"Jumping" hardware HTC's VR winter logic: pattern, rhythm, ambition

Whether it is from the total amount of investment and financing, or the true feelings of developers, VR has experienced a "cold winter" after the bubble development in the past year. The uncertainty of VR's future slows down the pace of entry for the giants. The relatively stable market structure has made HTC not eager to cope with new product challenges, and left a time window for further deepening of content and channels.

In the case of HTC's strategic VR, how to use the limited funds and time to promote the balance between the two fronts of hardware and content, HTC needs accurate calculations and make strategic choices: whether it is stronger or more indulgent. The “coldest” 2017 will be an important turning point in the transformation of HTC.

Hardware is the foundation of the global VR industry. At present, HTC Vive and Oculus Rift and Sony's PlayStaTIon VR (PSVR) are also known as the "three major products in the field of VR devices. Mobile hardware represented by Samsung Gear VR and Google Day-dream View, although the shipments are large. However, the price is lower and the experience cannot be compared with the "three major products."

In early 2017, SuperData released the 2016 VR market report. The report speculates that the total global shipments of VR equipment (only five major manufacturers) are 6.3 million units. Among them, the Oculus Rift listed in March 2016 was 243,000 units, and the HTC Vive shipped in April 2016 was 420,000 units. The PSVR, which was launched in October 2016, was released at the latest, but it was matched with the PS4 game. The fans of the machine won the championship of 745,000 units.

However, this is also related to the pricing strategy of the “three major products”. With key Lighthouse location tracking technology, HTC VIVE maintains the industry's highest price of $799, the Oculus Rift initially costs $599, and the PSVR is set at a relatively low price of $399.

Since the iteration speed of VR hardware is different from that of mobile phones, no new products have been released for the “three major products”. The price war seems to be the only bright spot in the market recently. The price of the Oculus Rift has been reduced from $599 to $499. Samsung Gear VR has also adopted a price reduction strategy to increase market share through price, but the VIVE price remains unchanged.

The industry’s rumors that VIVE will enter mobile terminals have never stopped. Bao Yongzhe, vice president of the HTC Virtual Reality New Technology Department, confirmed to the Economic Observer. "VIVE has always been doing research on mobile VR hardware in the lab, but when is it commercialized, when it will be announced, it depends on the timing of the market, content ecology, price, etc." Bao Yongzhe said. On the other hand, although China's VR high-end hardware accounts for a low global share, IDC predicts that China's VR market will grow fourfold in 2017. According to IDC's latest statistics, VIVE's share in the Chinese market in the fourth quarter of 2016 has reached 49%. In China's VR market, the status of VIVE boss has been confirmed, at this time the establishment of content ecological water.

“The investment boom of the domestic VR industry began in the second half of 2015, with a half-year investment of 1.68 billion yuan. However, since the second half of 2016, the investment amount has gradually slowed down, and investment institutions have invested in a wide range of VR industries. The review tends to be cautious." Zhao Ziming, an Internet analyst at Analysys Group, told the Economic Observer.

According to the investigation of the VR white paper of Analysys, the investment in China's VR industry is still dominated by Angel Wheel and A Wheel, with a total proportion of 75%. In the segmentation area, since 2016, the investment in VR hardware and technology has slowed down, and investment in the content field has been enlarged.

In this context, HTC shouted at the VIVE Ecosphere Conference, which has the meaning of warming up with the industry. However, Wang Congqing, the president of VIVE China, apparently disagreed with the judgment of “cold winter”. “In July last year, only 28 institutions participated in our VR venture capital alliance. Now it is 45 companies. The total investment pool amount was 10 billion US dollars, and now it is 17 billion US dollars. In just half a year, there is such a change. You say this. Is it cold winter?" Wang Congqing asked. “A good company can get investment at any time, and some people who don’t have the technology, content and industry background follow the trend. It’s strange to succeed.” Wang Congqing said.

According to him, on the VIVEPORT platform, more than 20 software companies have earned more than one million dollars in revenue. Although they are still small compared with mobile games, the return on investment is considerable.

VIVE focuses its current strategy on the cultivation of content ecology and the sinking of channels. It is crucial to gather developers and enable developers to survive and develop.

At the Ecosphere Conference, VIVE announced a series of new measures. Viveport has launched a new monthly subscription service that officially launches VR advertising services, allowing developers to use embedded tools to generate revenue. In addition, Viveport M has signed a cooperation agreement with six VR glasses box manufacturers, saying that it will bring potential mobile VR users of more than 10 million levels to Vive-port M before the end of the year.

Analyst Zhao Ziming said that the profit model and sales channels of China's VR software industry have not yet formed, and the financing ability is relatively weak. The listed companies also converge because of the increase in the company’s cross-details in May last year. Before the large-scale application of VR, it still needs the help of the content platform to spend a long night. Through a year of hard work, HTC has established an ecosystem consisting of hardware, online and offline content distribution platforms, and capital. Together with the VR Venture Capital Industry Alliance and the VR Research Institute, which was just established in Shenzhen, HTC has established itself in the Chinese market. Start a huge VR ecosystem. “This is the first time to do content platform advertising in the global VR industry, and it is also hoped to provide more sources of income for developers. At the same time, in 2016, there are tens of millions of users who have visited our offline experience store, and also hope that developers will get a certain amount of money. Income." Wang Congqing said.

In 2017, entertainment, education and enterprise applications will become the three main areas of VIVE's focus. Wang Congqing said that the popularity of VR equipment is initially in the game, and the next step should be VR cinema. When the mainstream entertainment industry began to embrace VR, the public also reached a new height in its recognition and acceptance.

At this conference, HTC announced that it will co-produce and promote the VR movie "Player One" with Warner Bros., directed by Spielberg. Vive also signed a cooperation agreement with Gome to provide support for China's first batch of 100 Gome VR theaters. At the same time, Vive and Qingdao Publishing Group jointly promoted the VR reading and innovation education display platform, which will be the key schools in major cities across the country. It is understood that in Viveport's platform application, 40% of developers are engaged in non-gaming industry, and half of them are doing educational content. Education VR has a good application prospect in some art disciplines and vocational training fields.

VIVE's ecological blueprint ambition is large, but the most worrying thing is still the financial status of its parent company HTC. According to HTC's 2016 annual report, the overall revenue was 78.16 billion Taiwan dollars (about 2.54 billion US dollars), down 35.8% year-on-year, and the net loss was 10.5 billion Taiwan dollars (about 340 million US dollars), down 32% year-on-year.

A few days ago, HTC announced that it would sell a mobile phone manufacturing plant in Shanghai to a mainland company for about 630 million yuan, which triggered another round of HTC's discussion on abandoning the mobile phone business and turning to VR.

Wang Congqing responded that the closure of the Shanghai plant has many considerations, but it has nothing to do with the VR business. Within HTC, the mobile phone service and the VR service are two independent BUs, and the VIVE R&D staff does not have many mobile phone R&D personnel.

In the interview, Wang Congqing has always stressed that VIVE will focus on VR, which is different from Samsung's logic of driving mobile phones through VR. HTC seems to believe that the current 6.3 million global VR market size can support a company's transformation costs. “A company can earn hundreds of millions of dollars in revenue in the first year of entering the market. This is already a good performance. IDC also predicts that China’s VR hardware market will grow four times this year, which is a very healthy market. Chairman Wang Xuehong also said that in the next 10 years, if VIVE doubles every year, HTC can become a super-large company. Therefore, I believe that the current market development is enough for an industry or company to survive for a long time." Wang Congqing said .

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