Sony hopes PlayStation can make virtual reality mainstream

A person using PlayStation VR
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After months of buildup, Sony's PlayStation VR hits the market Thursday.

And while it's bound to be a major topic of conversation and hot item this holiday season, analysts say it's unlikely to be a particularly big driver of new console sales for the company.

"Anyone who buys [a PlayStation VR unit] in the next six months already owns a PlayStation 4, so it's not necessarily going to drive that many new console sales, but it certainly extends the brand," said P.J. McNealy, CEO and founder of Digital World Research.

Sony has been warning for months that demand for PlayStation VR is likely to exceed supply. And SuperData Research predicts the company will sell 2.6 million units by the end of the year.

Sony's silver bullet in reaching those numbers is the PlayStation VR's price. At $399 (or $499 for the bundle including a tracking camera and controllers), it's significantly less expensive than Facebook's Oculus Rift (at least $699) or HTC's Vive ($799). It's also the only VR headset that's currently compatible with an existing video game console.

"I think this is the first good example of the midtier VR experience," said McNealy, noting that low end VR encompasses mobile headsets like Google Cardboard, while the high end includes Rift and Vive. "The midtier will prove to be a great experience over time because there are a lot of creative people in the video game space already making products for this. ... Sony will get to capture a whole bunch of the VR dollars for holiday 2016. Holiday 2017 will be a different battlefield, though. Microsoft will be much more competitive on the VR front."

The larger question, though, is whether the mass market is really all that enthusiastic over virtual reality. While Andrew House, president and global CEO of Sony Interactive Entertainment, said he has "rarely seen this amount of enthusiasm early on in a new medium," analysts note that there are several hurdles for the technology to clear.

"Right now, what holds back VR in the broader market is familiarity: Most people aren't familiar with VR, and VR is hard to retail." said J.P. Gownder of Forrester Research. "Content is growing quickly, but with a strong gaming bias today."

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So what about the games that are launching alongside PlayStation VR? Generally reviews have been favorable, and Sony has wisely included titles from big franchises including "Batman: Arkham," "Resident Evil" and "Final Fantasy" to lure fence-sitters. But some of the launch games are short, offering 30-45 minutes of play versus the 40-60 hours players expect when buying a console game.

Prices for these shorter experiences range from $20 to $40. Longer- form games, like "RIGS: Mechanized Combat League," carry a standard $60 price tag.

McNealy called the price of VR games "too high." And even House noted that finding the best price for this new type of play experience hasn't been easy.

"I think people will get a good sense of what kind of value there is," he said. "We've tried to walk a line between a category that has a lot of media and consumer interest and the fact you're asking the consumer to engage with the product in a different way. So trying to understand the degree to which that could constrain demand is a tough proposition."

Ultimately, mass market demand for virtual reality — whether on PlayStation or other platforms — will come down to must-have content. And as with most major system launches, that type of content usually takes a year or two. With the VR hardware market battle now fully engaged, the fight begins among Sony and other manufacturers to see who will have that crowd favorite first.

"VR is still making important strides forward but it may take longer to hit mass market," Ben Schachter of Macquarie Capital said in a note to investors. "New content is steadily flowing in but we have yet to see the killer app that will be necessary to make VR mainstream. We remain optimistic for VR over the long-term for both games and enterprise."