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China International Big Data Industry Expo 2017 (Big Data Expo)

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The state of virtual reality

Microsoft, Sony, Valve, Ready at Dawn all have games in the works

Virtual reality gaming during the 2017 China International Big Data Industry Expo at Guiyang International Eco-Conference Center 
| Photo by Lintao Zhang/Getty Images

One could argue that the age of virtual reality kicked-off during last year's Game Developers Conference, an event that nearly coincided with the launch of two of the technology's most important head-mounted displays in recent history: the Oculus Rift and the HTC Vive.

Months later — virtual reality hype still continuing to build — E3 opened its doors, giving retailers, streamers, journalists and developers a chance to look at a flood of VR games, apps, accessories and the soon-to-be released PlayStation VR headset.

That show — E3 2016 — was both the peak and turning point of virtual reality hype: highlighting the best and worst of technology in a setting almost designed to strip away nuance.

Stories both exulted the big showing as a tremendous success for VR games and decried it as a massive misstep for VR. E3 demonstrated the worst of the tech, according to The Verge. E3 2016 was the moment VR gaming finally made sense, according to Vice. Cnet wrote that the show mostly highlighted just how far the technology has to go. Virtual reality won E3, wrote the International Business Times. Engadget declared E3 secretly terrible for the future of VR.

By the time the PlayStation VR headset launched in October, it seemed the most vocal of supporters among analysts and journalists were already declaring virtual reality over. This year that undercurrent of un-hype, de-buzz — call it what you will — has steadily harped on how much virtual reality hasn't met expectations. And while PlayStation said they’ve sold a million PSVR headsets, Vive and Oculus remain mum on sales.

Despite that lack of numbers by most, those deeply invested in the technology, especially companies like Microsoft, Vive, Oculus and PlayStation, all say they're happy with where things are and that internal expectations were exceeded.

As we walk our way into this year's E3, one thing is clear: The fate of virtual reality and its current health is a far more subtle thing to judge than what can be discerned from the funk of VR's post-launch gloom or even its pre-launch hype

E3 2017

Microsoft’s anticipated VR solution for the Xbox, Oculus and Vive won't have any major presence at E3 this year, the companies told Polygon. And while the PlayStation VR will have a presence at the show, it won't feature the same sort of overwhelming scale it had last year.

But that doesn't mean virtual reality isn't a thing at E3. In fact, the number of virtual reality, augmented reality and mixed reality exhibitors at the show this year has more than doubled, up to 126 exhibitors, over last year's showing, according to show runner the Electronic Software Association.

The absence of new VR hardware to showcase, but a spike in VR software echoes what typically happens at E3 when a new platform arrives. In this case, it's mostly because those big stakeholders are stepping back a bit to give third-party developers the room to highlight their own software creations.

Last year, for instance, Valve showcased the Vive hardware and software just prior to its April launch. Then at E3 2016, the company had a lobby booth to show off mixed reality. That won't be the case this time.

"We don't have our own booth at E3 this year," said Daniel O'Brien, general manager at HTC Vive. "Instead, a variety of our partners have their own demos.

"In this second year, we're really focused on partners and ecosystem growth."

Oculus head of studios Jason Rubin said Oculus is focusing on a few key pillars post-launch.

"Great VR experiences and making the hardware accessible to as many people as possible," he said. "On the PC side, it’s driving down the price of Rift as well the PC itself which we’ve been doing by working closely with partners to make it easy and affordable to get a rig that can run VR. On mobile we continue to work with great partners like Samsung while pushing the technology forward across software and hardware. That’s why we were able to show off our standalone prototype Santa Cruz, last year at OC3. "

As with Vive, Oculus' E3 presence will be geared more toward allowing developers like Ready at Dawn, 4A and Hidden Path to show off their own stuff, and some behind-the-scenes meetings with potential game makers.

While this year's E3 is Microsoft's last big chance to go over the finer details of its powered-up Xbox One — codenamed Scorpio — that won't include talk of its virtual reality (or in Microsoft vernacular, mixed reality) capabilities.

In terms of MR experiences, Microsoft's Alex Kipman told Polygon, the focus right now is on Windows PC. Also, he added, Microsoft believes that console VR should be wireless. The implication is that perhaps Windows PC is getting a bit more attention thanks in part due to Microsoft's many partnerships with VR headset makers. Also, wireless VR simply hasn't been solved in a way that is affordable and practical for consumers and creators.

That said, Microsoft remains firmly committed to the technology, Kipman said.

"We are all-in on mixed reality," he said. "Our primary focus is making our Windows Mixed Reality experiences a success.

"We have games from Microsoft Studios in development for Windows Mixed Reality, and several game developers are working closely with us to bring their titles to Windows Mixed Reality. We’ll have more to share on specific games and content experiences coming to Windows Mixed Reality later this summer, after E3. This is just the start for us."

With more than a million PlayStation VR headsets sold — and that curtailed by supply issues, according to PlayStation — Sony seems most interested in still actively generating buzz around its headset at E3.

"We have been sold out ever since launch and it's only within the last month or so that it's started to come into supply and we're feverishly getting the factory cranked up as fast as we can," said Shaun Layden, president of Sony Interactive Entertainment America and chairman of Worldwide Studios.. "The product itself has way exceeded our expectation and we feel with over five million games already sold in that six month period, over a million sets installed around the world, we hope we're on the road to establishing the format as a viable, legitimate form of entertainment."

From Sony's point of view, virtual reality interest isn't stalled, it is simply having a breather after launching, landing in people's hands and the first rush of content.

"There's a lot of activity on day one and then people take a breath and you come back afterward, right?" Layden said. "But I think what we've seen with Farpoint, you'll see some more at E3, and through the rest of the year. There's already another title out there that supports the game controller and there's a couple more titles in the pipe so people are really looking at that.

"Shooters are very popular in the gaming world and I think, with Farpoint getting so much traction we will see more VR activity. Also with what Capcom did, with Resident Evil 7, being able to play the entire game in VR, I think we'll see other publishers looking at that kind of an opportunity."

The current state of VR

It's hard to separate the current state of virtual reality from the major players pushing the most popular hardware in the space. And those companies each have, not just different approaches, but unique relationships and challenges with which they are contending.

Facebook’s acquisition of Oculus for $2 billion in 2014 didn't just garner a lot of attention, the purchase price helped stoke the flames of investor interest in VR, ultimately having an out-sized impact on virtual reality as a whole.

It's that same purchase that could threaten to overshadow Oculus' once singular focus.

Earlier this year, the company mostly lost a lawsuit filed against them by ZeniMax, the parent company of id Software, which contended that some of the technology used to create the Oculus Rift was stolen.

Facebook faces a half-billion dollar ruling it has yet to pay.

But Oculus' Rubin said that the lawsuit and its conclusion haven't had any impact the company's path forward for VR.

The company remains excited about the progress of VR, he said.

"We’ve never been shy about the fact that this is a long road ahead of us," Rubin said. "This isn’t a platform that could just flip a switch and everyone has tons of content to choose from. Everyone is starting from scratch."

Annual E3 Gaming Conference In Los Angeles
The Oculus Rift headset in the Oculus booth during the annual E3 2016
Photo by Kevork Djansezian/Getty Images

More importantly, he added, developers are starting to become successful and self-sufficient, independently making their second or third VR titles.

"That's the place we want to be and we continue to nurture the ecosystem to accelerate that,” he said.

Facebook's increased interest in augmented reality, something it showcased at its annual F8 Facebook Conference earlier this year, could also be perceived as a threat to VR, especially given that Oculus is now working on both types of technology.

But again, Rubin said not to worry.

"It's probably more accurate to say that there are tons of incredibly smart people working on VR and AR across Facebook and Oculus," Rubin said, adding that Oculus is "moving as fast as ever when it comes to VR."

While HTC remains very focused on virtual reality through the Vive, it does seem that Valve, which helped created the headset and which hosts games for it on Steam, has taken more of a backseat lately. Valve writer and VR evangelist Chet Faliszek recently left the company and we still haven’t heard much on the promised three games the company said it would make for the tech.

But Vive's O'Brien, who manages the relationship between the two companies, said that's not the case.

Inside VR Park Tokyo
Inside VR Park Tokyo
Photo by Tomohiro Ohsumi/Getty Images

"I talk with Valve as much now as I did two years ago when we started working together," he said. "We collaborate on ideas and are constantly talking about things we're doing. We meet as leadership teams and engineering teams. We're highly supportive of each other.

"We don't have to work together the way we did two years ago, but we were so hands on in the evolution of the product that there's less things we have to engage on daily now. How we interact now is different, but not in a negative way."

As with many of the other people I spoke with for this story, O'Brien said that virtual reality had a great kick-off with great momentum but that now people are focusing on the next step: mainly software and broadening support.

"We're still in the early days," he said. "We're still working or way through adoption to get to that mass market in a couple of years."

He too pushed back against any notion that expectations not met were a bad indication for the technology.

"If the industry was really petering out and momentum dying, why are all of these massive companies coming into the market with new content and new headsets?"

Tokyo Game Show 2016 - Day 3
A visitor wearing an HTC Corp. Vive VR headset plays a VR game in the Magical World (Beijing) Network Technology Co. booth at Tokyo Game Show.
Photo by Yuya Shino/Getty Images for TOKYO GAME SHOW

Microsoft's approach to virtual reality has been uniquely redefining, or at least it aims to be.

Even Microsoft's take on what it actually calls virtual reality is unusual. In the minds of the people working on the technology at Microsoft, virtual reality falls in a "mixed reality spectrum" that also includes augmented reality. So the software built into Windows 10 and the headsets that use it — be they AR, VR or something in between — are all referred to as mixed reality.

Microsoft's Kipman points to Facebook's own evolving approach to VR and now AR as further proof that the company's take on the vernacular and design is the right way.

"We’re encouraged to see increasing interest in solutions and devices that span various portions of the entire mixed reality spectrum," Kipman said. "To us, it’s further validation of our belief that the lines between VR and AR will disappear and that the devices of tomorrow enable elegant blends of both. We’ve observed a narrative that pits AR against VR and asks, 'On which technology should developers place their bets?' Microsoft doesn’t believe anyone should bet on one over the other, which is why we developed the Windows Mixed Reality platform: the only operating system built from the ground up to seamlessly support and unify user experiences across the entire mixed reality spectrum."

And currently that software platform is where Microsoft is putting most of its efforts; not in creating its own head-mounted display or even bringing the technology to the console.

Microsoft Unveils New Surface Laptop
Terry Myerson, executive vice president of the Microsoft Windows and Devices Group, speaks about the Acer Windows VR headset
Photo by Drew Angerer/Getty Images

This year alone, Acer, Asus, Dell, HP and Lenovo plan to ship Windows Mixed Reality-enabled headsets that work on Windows 10. Microsoft also recently unveiled motion controllers that are designed to be plug-and-play with those headsets and which will hit this holiday.

While Microsoft also has its own HoloLens augmented reality device, the company isn't saying much about it right now.

"We are not commenting on our future product roadmap, but I can tell you that our goal is to bring mixed reality to everyone," Kipman said, when asked about whether and when HoloLens will be released for consumers. "Windows Mixed Reality is the most complete mixed reality platform across virtually any device type. While Microsoft HoloLens is focused on developers and enterprise scenarios today, we expect to see the capabilities of Windows Mixed Reality harnessed by a variety of devices to fulfill a range of budgets and requirements as the platform grows."

That focus on creating a platform, rather than the hardware that will use it, speaks to how important Microsoft views the technology and how invested in its future they are.

"We’ve been on a decades-long journey to make computing more personal, and mixed reality is a logical extension of that path," Kipman said. "We went from punch cards to character-based interfaces to graphical interfaces, then to touch, voice, pen and gestures. Bringing computing into the 3-dimensional world in which humans have always existed is the next step in making computing truly more personal.

"Mixed reality technology such as HoloLens and Windows Mixed Reality enables users to interact with holograms in the same ways that they interact with other physical objects, which aligns more closely to our natural instincts for communication. The future of computing goes beyond the isolated virtual world. We are unifying the mixed reality ecosystem around a platform that enables shared experiences and interoperability between headsets."

Acer VR

Acer says it has long recognized the importance of virtual reality too.

The company first dipped its toe into the world of VR by partnering with Starbreeze to create a VR headset with the game maker. That headset was designed to provide a high-end experience in places like movie theaters and theme parks, said Eric Ackerson, senior product marketing and brand manager for Acer.

Now the company is prepping to release its own Windows Mixed Reality headset for home use. And Ackerson doesn't believe their tech is coming too late to the party.

He likens the buzz around VR as something akin to a band like Led Zeppelin announcing a tour: Initially, there is a lot of excitement around the news.

"But then there is this wait before the concert," he said. "That's where we are right now: we're waiting for the concert. Early adopters have gone out to get the latest and greatest, but now we need to reach that mass market appeal. We need people to develop the games and the content and I think we're going to slowly build from there.

"It's a little less exciting, but a lot is happening in the background."

He said Acer decided to launch on Windows 10 because it brings a common structure that the developer needs and that it is "going to be the largest audience."


In the near term, all of the company officials we spoke to said they're focused on trying to bring in more developers, attract a larger audience and get more content for their systems.

Few are focused, or willing to talk about, what piece of hardware may come next from them. But they were all willing to speculate about what the future may hold for VR in general.

Oculus' Rubin noted that both Facebook founder Mark Zuckerberg and Oculus chief scientist Michael Abrash have shown charts that put us early in the curve of VR — both in terms of adoption and the actual technology.

"We think there’s already a ton of amazing things to do as an early adopter and gamer in VR right now, and it’s only going to get better in the year ahead," Rubin said. "Fast forward a decade and we will continue to break new ground and VR as a platform, and as a means of connecting, could very well be ubiquitous."

Rubin said he also believes that research into augmented reality will inevitably help virtual reality and vice versa.

"Both AR and VR and technology deal with a lot of the same challenges and technology so the advancement of one will continue to benefit the other.," he said. "So, when Mark was on stage at F8 showing how the camera could recognize a coffee mug, or add information to physical objects, or demonstrated tech that built a 3D scene from a photo — these are all examples of technologies that both platforms will use in different and compelling ways. "

Google Daydream

Vive recently announced plans for an "all-in-one" Google Daydream-supported, mobile-phone-powered VR headset and earlier this year the company announced a tracker that can be used to help inject real world, trackable items into the virtual world. Both seem tied to where Vive sees VR heading.

"We're getting ready to launch the tracker for the consumer and there isn't a triple-A studio who hasn't asked for a tracker or bought trackers from us," Vive's O'Brien said. "We believe in the future of VR and the all-in-one solution is another path forward for VR.

"You are going to continue to see us innovate and drive at that level."

Acer's Ackerson sees augmented reality and virtual reality coexisting.

"They are different, very different experiences and each has its own advantages and disadvantages," he said. "Augmented reality will succeed in maybe five years. But VR has places where it will exceed AR"

Microsoft's Kipman sees the same sort of future.

"All this talk in the industry about virtual reality versus augmented reality is short sighted," he said. "I don't want you to be confused, these are not separate or distinct concepts. These are just labels for different points on a Mixed Reality continuum. We should all be thinking 'And' instead of all this talk about 'Or.' 'And' means including, embracing, and unifying across the continuum."

In Focus: Scott Kelly's Year In Space
NASA astronaut Scott Kelly checks out the Microsoft HoloLens aboard the space station
Photo by NASA via Getty Images

Kipman said, quoting writer William Gibson, that the future is already here, it's just not very evenly distributed.

"In the future, devices will become lenses, lenses that will allow us to see, touch and feel mixed reality," Kipman said. "Mixed reality will enable us to freely and instinctually mix real people, places, and things; with virtual people, places and things. This will unlock amazing new experiences anchored to the physical world around us.

"In the future, we won't need to choose between transparent or opaque headsets. Devices will adapt instantly blending the real and the virtual into mixed realities."

And, he added, Microsoft is already building toward that future as it pushes for a single platform for all forms of mixed reality in Windows 10.

Sony comes at the question of the future of augmented reality and virtual reality from an interesting place: The company has been experimenting with and even selling augmented reality for years. The PlayStation Eye introduced the concept to PlayStation gamers in 2007. From that came a redesign of the camera and more AR games. There were even AR games for the PlayStation Portable and Vita.

And from that early work was born the PlayStation VR headset.

Sony Playstation VR Goes On Sale
A customer tries the new PlayStation VR at Sony Square NYC
Photo by Justin Sullivan/Getty Images

"Whether it's AR or whether it's VR, we're coming at it from gaming," Layden said. "That is our area of intrigue into it and we found that VR right now is providing us the greatest opportunities for different kinds of games and gamer expression. I'm not ruling out AR. We might go back to it and we might expand into it."

PlayStation's Jim Ryan, Sony Interactive Entertainment Europe and SIE global sales and marketing president, added that he doesn't think the two are binary and that both technologies bring with them potential for surprise.

"That's the really exciting thing about VR, you can look ahead on PS4 for the next 12 or 18 months and you've got a pretty good idea of the sorts of games that are going to come to the platform. VR? No idea. There could be something out there that will come in six months' time that puts a take on it that nobody has ever thought of before and for me, that's great."

Ryan said that PSVR is right at the beginning of its lifespan in PlayStation's mind.

"It's too early to really say where it goes," he said, "but, you know, clearly if we have aspirations to make VR into much more of a mass market proposition, we've got to be closer to something like [a pair of glasses] than to a big, bulky headset with wires.

"[PlayStation VR] is ergonomically the best there is, but it's still, you know, it's still quite an exercise to put it on."