s of the DVD Forum, I have to content my with consumer sentiment and hope it translates. Because the sentiment is very positive.  

According to a 2016 Touchstone Research report, 79% of consumers surveyed said they would actively search out VR experiences, and 81% of those who have already experienced VR have recommended the technology to their friends.  Crucially, this interest is spread fairly evenly amongst age groups, a good sign that the technology will stick.  And Baby Boomers – that beautiful, rich, fat demographic – is surprisingly favorable towards it.  64% of Boomers have positive feelings towards the technology, and over 50% wish to try it.  Most uplifting of all, 85% of influencers – those identified as opinion leaders with large networks of friends – say they will buy a headset.  Clearly, the early interest is there, so I convince myself it’s only a matter of time before mass VR adoption is upon us.

 

HEAD MOUNTED DISPLAYS:

These sales are intriguing because virtual reality never saw the concerted, unified effort that the DVD player saw.  In part this is because the technology isn’t a format, but rather a medium.  It’s a whole new way to experience entertainment.  In larger part still, this is because the technology has been kicking about in some form or another for over twenty years.  Its development up until now has been piecemeal.  The first head mounted display was designed originally for pilots and created by Howard Hughes’ aviation company.  In the entertainment space, the first headset was created in 1994 by Fortes Technology, followed up by Nintendo’s failed Virtual Boy in 1995.  Needless to say, neither lasted long.

Two decades later and technology has finally begun catching up to the ambitions of these early headsets.  Companies such as Oculus and HTC came out with their own headsets in 2016 – the Rift and the Vive – and the difference between these and their predecessors is immense.  Meanwhile, other companies like Samsung and Google have created lower-grade headsets that use your smartphone to simulate VR.  While these smartphone solutions have very little gaming application, they’re nonetheless popular.  If we were cavemen back in 90’s, we’ve only just now been given fire.  

 

WHAT’S DRIVING VR ADOPTION

If you take a quick look at the data, you might be tempted to draw some interesting conclusions.  In 2016, an estimated 1.5 million high-end headsets were sold, compared to a whopping 5 million low-end ones.  While both headsets can play 360 videos, the screen quality is night and day, and only high-end headsets can be used for real gaming experiences. But while these high-end headsets generated all the early hype for VR, lower-end solutions seem to be the real winners here.  Gaming’s influence – at a mere 23% of the market share – while sizable, is ultimately not the main contributor behind adoption.

But this just isn’t the case.

 

GAMING WILL INCREASINGLY DRIVE ADOPTION

An interesting wrinkle in the data is the arrival of Sony’s Playstation VR.  Though the PSVR only arrived in the closing two months of 2016, the headset managed to garner half of the high-end market.  Whereas DVD player sales eventually outstripped the PS2’s sales, this data suggests that high-end headsets will actually gain market share in the coming year.  This is made increasingly more likely by the fact that Microsoft is releasing its own VR solutions later in the year.  Again, it seems like the video games are driving cutting-edge technologies’ adoption.

Another point to consider is where the money is being pushed here.  At seven to eight times the cost of its competitors, Oculus and HTC command the lion’s share of total money spent in VR.  You can bet your bottom dollar that Rift and Vive owners, having sunk nearly a grand in their respective headset, are going to pay a premium for tailored VR content.  While there is money to be made in 360, smartphone videos right now, it’s not coming from consumers yet.  It’s coming from brands and advertising agencies interested in capturing new customers.  Where are VR consumers giving their money?  Tailored high-end experiences, like shelling out $60 for Rick & Morty VR.  Video games aren’t just responsible for the technology’s adoption, they’re where consumers are spending some serious money.

In this particular instance, more so than in DVD players, gaming’s particular dominance of VR seems only natural.  Spending time in virtual reality is the logical extreme of the very escapism that Pong first promised us 45 years ago.  Video games are better positioned than any other industry to readily take advantage of this technology, and gaming’s increasingly diverse demographic ensures that it will reach increasingly more consumers.  While these headsets might stand at almost identical prices to Toshiba’s first $700 DVD player, they are likely to fall in price just as quickly, only hastening further adoption.  Eventually, as headsets get cheaper and smartphones get smarter, these high and low-end headsets might collapse into each other.

 

MORE THAN A FAD

At the moment, there is some passive optimism about the state of VR.  While the industry hasn’t sustained the boom of PE investments it saw in 2016, it’s still expanding.  While the naysayers might make comparisons to 2012’s love for 3D printers or any other technical flops, they’ve ultimately ignored the lessons of recent history.  If the rise and success of the DVD player is any indication, VR is here to stay.  Sure, today’s technology can and will be replaced, but the medium will remain.  The future, I say to myself.  And as I look back at history, an eventuality.

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