(Chinese Version)

Recently, more and more VR products continue to emerge as industry insiders announce that the year of VR has officially come. The hardware industry, content makers, and the capital etc. are eyeing the VR market.

According to the 2015 Q2 AR/VR Report from Manatt Digital Media, by 2020 the AR/VR market would reach the scale of 150 billion RMB. The report VR & AR: The Next OpenCL Platform from Goldman Sachs shows that by 2020 the video game market alone would reach the scale of USD 6.9 billion with a user base of 70 million.

Industry leaders are confident about this market

In late 2015, Microsoft’s founder Bill Gates used HTC Vive to play tennis with Maria Sharapova and tweeted that today’s VR technology was a major breakthrough after the game.

On the Galaxy S7 press conference in February this year, Samsung provided the journalists present with a Gear VR each to experience the conference. Besides that, its partner Oculus’s boss Mark Zuckerberg was also there to support Samsung, who stated that VR would be the next heavyweight computing platform.

Apple, as another tech giant, hasn’t reveal much about its plan for VR either. However, Apple’s CEO Tim Cook thinks highly of this industry. “I don’t think VR is a fringe technology,” Cook commented in the 2016 Q1 fiscal phone meeting. “Instead, I believe VR is going to evolve fast and bring about many cool applications.”

In China, even the film industry has been eyeing VR technology. Famous Chinese director Zhang Yimou revealed that he’s been experimenting to fuse VR technology with filming. “This technology is going to change the future landscape of the movie industry in the next decade,” Zhang said. Meanwhile, the filming of VR long movie Bijokan, directed by Gao Qunshu, has begun. Another VR movie featuring Chinese legends is also in preparation.

The market is not responding

The prospect of the VR industry stirs up the enthusiasm of hardware makers.

To win more market share, the top three VR giants, HTC, Sony and Oculus, made quick moves to launch consumer-level products. In late February, HTC officially launched consumer-level HTC Vive, allowing consumers to preorder. On GDC in mid-March, Sony officially rolled out PS VR. At present, rumor has it that the boss of Oculus Rift would personally deliver the products to consumers that have preordered.

Statistics from the VR Industry Base Conference show that in the Chinese market there are more then 150 VR makers in total, including giants like Baidu, Tencent, and Alibaba, emerging powers like LeTV and Baofeng as well as startups like VRFIRES and ANTVR. All these companies have made their own hardware and their VR solutions.

Compared with the heated scene within the industry, the market doesn’t seem to be excited, which is shown by the shipment volume of relevant products.

HTC announced that so far HTC Vive’s first shipment has reached a volume of 15,000. Baofeng Mojing on the other hand announced that the company had sold over one million sets. Oculus hasn’t released any specific number yet but statistics from third parties suggest that the company sold 120,000 set in the first three days. Some analysts even predicted that Oculus’s sales volume would not even hit over one million.

The gaming industry doesn’t seem to be a way out

In the report from Goldman Sachs, the applications of VR technology have been divided into 9 areas, which are video game, live streaming, retailing, real estate, education, medicine and health, engineering, and military. Among them, the video game area accounts for 35% of the total applications. It’s important to note that the video game market is shrinking and the cost of a VR game is incredibly high.

Besides their immersive features, VR games, especially those that are based on PCs, are no different from console games at their core. The truth is the mobile gaming sector is gaining more market share from the console game market.

For instance, according to the report from Computer Entertainment Supplier’s Association in Japan, there are currently 43.36 million gamers in Japan, 70% of which are mobile gamers. Statistics also show that in Japan 52.24 million people own consoles, and that 32 million people are active console gamers and only 15.39 million people are constantly-active gamers. This is definitely a bad news for VR games.

As for the cost, due to the limits in performance, mobile VR products can hardly compete with those based on PCs. And if the users want VR products with high performance, then they also need to prepare PCs with high-end video cards and processors. Take HTC Vive for example, the whole set would cost nearly 20,000 RMB. Even PS VR, the cost would be more than 5000 RMB without duty and the digital content. Such high cost makes it very unlikely for video game sector to become a way out.

Startups are dying

The seemingly heated VR startup scene might be just a craze. Eventually, the startup scene would experience a harsh winter. This is the reality that the VR industry has to face.

Some media reported that on the 2016 Shenzhen IT Leader Summit, the former CTO and co-president of Sina, Xu Liangjie, stated that in 2014 there were more than 200 companies that dedicated to the making of VR helmets. “However, in 2015 the number shrank to 60, meaning 70% of those companies failed,” Xu added. “And in this year, another group of VR helmet companies will fail.”

Such statistics might contradict those from the VR Industry Base Conference, but they do show the harsh side of the reality: VR startups are suffering, and the situation will only get worse.

It’s reported that VR and AR projects are burning lots of money. Many VR startups are still in their early stage but they already have a really high valuation, which means once they couldn’t find new financing they would face the danger of complete breakdown. Yu Lifeng, partner at Granite Global Ventures, revealed in an interview that many VR companies are valued at over one billion but their products are still in the early stage, which keeps the capital down.

“At present the VR industry is still far from mature. The overlaps of the hardware and the lack of content are holding the industry back,” Analysys’s analyst Ge Hantao stated on the Future Tendency Of Cinema and VR Forum last year. “The VR industry in China lags behind the ones in the western world. The statistics are suspicious as well. That’s why many people are not thinking positive about the development of the VR industry.”

Furthermore, many VR startups are having internal issues. Some even fabricated their statistics. Earlier this year the article The Truth Behind ANTVR exposed that the internal management of ANTVR is very chaotic, which leads to troubles in business and order faking on crowdfunding platforms. And in March there were also reports saying ANTVR is suspected for financing fraud.

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[The article is published and edited with authorization from the author @Niu Yang, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.