Re­al­ity bites

Has China’s proph­e­sied VR boom be­come a vir­tual dis­as­ter? 来势汹汹的虚拟现实技术真的火了吗?

The World of Chinese - - Tech Support - BY DAVID DAWSON

At 50 RMB for a few min­utes in the vir­tual re­al­ity (VR) booth, cus­tomers in the swanky down­town Beijing mall just weren’t bit­ing.

Dou­ble that price got you three turns, but the 15 min­utes of cut­ting-edge en­ter­tain­ment still didn’t seem enough of a draw­card, es­pe­cially when shop­pers could hap­pily kill a cou­ple of hours at a 3D mati­nee movie next door for even less.

Such is the cur­rent state of VR en­ter­tain­ment in one of the more pol­ished of­fer­ings among the thou­sands of “ex­pe­ri­ence out­lets” and ar­cades that have pro­lif­er­ated around the coun­try, pri­mar­ily in Shen­zhen and other first­tier cities, on the back of a promised VR craze.

Af­ter forking out the 100 RMB and se­lect­ing the hor­rorthemed “Hor­ri­ble Vil­lage” ride, I was rec­om­mended an al­ter­na­tive, “Per­cep­tion of Death” as “more fun.” The re­sult­ing ex­pe­ri­ence, a brief trip in a wheel­chair through what was pre­sum­ably a burnt-out in­sane asy­lum, in­fested with zom­bies and ghosts, was blurry and lacked in­ter­ac­tiv­ity. Aside from the abil­ity to peek a few ex­tra de­grees in any given di­rec­tion, un­der­go­ing this Per­cep­tion of Death was not all that dif­fer­ent to one of China’s many du­bi­ously ti­tled “4D” cin­e­mas, which, aside from mov­ing chairs and oc­ca­sional blasts of wa­tery mist, are es­sen­tially the same as stan­dard movies, al­beit without any hope of a de­cent script.

But be it shoot­ing at ro­bots in a desert with a sniper ri­fle, or ski­ing through alpine forests with quick turns and jumps—which, un­like the hor­ror games, can make some users feel nau­seous––lack­lus­ter ex­pe­ri­ences like th­ese cut to the heart of the prob­lem fac­ing the VR in­dus­try: The hard­ware for a proph­e­sied boom may or may not have ar­rived, but the soft­ware just isn’t there yet.

Through­out 2016, even as hun­dreds of VR star­tups crashed and burned, bullish re­ports in both main­stream and trade me­dia her­alded a new world of vir­tual en­ter­tain­ment. In Novem­ber, a South China Morn­ing Post colum­nist spec­u­lated that VR would soon be used to of­fer sneak peeks of travel des­ti­na­tions, while mu­se­ums would of­fer vir­tual tours, call­ing the suc­cess of the in­dus­try “vir­tu­ally as­sured.” If its boost­ers were to be be­lieved, VR was on the cusp of rev­o­lu­tion­iz­ing ev­ery­thing from ed­u­ca­tion to shop­ping, work and en­ter­tain­ment.

Doubters were con­fronted with the ex­plo­sion in VR ex­pe­ri­ence out­lets around the coun­try, as well as some hefty in­vest­ment by big com­pa­nies. Last July, tech gi­ant HTC based in Tai­wan, which pro­duces the Vive head­set, an­nounced plans to open 10,000 such VR ex­pe­ri­ences through­out China, in part­ner­ship with Vive re­tail­ers, along with 10 bil­lion USD in in­vest­ments with lo­cal VC firms to sup­port the in­dus­try. An­other com­pany, EMAX, al­ready has around 170 out­lets in East Asia; Quartz es­ti­mated the to­tal out­lets on the main­land in Septem­ber 2016 at around 300.

If last year marked a dizzy­ing sum­mit in VR in­vest­ment, by the time 2017 rolled around, things were look­ing less op­ti­mistic.“the VR in­dus­try was stim­u­lated by a large scale of cap­i­tal flow, but this also brought about a de­cline,” Al­ger Liu, an an­a­lyst with mar­ket re­search group ii­me­dia, told TWOC. “In 2016, VR was con­fronted with a boom­ing in­dus­try be­cause a mass of cap­i­tal flowed into in­vest­ments.”

Re­tail gi­ant Alibaba of­fered vir­tual “shop­ping ex­pe­ri­ences” on Taobao via cheap card­board-ands­mart­phone head­sets as a sales gim­mick to push prod­ucts; cus­tomers could visit Times Square in New York and view prod­ucts in Macy’s flag­ship store. Mean­while, tech com­pa­nies, led by Vive’s HTC, banded to­gether to form a multi-bil­lion dol­lar in­vest­ment al­liance and part­nered with the Shen­zhen gov­ern­ment to push the tech­nol­ogy via a 1.5 bil­lion USD re­search in­sti­tute

Even as ev­ery­thing seemed at full steam, cracks be­gan show­ing late last year. In 2015, sev­eral hun­dred Chi­nese firms were jock­ey­ing to pro­duce their own head­sets; by late 2016, ac­cord­ing to startup founder Fang Wenxin,

there were barely 10. In De­cem­ber, China Daily blamed the pro­lif­er­a­tion of copy­cat pro­duc­ers for bring­ing a “win­ter” upon the in­dus­try and suf­fo­cat­ing fundrais­ing. Other sources dis­pensed with talk of a boom en­tirely: One re­port pointed out that 90 per­cent of do­mes­tic star­tups had de­clared bank­ruptcy and the re­main­ing play­ers—firms such as Al­fareal, Storm Magic Mir­ror, and Mi­ido—had started to lay off staff and with­hold salaries.

TWOC con­tacted two ven­ture cap­i­tal groups and reached out to four dif­fer­ent VR star­tups, to com­ment on the re­cent spate of clo­sures. Most did not re­spond, while one startup said that it was cur­rently “not a con­ve­nient time to talk” and would pre­fer to wait un­til it was.

Es­sen­tially, smaller com­pa­nies all run into a sim­i­lar prob­lem: while there is plenty of en­thu­si­asm for VR ex­pe­ri­ences and the po­ten­tial is there, vast sums of money and tech­no­log­i­cal know-how are re­quired to pro­duce orig­i­nal, pol­ished VR soft­ware. Cur­rently, Chi­nese VR con­tent comes mainly in the form of sim­ple games and videos—there’s lit­tle qual­ity in ei­ther field, and a low up­take in costly do­mes­tic hard­ware means that brands lack cus­tomer loy­alty. The bil­lion-dol­lar big hit­ters may have hopes of crack­ing this mar­ket, but the smaller star­tups have far more lim­ited hori­zons than many had as­sumed.

“The re­quire­ments of the VR in­dus­try are gen­er­ally un­der­es­ti­mated,” Liu said. “The op­er­a­tional and tech­no­log­i­cal level of th­ese startup com­pa­nies var­ied dra­mat­i­cally, es­pe­cially in terms of hard­ware man­u­fac­tur­ing tech­niques. To some ex­tent, the Chi­nese VR in­dus­try might have been un­sus­tain­able from the very be­gin­ning, even though it looked like it was flour­ish­ing.”

Liu pointed to the vast in­vest­ment re­quired to pro­duce hard­ware, such as head­sets, that is both com­fort­able and cost-ef­fec­tive. “This has re­mained at the el­e­men­tary stage so far, pro­vid­ing lit­tle pos­si­bil­ity in achiev­ing a tech­no­log­i­cal break­through,” Liu said.“con­se­quently, ho­mog­e­niza­tion has be­come a big is­sue, be­cause small busi­nesses don’t have any ad­van­tages when com­pet­ing with big ones. When in­vestors re­al­ized this, they started to lose in­ter­est and con­fi­dence in the VR mar­ket, and be­gan to with­draw money at the end. Many com­pa­nies couldn’t sur­vive without financial sup­port.”

Of course, ac­tual tech­no­log­i­cal de­vel­op­ment is not nec­es­sar­ily the same as set­ting up a VR “ex­pe­ri­ence” cen­ter. For be­tween 6,000 and 10,000 RMB, any­one can or­der a Vive head­set on­line. The pri­mary com­peti­tors, the Face­book-backed Ocu­lus Rift, re­tails for be­tween 5,600 and 13,800 RMB, de­pend­ing on the im­porter and model. As the ba­sic in­vest­ment re­quired to set-up shop, it’s pretty min­i­mal, while for the truly cash-strapped, there are cheaper, lo­cal op­tions like Leeco and Baofeng.

The rel­a­tively low cost of en­try made VR ex­pe­ri­ences an at­trac­tive small busi­ness to launch—par­tic­u­larly for the young, gen­er­ally male en­trepreneurs who want their own busi­ness in this in­dus­try. But there are a lot of ques­tions over whether VR ar­cades are help­ing or hin­der­ing the in­dus­try’s de­vel­op­ment as a whole. While they may ex­pose more peo­ple to the tech­nol­ogy, it might be detri­men­tal to the over­all VR in­dus­try if the ex­pe­ri­ence is sub-par.

Even when the tech­nol­ogy is cut­ting edge, there are still prob­lems mo­ti­vat­ing con­sumers to buy. Aware­ness of VR is still rel­a­tively low, de­spite all the ex­pe­ri­ence cen­ters around the coun­try, and a sig­nif­i­cant num­ber of peo­ple get mo­tion sick­ness from un­der­go­ing rapid move­ment in head­sets. Liu cites ii­me­dia re­search say­ing that over half of Chi­nese con­sumers have never even heard of vir­tual re­al­ity, while 71 per­cent wouldn’t think about buy­ing it. He also points out that unit costs need to come down for most con­sumers to con­sider buy­ing the tech­nol­ogy.

De­spite the re­cent hard­ship, VR is not go­ing any­where for now. Amer­i­can com­pa­nies may dom­i­nate head­set man­u­fac­tur­ing for the time be­ing, but large Chi­nese com­pa­nies have carved out a niche in the VR mar­ket. Storm and LETV have made their pres­ence felt, while 3Glasses is cur­rently one of the lead­ers in the mar­ket—due, in large part, to their man­u­fac­tur­ing base in Shen­zhen and a part­ner­ship with Mi­crosoft. Be­tween that, and a 60 mil­lion RMB deal with film com­pany O-film to buy their stock, 3Glasses has achieved a val­u­a­tion of 560 mil­lion RMB.

In the mean­time, man­u­fac­tur­ers will be cross­ing their fin­gers and hop­ing for some magic-bul­let piece of soft­ware that makes the hard­ware be­hind it all worth­while. Some com­men­ta­tors claim that China’s pas­sion for ed­u­ca­tion may drive VR’S fu­ture suc­cess, as kids sit in VR class­rooms. Oth­ers say that vir­tual shop­ping ex­pe­ri­ences will pay for them­selves via in­creased con­sump­tion.

But, per­haps, pro­duc­ing a ski­ing game that doesn’t make users sick would be a good start.

“TO SOME EX­TENT, THE CHI­NESE VR IN­DUS­TRY MIGHT HAVE BEEN UN­SUS­TAIN­ABLE FROM THE VERY BE­GIN­NING, EVEN THOUGH IT LOOKED LIKE IT WAS FLOUR­ISH­ING”

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