Project Morpheus could be the most revolutionary thing we've seen in quite a while. For those of you who don't know, Sony (NYSE:SNE) has a working prototype of a Virtual Reality Headset. However, Sony plans to take things slow (like usual), and wants to ensure the product is just right before they actually release a final product.
Biggest problem with Sony's VR headset
Sony can't release the VR without software developers and third parties willing to design games for the hardware. To highlight the importance of developers, let's rewind history and look at Steve Ballmer's Microsoft (NASDAQ:MSFT) presentation back in 2006. Yes, he sounds like a goof ball, but in reality, the only competitive moat around hardware is the software that goes along with it. Why not UNIX, or LINUX instead of Windows? It's because Microsoft convinced software developers that Windows was the way to go, and if you designed software for their platform, you will make money. Hence, creating a platform that can operate at great economies of scale is the focal point of whether or not hardware reaches the masses.
As you can tell, this device has a very different philosophy from other wearable tech like Google Glass (NASDAQ:GOOG). Sony's VR is about escaping reality and entering the world of virtual in as complete a way as possible. Google Glass forces computing to enter reality, and allows virtual to exist with the tangible. In a sense, the material and immaterial are married together through the visual senses, making the Google Glass extremely different from Sony's VR headset.
Sony's VR headset could be ready for prime time much sooner if it can skillfully include other entertainment mediums like movies. I'd love to sit cross legged on my sofa at home to watch Star Wars episode 7 on a headset. Maybe Sony can include 3D viewing with the Virtual Headset, and Beats Audio, so I can top Harkins and IMAX theaters.
Virtual reality may have to wait for the PlayStation 5
Sony may release the PlayStation 5 sooner than the historical launch window for next generation consoles. Perhaps a 4-year launch cycle may be more appropriate, especially considering a VR headset sold as a stand-alone will fail. Sure, novelty sounds great, but unless consumers are forced to go along with something new, they most likely won't. As is, Sony is having a hard time convincing customers to buy the PlayStation Eye, and Microsoft was unable to leave out a disc drive in favor of a purely digital device. In other words, Sony and Microsoft need to include the VR Headset at the beginning of a console generation.
In the current console generation Microsoft was intelligent enough to bundle the console with the Xbox Kinect. I say smart, because game developers are guaranteed to have the additional input from the Xbox Kinect to offer a more unique game experience. Game developers will avoid adding features to a game that may alienate those who don't have the specific gadgetry needed to make it work. In this sense, console exclusive going to Xbox will be able to take advantage of the Kinect, because everyone who owns an Xbox One also has a Kinect.
Because, Sony has already released the PlayStation 4, there's no way in heck developers will pour massive amounts of money into games that run on a virtual reality headset that consumers may or may not buy. Without games, consumers will find the VR Headset gimmicky because the headset doesn't come with games. Hence, we run into the conundrum of what will come first, the chicken or the egg?
Currently the PS4 doesn't have the technical specs to render graphics that look anywhere near that of CG animated reality (think in terms of Avatar). The movie Avatar took a modern super computer to compress the file size down, meaning that the original file size was massive. Clearly there's a lot of extra room on the mile when it comes to graphical enhancement, and the more like reality it looks like, the greater our chances of having a virtual Avatar.
My guess is that Sony will hurry the launch of the PlayStation 5. The PlayStation 5 will most likely run on AMD hardware, and assuming a 4-year launch cycle, we'll be at 16nm or 10nm processing tech. By then, computing power would have advanced significantly, making it worthwhile for Sony to refresh the console with better hardware and a virtual headset. Since we're operating on a more standardized instruction set (X86), game developers can simply lower graphical settings, for older generation consoles, while working with a new user interface for the next generation console.
If there's one take-away from this, it's the fact that Virtual Reality is no longer sci-fi fantasy. At the same time, for it to work, it needs to operate at significant economies of scale. This goes back to being a business problem rather than a technology problem.
Sony has presented compelling hardware, but hardly any software. This is like a bank opening up for business without having enough cash on deposit to make loans. Unfortunately, Sony missed the timing needed to make it work for game developers, and that's going to give Microsoft just enough time to come up with its own Virtual Reality headset assuming a 3-year development curve.
On the bright side, Virtual Reality Headsets will salvage the video gaming industry, and will prevent the end of game consoles. If anything, technology analysts should begin to wonder if the VR Headset and Google Glass will bring an end to the television.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.