VR’s the star at this week’s gaming expo
The race to dominate virtual reality is about to speed up.
On Tuesday, the video game industry hosts its signature event, the Electronic Entertainment Expo, in Los Angeles. Last year, more than 52,000 attended E3. While consumers know Sony’s PlayStation VR will command most of the attention, there’s a possibility Microsoft joins them with a VR device of its own. Meanwhile, video game and software makers are expected to reveal more experiences suited for virtual reality, the content that will make this early crop of VR headsets worth buying.
“VR will be a major focus at E3,” says Piper Jaffray analyst Michael Olsen.
Sony’s PlayStation VR is among the big names heralding this push toward virtual reality, along with Facebook-owned Oculus and its Rift headset and HTC’s Vive.
The Japanese tech giant is expected to use E3 to give a first glimpse of the Sony games and experiences that will run on its previously announced headset, a device that works with its PlayStation 4 video game console. Available in October, it’s entering the market with an early edge — its price. At $399.99, the Sony VR set is cheaper than the $599.99 Oculus Rift and the $799.99 HTC Vive.
Olsen says Sony also boasts a “major advantage” as a known brand among video game players. As of May, Sony confirmed it sold more than 40 million PS4 consoles worldwide. “If it’s any platform players will trust, it’s PlayStation,” says Olsen.
Meanwhile, rumors swirl around a possible VR device Microsoft, maker of Xbox, is planning. Reports suggest Microsoft could make its own push into the space separate from HoloLens, its augmented reality headset. While a developer’s edition is available now, Microsoft has yet to share when consumers can try HoloLens.
Olsen predicts Microsoft will make a “bigger push” into VR, but not this year. A recent report from video game site Kotaku claims Microsoft is working on a version of the Xbox One capable of running a VR headset like the Oculus Rift.
Headsets aside, the quality of new games and other content for VR will determine whether this latest medium catches on this year — or remains an object of curiosity. A survey from Newzoo in April found 11% of the global online population plans to buy a VR device in the next six months, and new experiences unveiled at E3 could push more consumers off the fence.
Microsoft will likely reveal Xbox One hardware, says Wedbush analyst Michael Pachter, in a lower-priced form. “I think it’s a logical progression based on where they are in the cycle to make a less-expensive box.”
Sony confirmed it’s working on an upgraded PlayStation 4 capable of running 4K content, but Interactive Entertainment president Andrew House revealed it won’t make its debut at E3.
These refreshed consoles arrive as hardware sales in the U.S. are declining. According to NPD Group, video game hardware sales are down 20% at $844.5 million as of April 2016.
“Some of that has to do with softness of pricing,” says NPD analyst Liam Callahan, citing a recent drop in price for the PS4
and promotional deals for the Xbox One.
Regardless, consumer spending on video games is expected to continue a slow climb. Consumers in the U.S. spent $16.97 billion on games (not including consoles or other game hardware) in 2015, according to consulting firm PricewaterhouseCoopers’ annual Global Entertainment and Media
Outlook 2016-2020. Video game revenue is projected to $17.7 billion this year and, in 2020, about $20.3 billion.
Spending on console games (including physical copies, digital downloads, online microtransactions) is projected to account for $10.57 billion, or about 60% of game spending, this year. Console game spending is projected to grow slightly to $11.3 billion in 2020 (52% of total game spending).
“We do anticipate another generation of consoles and are also seeing innovation in the video game space,” said PwC director Matt Lieberman. “We see the gaming community growing, with social media helping drive increases in online transactions and social games.”
Another potential rising market for video game companies is eSports. A report from research firm Newzoo finds the number of people aware of competitive video gaming reached 1 billion worldwide.
Publishers Electronic Arts and Activision launched divisions to capitalize on competitive video gaming, while others including Microsoft are creating tournaments around franchises like Halo. Meanwhile, networks including ESPN and Fox Sports, as well as advertisers, are jumping on board.
“Esports is a pretty interesting secular trend that is only gaining momentum,” says Digital World Research analyst P.J. McNealy. “There is real money going into some of these tournaments, and it’ll attract a larger audience.”
But expect much of the talk to center on virtual reality and its future. “VR (and) AR are here to stay,” says Newzoo CEO Peter Warman.