The Lucrative World of Virtual Reality
It’s no understatement to say that virtual reality is enjoying a boom. It used to be that such technology could only be seen in movies and TV shows, but in recent years, many companies have made use of it to attract more customers and earn more profits. For instance, even companies like snowmobile producers and furniture makers are adding virtual reality to their offerings or services in the aim to liven up their businesses, which might probably see a lack of growth due to the weakening economy. It is a commonly held belief in the business world that VR technology can help them increase sales while minimizing overhead costs.
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One such company is the theme park operator Six Flags, which is equipping some of its traditional roller coaster rides with Samsung VR headsets so its customers can enjoy new and exciting experiences on the rides without necessarily having to overhaul them or making entirely new and expensive adverts for them. Another company that is benefiting from VR technology is Arctic Cat, a snowmobile manufacturer that will now allow its customers to test out its new models via VR rides. Similarly, eBay’s StubHub is testing out a new process that allows its customers to test out the views from different seats before they buy tickets. A report about the corporate earnings of some 38 companies that included the New York Times and the furniture distributor Wayfair has revealed that VR is commonly treated as an important component of the said companies’ business plans.
In addition, Reuters made an analysis of earnings calls transcripts wherein it was discovered that out of the eight companies that did a similar business strategy last year, they all enjoyed a 375 percent increase in profits. But all of them were either consumer or technology companies, making the conclusion that VR technology still has some way to go before it can truly be considered a big player.
Little Clean Plays
For financiers who are thinking of investing in the technology, there are a few clean plays to be had. At present the most well-known VR head gear are Facebook’s Oculus Rift headsets, which cost the giant company a mind-boggling amount of $2 billion; the company began shipping around March, and the units themselves cost $599 each. Other high-profile companies like Alphabet and Apple are also rumored to be developing their own high tech gear, although none would confirm the news upon inquiry. (Alphabet is known to be Google’s parent company.)
At present, VR makes up just a small percentage of Facebook’s earnings, and even in-depth analysis could not determine the impact of Oculis in the company’s estimated revenues. Further, Facebook did not reveal the number of headsets it is planning to sell in the coming months on its latest earnings call.
Mark Zuckerberg, the chief executive of Facebook, has said about the issue, “This is very early and we don’t expect VR to take off as a mainstream success right away…but eventually we believe that VR is going to be the next big computing platform and we’re making the investments necessary to lead the way there.”
However, a few financial analysts are saying these for the companies they represent. Tyler Batory, an analyst at Janney, said, “I don’t think it’s possible to break out (the benefit of VR technology) with any sort of precision.”
Montgomery Scott of Six Flags similarly said, “But I can tell you that I think they are going to report record results this year because their growth rate is accelerating, and the growth rate wouldn’t be accelerating if they didn’t have it.” According to him, equipping rides with VR headset technology is not as costly as creating a new concept and constructing another roller coaster. The VR technology process would just need three additional staff members: one worker to ensure that people wear the headsets properly and two workers responsible for cleaning the units after each ride.