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Text / Wen Yehao
Source/Photon Planet (ID: TMTweb)
On the one hand, the smartphone market is sluggish, and on the other hand, it is boosted by the heat wave of the Metaverse. In 2022, it has become the “Shura Field” where giants compete for the VR/AR cake.
Especially after Meta tried to seize the opportunity by changing its name, players from all walks of life became obviously anxious. Old players such as Sony continued to exert their efforts, while new players such as Byte and Tencent poured in one after another, with clear ambitions.
Obviously, the giants lacking stories are trying to reshape the growth logic through this new track. From 2021 to 2025, shipments of extended reality (XR) headsets will increase by about 10 times, according to Counterpoint.
But predictions are only predictions after all. In the face of an immature market, no one can give a definite answer at present. In other words, Meta and its challengers are doing their best to participate in a big gamble on whether the VR/AR trend will actually come.
Who is hunting Meta
From the so-called first year of VR in 2016 to the second spring driven by the Metaverse boom, the logic of the VR industry has undergone significant changes.
At that time, almost all VR equipment manufacturers were emphasizing the hardware itself. At present, players are following Meta’s ideas, which seems to indicate that the hardware + content play is the mainstream way of the VR/AR industry.
There are three types of players who are eyeing Meta. One is an Internet giant with a place in the field of interactive entertainment, one is a hardware manufacturer with hardware and supply chain advantages, and the other is an all-rounder with both content and hardware capabilities. player.
Among them, the pure software route is the most unpleasant. After all, VR/AR is generally considered to be the “ship ticket” in the post-smartphone market era. Without hardware entry, the imagination space will be greatly reduced, and it may be subject to hardware manufacturers.” kidnapping”.
It can be seen that whether it is Byte or Tencent, the giants coveting the market are almost all making up their own hardware capabilities. In June of this year, it was revealed that Tencent had officially established an XR department. Earlier, there were rumors that Tencent acquired Black Shark Technology. Byte, on the other hand, acquired VR manufacturer Pico early last year and incorporated it into the XR business line, and recently released a new wearable device.
However, hardware capabilities are just tickets to the finals, not the way to win. At present, there is no device that can cover both light and heavy users at the same time. Although stacking hardware can improve the experience, it will also increase the cost and violate the overall consumption level of the market. In the end, it can only catch a very small number of enthusiast players.
In the face of an immature market, the primary goal of each player is to capture light users with a larger base. For light users, since VR/AR still lacks rigid needs, the price will be the biggest threshold. Once the cost of early adopters is too high, the willingness to purchase will be greatly reduced. That is to say, in front of the relevant manufacturers, there is only the road of cost performance.
The Oculus Quest 2, which established Meta’s dominance, is the product of the cost-effective route. Even if it has been in existence for two years, it is difficult to surpass it in the market. Not long ago, according to its chip supplier Qualcomm, the VR device Oculus Quest 2 has sold 10 million units.
The master opened the way, and the disciples followed. Taking Byte as an example, one year after the high-profile acquisition of VR hardware manufacturer PICO, it brought out PICO 4, which has the power to fight in terms of specifications and cost-effectiveness, in an attempt to replicate the logic of Meta. The logic switching of the track will undoubtedly impact the status of traditional hardware manufacturers.
Previously, due to differences in previous businesses, hardware manufacturers often had certain advantages in product design, supply chain relationships, etc., which naturally could effectively reduce costs. However, this scale advantage is only for “second-rate opponents”. Once the opponent becomes a giant, the advantage will turn into a disadvantage.
The logic behind it is that hardware manufacturers have a relatively single revenue structure, lack content ecological support, and are extremely dependent on the negligible profits brought by selling hardware. .
Internet players are different. If necessary, they can make the price of the equipment lower than the cost, and then rely on the software ecology to make profits, killing hardware manufacturers. This was more common in the past game console battlefields, and the high-priced games in Quest2 are also a reflection of this style of play.
From the perspective of the layout and actions of each player, the play of hardware concessions and content payment may become the main theme of the VR/AR track. In this context, whoever has the most market traction in the content ecology will be able to take the initiative in this battle.
The content of the giant battle
Since VR first fell from the air, the content ecology has always been the heart disease of the VR industry. Take the VR product launched by a certain mobile phone manufacturer as an example, not to mention the impact of outdated hardware on the experience, its weak content ecology cannot support users’ pan-entertainment needs at all, and can only be reduced to a tool-based movie viewing device.
Even now, Meta, as a benchmark manufacturer, is also facing challenges at the content level. Taking its exclusive content as an example, almost all of them are lesser known works such as “Wands Alliances” and “Liteboxer VR”, and the more famous “Resident Evil 4 VR”, the original work is actually a work released in 2004, Market appeal is limited.
Even though Meta is at the forefront at this stage, it has not established an insurmountable advantage in terms of content ecology. In other words, challengers have every opportunity to overtake through content.
Since the current installed capacity in the market is not high, content producers blindly devote resources to VR/AR, which is likely to fall into an unprofitable situation. Take the long-awaited 3A game in the consumer market as an example. The development cost is tens of millions or hundreds of millions of dollars. Even if it is launched on all VR platforms, it may not be able to recover the cost, let alone as an exclusive content on a single platform.
It can be seen that in addition to “Half-Life: Alyx”, works that can support the quality of VR content in recent years are either the products transplanted from other platforms such as “Resident Evil 7 VR Edition” and “Resident Evil 8 VR Edition”. Or a work such as Horizon VR Call of the Mountain that can reduce costs by reusing existing resources. In this regard, Sony, one of the “Three Royals”, will have a certain advantage.
Compared with Sony, which relies on high-quality games to cut into heavy users, Byte seems to have embarked on a completely different path. Judging from the content scenarios bound by PICO4, there is a lack of hard-core applications, and it is obviously biased towards light users. As mentioned above, it is more pragmatic to target light users at this stage, but the construction of light content is relatively easy, and it is difficult to form a moat. How to ensure the competitiveness of the content level will become the key.
In this regard, PICO, which is backed by Bytes, seems to have deliberately avoided the game scene with serious involution and made efforts towards the video content ecology. It is reported that PICO is intensively establishing cooperative relationships with content production companies, streaming media platforms, etc., and is trying to fill itself with UGC content through the “Creator Incentive Program”.
Obviously, Byte, which is slightly weak in the game field, wants to open up the path between user creation and content consumption, thereby increasing the barriers to its own content ecology, but for creators, the production of VR content at this stage means more complicated workflow and With a smaller audience, it is likely to be thankless. Based on this, it will be difficult for Byte to migrate the original content ecology to VR scenes in the short term.
Similar to Byte, the trend of Tencent’s XR business also seems to be in line with its own fundamentals. It is reported that Ma Xiaoyi is the general manager of Tencent’s XR business, and Shen Li is in charge of the specific business. Both of them are veritable veterans of the game industry. It is worth mentioning that Tencent and Logitech recently jointly launched a cloud gaming handheld.
The so-called cloud game means running the game in the cloud. The service provider compresses the rendered game screen and transmits it to the user through the network. The user only needs to connect to the network and display device.
The cloud gaming capability is a major export for balancing the portability and performance of VR devices at this stage. The person in charge of Xiaomi cloud gaming once said on a forum last year that Xiaomi will make a comprehensive layout in cloud gaming, AR/VR and the metaverse. But cloud games are not a panacea. The industry’s big brother, Google, has used Stadia to teach the industry a lesson – even with cloud games, upstream content capabilities are still indispensable.
In addition to games, social networking is also an extremely important hand for Tencent. However, limited by the level of technology, the so-called XR social network has always lacked a way to provide a sense of belonging to the social circle, and it is impossible to convince users to indulge in it.
Recently, documents leaked from Meta showed that Horizon Worlds, its metaverse social platform, was of poor quality, and was disliked by employees even internally. It is worth mentioning that Horizon Worlds, as a virtual community, is the main position of the social matrix of Meta. In other words, Meta, which holds the same social card, seems to have tried and made mistakes for Tencent – pure social networking cannot support the immature XR scene. In order to explore a feasible path, more “small but refined” attempts may still be needed.
In the final analysis, whether it is Sony, Tencent, or Meta and Byte, they are all trying to graft their own longboards into the content ecology, and their playstyles are also different. However, from the current point of view, establishing a scale advantage will be a clear path – only by expanding the scale of its own users can it attract more content developers and creators, and then improve the content ecology and attract more users. Byte has spared no effort to push PICO4 some time ago, and it is likely to go to users.
Waiting for Apple’s answer
It is undeniable that the current XR track has players allotted the cake. However, according to the aforementioned Counterpoint’s prediction, the share of each player at this stage is just an iceberg on the water, and there may be a huge market that needs to be developed under the water.
The logic behind it is simple. If the XR device is regarded as the next smartphone, it will inevitably end up in thousands of households; if the XR device is regarded as the next-generation mainstream interactive entertainment device, it may replace the status of home game consoles. Judging from the existing route, XR manufacturers seem to be more willing to “step on two boats” in order to become a disruptor in the field of consumer electronics.
In addition, XR equipment also has many stories to tell in the B-end market. Taking the in-vehicle scene as an example, both Tesla and Audi are trying to enrich in-vehicle entertainment through XR devices, and even put AR applications into the windshield to create a more intelligent driving experience for users. If any of the aforementioned paths can be passed, then there will be an almost endless demand.
Although the stories are all tempting, no matter how players pour in with hot money, and how supply chain companies are gearing up, the popularization of XR equipment ultimately needs to face the consumer market – only if it sells can it become a real trend, and if it doesn’t sell, it will be self-inflicted. Hi.
Judging from the current trends of the players, the situation does not seem optimistic. Recently, Ming-Chi Kuo revealed that Meta may postpone all AR/VR projects after 2024, and reduce this year’s shipments by 25-35%. Once the news came out, the market value of Goertek shares evaporated by 10 billion. It can be seen that even Meta, which is at the forefront, is facing huge uncertainties, not to mention the challengers of Meta.
The logic behind it is that no matter how hard the players work on the content ecology, the XR track always lacks an instant killer app, or killer gameplay and interaction—if it doesn’t constitute a rigid need, it can only serve users “early adopters” forever. ‘s demands.
According to the aforementioned logic, Apple is undoubtedly a BOSS player on the XR track. Not only does it have advantages in hardware fields such as mobile processors, but its software ecosystem also gives XR devices more possibilities. In addition, Apple has also been complementing content capabilities such as games and streaming media. For now, Apple, with its software, hardware, and content ecosystem, is undoubtedly the most comprehensive player in the XR field.
Based on this, except for minorities such as Meta, Byte, and Sony, although the vast majority of players are frantically developing various layouts, they have always maintained a wait-and-see at the product level. It is not difficult to guess that all players may be waiting for the answers given by Apple. After all, not all players have sufficient cash flow. A set of mature templates will save the cost of trial and error in the early stage to a large extent.
In other words, the current stage may only be the preliminary stage of the XR track, and the real contest may not start until Apple officially enters the war.
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