Where Does XR Go From Here?

The Magic Leap headset. ANSHEL SAG

2018 has been an interesting year for the XR industry. While many people try to separate the fates of VR and AR, those that work in the industry know these devices will inevitably merge into XR devices capable of both. AR and VR would struggle if they both tried to convince consumers about either or rather than and. The long-term truth is that VR and AR devices will become XR devices and this has been a known fact for quite some time by most in the industry. We’re already starting to see it happen, as some of the more mature VR devices like the HTC  Vive and Lenovo Mirage Solo start to take on AR capabilities.

The journey

The truth is that XR has to go down the same path that every previous major computing platform went in the past. During the first phase, early devices are clunky, expensive, and lack content. However, select businesses see clear ROI and business opportunities for the technology and adopt it regardless of cost and ‘clunkiness.’ We see that today in XR, where enterprises utilize AR for training and repair and VR for training, engineering, and sales purposes. These businesses eventually pull everyone else in their direction as the industry caters to their operational needs and chases enterprise dollars.

After that happens, manageability, scale, and services start to appear. These devices start to be offered as a service, usually tied to a specific location like the PC cafes of the 90s. Today’s equivalent is the location-based entertainment solutions like The VOID or SPACES, in which people walk around a virtual world with a content-rich story. These location-based VR experiences help to solve one of the biggest problems with VR—not enough people have tried it, to decide for themselves if they want or need it. AR doesn’t have that problem thanks to smartphone-based technologies like ARKit and ARCore. With these technologies, Google and Apple  are populating the market with AR apps before either of them launch an AR headset. Yes, there’s Google Glass, but that too has morphed into what is today almost an entirely enterprise solution.

It takes experience with the technology for users to get excited enough about the platform to invest. By that point, the technology will, in theory, have had enough time to develop and reduce costs to the point where consumers can purchase it. This didn’t happen immediately with the Smartphone or the PC, and nor will it with XR. It can take a decade or more for new technologies to fully come to fruition. The smartphone didn’t start when the iPhone was introduced and the PC didn’t launch with Windows 95, people always seem to forget this.

Big things take time. They always do. They also never happen with one player dominating the space—it takes competitors fighting it out with each other to deliver the best possible product. Right now we’ve got Facebook, Google, Apple, and Magic Leap vying for leadership, and its anyone’s guess who will come out ahead (though there’s a trend of Apple always finding its way to the top of the field for nascent platforms). I suspect that the XR platform war won’t be a two-dog race.


XR is still an emerging market and that means there will be a lot of companies that get into financial trouble and go under or get acquired. We saw plenty of this in 2018. IMAX VR announced it would be shutting down both of its locations and abandoning the concept. IMAX’s approach was very movie theater-esque, and made you pay per experience with show times and curated content. It had a good diversity of content, but its IMAX brand was almost entirely wasted with close to zero marketing effort after launch. Many location-based VR businesses that have seen success relied on tried and true IP to drive users’ curiosity and excitement about XR.

One of the earliest and arguably most innovative companies in the space, ODG (Osterhout Design Group), struggled to gain a foothold in the market and deliver a product that makes the company money. It is still struggling to get its R-9 and R-8 glasses into the market, which is a shame—the company has been showing them off for quite some time and they look very promising. The current state of ODG itself is unknown, but it is a known fact that the company is shopping around its mountain of IP. Ultimately, ODG’s problem is a lack of ecosystem support for what it is doing. It simply doesn’t have the relationships or distribution to get its headsets in the right enterprise or consumer hands. There are plenty of mixed, merged, and augmented reality platforms in the enterprise that could have benefitted from ODG’s hardware.

Last year, Blippar also announced it would be shutting down. This came as little surprise to many—while it was one of the earlier companies in XR, its star had faded in the last few years. Blippar was a platform, which made it heavily reliant both on developers (to build apps for it) and the overall growth of AR (which remains at a steady, but slow pace). There were rumors that Blippar turned down acquisition offers from some pretty big players. This could explain why it failed to raise any more funding and had to shut down. However, Blippar’s IP may still live on through asset sales as a new venture which will likely be run by different people but funded by one of Blippar’s investors.

One of the more curious cases right now is StarVR. The company’s current status is unknown, having gone virtually silent since it announced its new StarVR One headset. After the announcement that it was putting its StarVR development program on hold, rumors swirled that the company was being shopped around or that it may have already gone private. StarVR was originally a joint venture between Acer and StarBreeze studios, but Acer now owns the majority of shares. What’s peculiar is that Acer just invested more money into StarVR in late 2017 to increase their share, and is now rumored to be looking for a suitor. There’s talk that this is due to a collapse in location-based VR revenues, but that seems like a weak excuse given the small part of that market StarVR had, compared to HTC and Oculus. If StarVR wants to be successful, it must push forward with its StarVR One headset. I believe it has potential for a major enterprise use case, as well as entertainment and other secondary uses. Yes, the StarVR One is an expensive headset. However, if a piece of technology is good enough, companies and developers will find a way to make use of it. StarVR’s story is not over yet—its headset was one of the best things I saw in 2018, and I hope that it is able to pull through and bring a final version of the StarVR One to market.

Meta is yet another AR company that went under recently, I had been tracking Meta since I first saw them appear in the space and they were compelling at least for an early piece of hardware. The company made many improvements to image quality, tracking and hand tracking but failed to ship headsets fast enough to get enough developers onboard to really drive adoption and sales. Trying to perfect the headset ultimately drove the company into a place where it was no longer viable and while I respect the need to get a piece of hardware out there that’s perfect, you still have to actually ship the thing too. Meta’s original folly was that it had to be tethered to a PC, which as an AR headset doesn’t really benefit users as much as a standalone headset, which they also had in development. That headset could have had a lot more potential, and I believe that may have been a better play for the company from the outset, but it may have also been what caused the company to run out of resources faster than they had anticipated.

Where to next?

Looking forward, the industry finally has the tools for success. Companies like Epic, Unity, Vuforia, Magic Leap, Facebook, Google, and Apple help developers build the XR apps of the future with their tools and capabilities. The hardware still has limitations, but I firmly believe that the optics and display problems are slowly being solved.

In 2019, I believe VR will continue to chug along and grow into an industry with a standard cadence of new products and content. The new hardware, such as Oculus Quest, and content will help to grow the industry and entice more people to buy into the platform. VR and AR will likely continue to merge into one XR platform. With the introduction of 5G in 2019, more services will be delivered to VR headsets for content streaming at high bitrates, which translates to better quality VR experiences. The Oculus Go recently announced multiple TV streaming partners—I honestly can’t wait to see what VR content platforms like NextVR can do once they get enough bandwidth to work with.

In 2019, I believe we will see a significant boost to the AR industry in ways we didn’t in 2018. The hype always seems to come a year before the real big launches happen. I am seeing more AR companies secure funding to expand production and more new technologies that promise to improve user experience. AR already has a good niche in the enterprise (as does VR) and I expect this to continue. Meanwhile, companies like Apple, Facebook, and Snapchat are helping to democratize AR with their SDKs and familiarizing people with how to interact with the platform. Long term, I believe that for AR to really succeed, headsets must become highly portable and ultra location-aware. Without location awareness, AR is not that much different or better than VR and, in some ways, it’s worse. All of the mass-market business cases for AR are dependent on location, which is why companies like Google and Mapbox are working aggressively to improve location awareness in AR.

I believe that Microsoft  is going to play a major role in AR’s growth this year, with the company’s expected Hololens 2 announcement at MWC 2019 in Barcelona, which I will be attending. Considering it already has a $500 million contract from the U.S. government, I expect that Hololens 2 will gain a lot of traction–especially if its priced better than the original. The Windows Holographic platform is still the default hardware/software ecosystem that enterprise developers consider when building enterprise apps. I expect that this could eventually translate to the consumer realm, with future versions of the Hololens or other compatible partner devices. Ultimately, Microsoft doesn’t want to be the only one building hardware for its mixed reality platform, but if it has to be the first one to establish the platform, it will be.

I believe that the Japan 2020 Olympics and the deployment of standalone 5G NR networks in 2020 will likely help to propel both AR and VR further into the mainstream. I have a strong feeling that many companies will use the 2020 Olympics as an opportunity to showcase their technologies, and the Japanese operators will likely be excited to show off their shiny new 5G networks. Olympics are a very prestigious event and host countries spend lots of money to maximize on the positive PR. For this reason, I expect the next Olympic games to be by far the most technologically advanced we’ve seen yet. We’ll probably get some sneak peeks in 2019.

Beyond 2020

Long term, looking past 2019 and 2020, I expect we’ll see a gradual growth of the XR market, which will most likely crescendo when Apple announces its own device. We’re currently in a phase where Apple and other smartphone manufacturers build AR experiences on phones and tablets, which serves to build an application base for eventual headsets. I don’t know when Apple will release a headset, but I suspect that will be the event that finally brings the market into the mainstream. Apple has proven time and time again that its size and branding alone are market-making, and I believe the company’s patience with bringing an XR device to market will ultimately pay off in a big way. Judging by the IP and patents that Apple has filed for, we could see a very capable device. It will undoubtedly carry a significant price tag, but with the current price of smartphones, this is less of a concern than it might have been 2 or 3 years ago.

Global macroeconomic factors could also affect the pace of innovation in 2019 and 2020, but I believe that exciting new industries like XR will still be prioritized. Even in the event of a recession, I believe we’re on pace for a mainstream XR market by around 2025-2026. No market was made overnight; it takes roughly a decade for any new platform to mature into what can be considered mainstream. The promise of XR is very real, and it will be worth the wait.