Gamers aren’t buying the VR hype, and game makers are quietly hedging their bets

Key Points
  • Game makers are downplaying virtual reality at this year's E3 event.
  • Sales of VR headsets have been slower than anticipated.

A visitor plays a video game while wearing a virtual reality headset developed by Sony Interactive Entertainment.
Chesnot | Getty Images

Actual reality hasn't been especially kind to virtual reality so far.

A year ago, the then red-hot technology basked in the spotlight at E3, with show attendees waiting hours to plug in to alternate worlds at the Sony and Oculus booths.

This year, things are a bit different. Facebook-owned Oculus bypassed the show, foregoing a booth. HTC, makers of the Vive headset, similarly opted against a formal show-floor presence. And while Sony is still showcasing PlayStation VR, the emphasis is more subdued than in 2016.

This all comes as sales of VR headsets have been softer than some analysts were predicting. To date, neither Oculus nor HTC have given any firm numbers for their headsets, but projections have been soft. Research group CCS Insight estimates the two companies sold a combined 1.2 million units last year.

That makes Sony the clear market leader, selling 1 million PlayStation VR headsets since its launch last October. Those aren't bad numbers, but they're not exactly jaw-dropping and certainly don't live up to the early buzz VR gathered.

"People are realizing there's no quality content, so there's no need to buy these systems," says Ben Schachter of Macquarie Capital.

(Sony might argue otherwise. To date, the company says it has sold 5.25 million VR games globally.)

While the early numbers have been lower than expected, some analysts remain extremely optimistic about the long-term prospects of VR. IDC, for example, is predicting triple-digit growth for the category this year. And CCS Insight is predicting an 800 percent increase in sales between now and 2021.

But executives in the VR world cringe a bit when they hear that sort of talk, saying it once again sets expectations that are out of their control.

"I take issue a little bit, if I'm frank, of the analyst view of the world," says Andrew House, global chief executive of Sony Interactive Entertainment. "I think they've been guilty of potentially too much hype in the category.

"This is VR 1.0," House says. "It's the start of a very long road in terms of the maturation of this new medium. Our view of it was fairly slow and steady. ... From our perspective, it's going better than or just as well as we first envisioned."

One reason VR seems to be fading somewhat from people's collective consciousness is the marketing for all of the top-tier headsets, even Sony's, has been minimal. (Only Samsung Gear, which works with mobile devices, has seen a substantial marketing push to date.) House says Sony has refrained because it had initial supply issues. In Japan, he says, the company still can't keep up with demand.

A recent survey from Nielsen, though, found that just 26 percent of the general population (ages 13 and up) were aware of PlayStation VR. Oculus Rift had a 25 percent awareness level and the Vive had just 10 percent. (Samsung Gear, which has been marketed by the company in conjunction with new phones, had the highest awareness — at 34 percent.)

Perhaps more damning is the fact that there hasn't been a definitive software product that captures people's imagination on a widespread basis.

"We are in the trough of disillusionment," say Schachter. "The fact is the software hasn't delivered on expectations. People want it and love it, but it hasn't been delivered. ... You need to see a killer app — a Pokemon Go-type event — on the hardware."

Whether that killer app is on display here at E3 is something only time will tell. But there are a few bright spots for VR enthusiasts to focus on.

First, VR is slowly starting to get cheaper. In March, Oculus lowered the price of the Rift and its Touch Controllers to $598 — a $200 drop.

And at E3, Bethesda Softworks, the developer whose parent company successfully sued Oculus, winning $500 million in February, is showing updated VR builds of both "Fallout 4" and "Doom" — two of its biggest franchises. Ubisoft is showing off several intriguing VR games, including "Space Junkies," a shooter designed with core gamers in mind, and "Transference," a psychological thriller.

"I think we're still on track to seeing our first killer apps for VR in the second half of this calendar year or the first half of 2018," says P.J. McNealy of Digital World Research.