Austin tech companies ponder: What if VR boom doesn't happen?

Austin companies play the long game with virtual reality despite abundant growth and hype.

Posted August 12th, 2016

Story highlights
  • VR as an industry could grow to more than $40 billion by 2020.
  • Austin VR software makers are keeping costs down and looking years down the road before the tech goes mainstream.
  • Despite a number of hardware launches this year, there still aren't enough people with VR hardware to support big-budget games.

If you're only going by where the attention in tech media is right now (and especially what was most buzzed about at South by Southwest Interactive in March), virtual reality is due for explosive success very, very soon, perhaps as soon as you finish reading this article.

VR as an industry covers a wide category of technologies that has come to include everything from VR headsets such as Oculus Rift to augmented reality (think "Pokemon Go") to 360-degree video, which is being touted for sporting events like the Olympics and for real estate and future tech that will likely beam imagery directly in to your eyeballs (not making that up).

Sales of VR gear and software is expected to reach about $2.86 billion for 2016, even with lowered forecasts, and to hit heights of $40.26 billion by 2020.

Austin is poised to become a hub for much of that activity. Video game developers, filmmakers, marketers and researchers are embracing the potential of VR, creating a growing ecosystem for VR in Austin

Already, the city has played host to a traveling VR film festivalattracted international attention for VR attractions at SXSW, has been the home of a Kickstarter funded treadmill for use in VR and, of late, a place where scrappy VR pioneers are drawing significant financial backing.

Contributed by Virtuix Holdings, Inc.The Omni is hardware meant to provide a way to move around in virtual reality. It was developed by Austin-based Virtuix and will be used with a VR version of "Crisis Action," a popular first-person shooter from Chinese company Hero Entertainment.

But what if VR doesn't go mainstream quickly enough to support the growing number of companies jumping into the technological fray? What if VR fizzles, going the way of the hype around 3-D television, QR codes and 3-D printing, which -- useful as it is -- has not led to a boom in sales of devices for the home?

Barbary Brunner, CEO of the Austin Technology Council, counts herself as a big fan of VR and its potential. She says that augmented reality in particular has such potential to change everything from the medical industry to retail shopping, that it's unlikely it won't cause significant disruption.

"We've seen it before with smartphones, we've seen it before with tablets and smart watches," said Brunner, who worked with Microsoft on a very early device called the Microsoft SPOT, which was more than 10 years ahead of its time. "There are so many potential uses. V.1 and V.2 of any emerging technology is always shaky and always has people who are going to be disappointed. Eventually the technology will become perfect enough to create seamless interactions," she said.

Brunner says that Austin has a healthy mix of silicon-based industries and tech talent to support VR companies through that transition. That includes PC makers such as Dell Inc. and chip makers such as AMD, which of late has been pushing hard into the VR enthusiast market. Brunner points to Magic Leap, a mysterious Florida-based company working in VR that is hiring in Austin and expected to open an office here soon.

"That says to me there's talent and experience and a community here that they want to take advantage of," Brunner said.

Weathering the 'Trough of Disappointment'

Alex Schwartz, CEO of game developer Owlchemy Labs, which just raised $5 million to continue developing its VR products, said his company has been in the space since 2013 and is prepared to stick around through the highs and lows that the tech will inevitably go through.

"It's a market trend we can predict," he said, "we're entering this 'Trough of Disappointment.' Investment money, hype, press will overinflate the predicted curvature in the first two years. Hardware sales are clearly not going to be able to get the numbers that some of the predictions are calling for," Schwartz said.

Despite releases of the Oculus Rift and HTC Vive headsets this year and Sony's upcoming PlayStation VR, there still aren't enough VR headsets in people's hands (and on their faces) to generate enough income for developers, at least not right now.

Contributed by Owlchemy LabsA still from "Job Simulator," a VR game from Austin-based Owlchemy Labs.

"We can't make enough money making VR content today, period," Schwartz said. "Everybody in the space is manufacturing bound. I have no doubt that VR will become a huge 30- to 40-year medium that defines and changes all future mediums to work with. But I'm not deluded to think it'll be an overnight change."

Owlchemy has made a bet on making its games, such as "Job Simulator," run on all the emerging VR hardware devices and has partnered with those makers. Its game was bundled with the HTC Vive and will be a launch title for Sony's VR headset and the Oculus Touch controller. The company is only working on VR projects and jumped in early. "Most of our advisers said we were completely insane to jump into VR in 2013," Schwartz said. "We knew we'd be a year ahead of everyone else."

Right now, VR is constrained by costs for many users. In order to run Oculus Rift and HTC Vive, you need a PC with high-end graphics hardware and the headsets themselves cost more than $500. The headsets are connected by a wired tether that will eventually go away as the technology improves and goes wireless. VR developers are hoping that Sony's VR headset, which runs on the PlayStation 4 and cheaper devices like the Samsung GearVR, will open the door wider and more quickly.

TheWaveVR, an Austin and Los Angeles-based company combining VR with music performance, raised $2.5 million recently and is betting on mobile phone-based VR as well as emerging devices such as Google Daydream to create a bigger marketplace.

Contributed by TheWaveVRTheWaveVR has raised $2.5 in seed funding for its music VR project, which would allow for live performances in VR.

Finn Staber, co-founder of TheWaveVR, said that his company can continue to operate in the niche of early VR adopters and make its product accessible through nearly any device.

"As we get more hardware proliferated in the marketplace, we're gonna see the mainstream consumer base really pick up," Staber said. It doesn't hurt to have a visually exciting product endorsed by well-known DJs and to put on live events to draw interest. "That'll definitely happen because of how cool and enjoyable it is."

An indie aesthetic

J.J. Castillo, founder of Austin's Viewer Ready, was a veteran of Rooster Teeth Productions before he left to pursue VR full time at his own company.

He says so many big players are entering the market that in a sense, "VR is at a point where it's too big to fail. You can't put it back in the box. Once people know it exists, people are interested. The PlayStation release is really going to solidify the market."

Contributed by Viewer ReadyAustin's "Viewer Ready" developed "Pitch-Hit," a VR baseball game available on Steam. 

Castillo's company has created "Pitch-Hit," a VR baseball game demo that he plans to release as a full game next month on Steam. For Castillo, much of the challenge for VR developers is how to keep costs lean, develop for multiple platforms and price software realistically, whether it's as a free demo or a $10 full game.

"Some people will go and spend $1 million to produce a really good game. Let's say you make it for the HTC Vive. Even if everyone with a Vive buys that game, you're not going to make that $1 million back," Castillo said.

His company, Castillo said, is embracing a more indie aesthetic, turning an investment of $1,500 in a tech demo into a $10,000 customized VR product for a retail chain client.

"I'm able to approach it like indie movies," he said. "Let's see how much we can squeeze out of these costs and how many hats we can wear." 

It might be a romantic time for VR makers, whether they're coming at it from game development, marketing or traditional filmmaking. At least that's how Castillo sees it.

"I always read these books about the old days of film, and how people just kind of elbowed their way up the ladder with no real background in the medium, and was bummed that I missed that moment in time, when you could just put the camera in a weird spot and all of a sudden you have invented a technique," he said. 

"That’s what VR is right now."