Elements of the VR industry and their state of emergence.

1. VR/AR Industry Report
SECTION I : The Present
The idea of Virtual Reality has been at the forefront of human imagination since the early ages. The
whole concept of theatrical performance, and produced media in every formant has been a crude
implementation of the concept: to immerse the viewer in a simulated ‘virtual’ reality. Today, virtual
reality has evolved into what the original creators truly intended. With the help of computer-aided
audio/visual/sensory simulation and inter-actability, we have recently become capable of immersing the
user into a parallel world that seems every bit as real as the one we live in. But we have only opened this
Pandora’s box, and we lay at the mere prologue of history as this technology challenges the status quo
of other forms of media and utility devices. 1
Here are some components of industry emergence as it relates to VR/AR:
1. Firm Strategy
2
We can deduce from the image above that the number of companies being formed in this sector has
been steadily increasing for the past few years. The trend shows no signs of slowing down. Today, there
are thousands of companies that are competing to set standards, and lead the way towards a future
1
https://www.vrs.org.uk/virtual-reality/history.html
2
http://www.virt.mobi/blog/2016/1/20/5-numbers-to-watch-in-2016

2. with diverse formats and applications of this technology to meet a wide range of needs, and to cater to
every single human inclination regardless of race, age, and gender.
3
It can be safely deduced that there is tremendous amount of competition in the sector. In the absence
of a dominant influencer, the competition has been very constructive, and the segment is rife with
opportunities for innovation. There are numerous platforms and a huge number of developer and
content creators for any given platform. Therefore, the market is fertile for companies to emerge as
standard setters, and lead the race.
2. Technology
Virtual Reality has captured the hearts and minds of science fiction for more than a few centuries now.
And it seems that the actual technology has been trying to catch up to the imagination of humans.
Edward Link is credited in creating the first viable, technology driven, interactive Virtual Reality
3
http://www.thevrfund.com/wp-content/uploads/vr_industry_aug2016.png

3. device/application. It was used as a flight simulator to train pilots. And although rudimentary, it was very
practical and has facilitated the training of pilots within safe, controlled environments ever since. But
these were big, cumbersome machines that were practical only for military and corporate scale usage.
4
Today, modern technology has become powerful enough to bring Virtual Reality into the houses of the
masses. With the help of a smartphone (and an economical VR headset), today, enthusiasts can
experience Virtual Reality in their homes. The technology has just emerged enough that an increasing
number of platforms, applications and contents become available to the end user at an increasing rate
for a modest amount of money. But as the technology continues to emerge, and improve, we can
expect to see new innovations more frequently.
3. Investment
There needs to be sufficient amount of money invested in any industry for it to emerge. Industry
emergence and investment are so corelated that one would check the investment in an industry to
gauge the emergence of the said industry. In the case of VR, as demonstrated by the diagram below,
investment has been steadily growing to amount to billions of dollars. All this money is being used
wisely by people around the world to conduct research and development, and to create content for the
VR platforms.
There is heavy investment activity in the industry, and it is a testament to the promises this new
technology holds. As VR products have only recently started to reach the consumers, this investment
4
Billinghurst, Thomas, University of South Australia( https://www.slideshare.net/marknb00/comp-4010-lecture2-
vr-technology)

4. was necessary for the industry to emerge. As the VR products start to reach consumers, and as VR finally
starts to bring in revenue, we can expect the investment to start leveling off within a few years before it
may start declining beyond that.
5
4. Supply Networks
As the industry has only begun to emerge, there are several platforms that are vying to set standards in
the industry. At the current state, there are a few high-volume products that are available for the end
user.
a. Google Cardboard/Daydream: This is a technology that revolves around a smartphone. It uses a
smartphone to provide VR functionalities to the end user. Therefore, all smartphone producers
could be categorized under this sector. A low-cost, self-buildable apparatus can be used along
with an existing smartphone to enable VR usage. As smartphones have become ubiquitous in
today’s tech driven society, we can expect that there will be no shortage of this component, and
is not yet affected by the VR industry emergence.
b. Computer-Driven Units: These units employ the processing prowess of a consumer grade
computer to enable VR applications. This segment has only recently become available for the
consumer usage, and as such, only the latest computers are equipped with the necessary
equipment for VR usage. The main component required in this segment is a discrete graphics
card. With the installation of a powerful enough graphics processing unit (GPUs), even slightly
older computers can be used to enable VR capabilities. But the supply of GPU has been
intermittent, and sporadic due to a niche application of the GPUs. Currently, the GPUs have
seen high demand due to their unintended usage to mine Ethereum, a trending cryptocurrency.
As such, stockpiles of VR capable GPUs have been accumulated by miners in a ‘farming rig’. This
has led to an artificial inflation of GPU prices, and have, for the time being, impaired the growth
of the industry.
5
https://files.pitchbook.com/images/Venture_investment_in_VR_AR_Nil.png

5. c. Standalone Units: Standalone units are, as the name suggests, entirely self-sufficient. They come
with their own processing and audio/visual capabilities and do not require any additional
equipment. But this sector is still in very early stages of growth, and have not yet been readily
available to the general consumer. Therefore, the supply networks of these units, and their
parts up the supply stream have not been affected by the emergence of the industry as a whole.
5. Production
VR platforms have reached various levels in the production hierarchy. Currently, the most viable VR
usage is the smartphone based headsets. These headsets are just used to house a smartphone, while
using a divider to provide a portion of stereoscopics image to each eye, which is processed by the
human brain to create a 3-dimensional image/field-of-view. These units are cheap to produce, and there
are hundreds of companies making generic units at affordable costs. While this is a cheap way to
experience VR, it is also very limiting, as it can only be as good as the smartphone powering the unit.
The most promising VR units are computer powered units such as Oculus Rift and PlayStation VR (and
others). These units are at the scaling stage, as they have just emerged out of the Pilot Stage and are
now reaching general consumers. Over the next few years, this segment is expected to grow as the
producers are able to produce at economies of scale to provide the best prices to the consumer.
Standalone units are still in the pilot production phase, as they are limited by the manufacturer’s
capability to fit the best processing and audio/visual components.
6. Markets
The market for VR technology is at its early stage. There are a lot of early adopters of the technology in
gaming, enthusiast, training, and media consumption sectors of the market. But the market still faces
market expansion gap. Given the potential of the industry, this market gap can be expected to be
overcome with ease. As other elements of the industry continue to emerge, and synergistically fall into
place, we can expect VR technology to be embraced by consumers all over the world without much
deliberation.
7. Governments
Governments play a tremendous role in the emergence of an industry, from investment to policy. In the
case of VR, as the industry emerges and VR products become more common, we can expect the
Government to step in to regulate the industry. VR is about to bring a paradigm shift in the way we
use/consume media, and interact with others on a daily basis. As such, many ethical issues about
exploitation, misrepresentation, privacy, and piracy could be highlighted.
Governments have always taken some time to respond to disruptive technologies, and VR is not
different. We can expect the government to catch up to the industry and form policies pertaining to
these issues. The government should be proactive in enacting regulations before there is a backlash
against VR due to a mishandling of the product and the services by the user or the producer.

6. SECTION II: Roadblocks and Possible Paths
For an industry to emergence, there needs to be a synergy between all the seven elements mentioned
above. It all needs to fall into place at the right time for an industry to emerge. Here are a few elements
that have a critical impact in the further emergence of the technology:
Supply Networks
The hottest market segment within VR right now is the usage of VR for gaming. This is made possible by
a gaming capable computer with VR-capable Graphics Processing Unit. But, there has been a serious
disruption in the supply network of these GPUs.
GPUs have found an unintended usage in farming cryptocurrency. These GPUs are, in essence, an
additional processing unit. Traditionally, they are used to drive the visual engine of the Game while the
CPU handles the game. This graphics processing is what makes these GPUs such an important part of the
VR unit, as without these, it would not be able to process the graphics demand of VR. But lately, mining
a certain cryptocurrency has been trending. The prices of ‘Ethereum’ have gone up, while the processing
prowess required to mine this currency has remained low enough. One can easily setup a ‘rig’ with many
GPUs daisy chained together to create a pseudo-Super-Computer that can churn through number to find
cryptographic keys required for the currency. And while farming it has remained lucrative enough for
miners to essentially create revenue by just running these GPUs.
This has put unnecessary strain in the supply network of these GPUs. Since this is just a trend that is
expected to become not very lucrative in the very near future, the demand for GPUs are not expected to
remain high. Therefore, the producers do not want to risk over-producing these GPUs for the fear of
obsolescence as the GPU technology continues to get better. In the meantime, the GPUs have become
hard to source as the miners have increased the demand. As long as the miners are willing to pay a
premium for these GPUs, the general street price for these GPUs will remain at an artificially inflated
rate. The consumers do not want to pay the inflated rate, as there are lesser, non VR capable GPUs for
reasonable price.
There is, however, a silver-lining. As the Ethereum trend is expected to become less profitable by the
day, consumers expect that these miners will sell their GPU stockpiles while they are still worth some
money. These GPUs are expected to reach the used equipment market and sell for a depreciated price.
When that happens, a lot of capable and willing consumer will become able to get into the VR industry
for a very low cost. This might even enable non-VR enthusiasts to ‘try’ the technology as the capability
of these GPUs will enable them.
Standalone/All-in-One Units
Right now, VR is used in the consumer grade applications to consume media, and for Gaming. Gaming
requires tremendous computing prowess, and therefore needs to be tethered to a Personal Computer.
But, as the industry continues to emerge, it is expected to find applications in utility and general usage
with further development of Augmented Reality, and Mixed Media.
As the technology emerges, there will be firms competing for dominance in this sector. This is where
Microsoft’s HoloLens is expected to slot it. While there is a tremendous backing by Microsoft, there is

7. still room for other players to compete against Microsoft. This segment is in desperate need for a
standard setter to lead the way. While Microsoft is piloting the HoloLens, there are other companies
vying for a strong footing in this niche.
Google Cardboard was Google’s Answer to Oculus. It was a low-cost alternative to Oculus, but it had its
limitations. Oculus and similar products are at the height of their emergence, and will be ubiquitous with
VR in the coming years as a home/office based VR consumption platforms.
But for those on the go, Standalone products have the most potential. For there to be a VR/AR-rich
society, where all computing will be done in a VR/AR platform, Standalone units sector is rife for
innovation. This segment desperately needs player to fill the void, and to create a user-friendly device
that uses VR/AR to solve the problems of the modern man. This sector is set to become the personal-
computing device, to supplant the Smartphone as one’s primary computer. I would personally invest in
Standalone Units segment.
Government
As the industry continues to emerge, it is bound to shed light to a number of ethical issues.
Pornography, Exploitation, and Privacy seem to be of the highest concern regarding the VR industry.
While the industry is still in its infancy, the Government needs to step up to the present and address
these issues. The Government should lead the way for the industry to emerge within controlled, ethical
constraints.
The VR technology is going to be a disruptive force that sets to challenge the status quo of traditional
media and utility outlets. For there to be a smooth transition without unforeseen complications, the
government needs to be diligent and proactive in responding to the issues that loom large upon the
technological advancement of mankind.