Things You Can Invest In: Virtual Reality Edition

virtual reality

In the ’90s and early ’00s, marketers and executives spoke at length about virtual reality and how it was the future of entertainment. Unfortunately for them, products like Nintendo’s Virtual Boy and various expensive headsets proved otherwise. Like 3D TVs and Jason Mraz, people quickly stopped caring about virtual reality and went back to watching TV the regular way.

In the last few years, virtual reality technology advanced and attracted attention from entertainment enthusiasts and marketers alike. Starting with the Oculus Rift, VR headsets utilized components often found in smart phones that let users control their view by moving their head. Resolutions increased to the point where high resolution 3D images could be displayed in relatively inexpensive headsets. While the upfront cost of using a powerful VR devices ($900 and up), virtual reality is now gaining traction with consumers. It could soon end up becoming how we consume entertainment.

Before that happens, however, you can invest in companies making virtual reality devices before they explode in popularity. There’s just one catch: companies making these devices make a whole lot more than just VR headsets.

Oculus Rift, the most famous of the newer VR headsets, started off as a Kickstarter. It’s now owned by Facebook.

Facebook ($FB) bought Oculus VR for $2.3 billion in cash and stock. They don’t just see the Oculus headsets as a gaming device — one that currently requires a $1,500 PC to use. The company sees virtual reality as a future communication tool, a way to explore new avenues of entertainment, and other ways to get less niche and more mass audiences interested. The headsets retail for $500, but future versions will likely sell for cheaper and require less intense computer hardware. Since Oculus devices aren’t breaking sales records any time soon, Facebook still must rely on the billions of dollars they make in ad revenue from their site.

The Vive is also popular with the gaming community, and has a few features that the Oculus is missing.

HTC ($2498 on the Taiwanese Stock Exchange) normally manufactures phones, but they made the Vive in conjunction with Valve, a leading game company. In addition to normal virtual reality headset features, the Vive has a camera that senses the room and any obstacles that would prevent the user from having an enjoyable VR experience. The Vive is meant to be used while moving around (possibly with a backpack-style computer), offering better resolution and more mobility. Unfortunately, HTC’s phone division makes the company the most money, and has been in decline for a few years now (as has their stock).

Sony’s PlayStation VR has a bigger install base and smaller upfront cost than HTC and Oculus.

PlayStation VR ($SNE) requires the purchase of a headset ($400), camera and accessories ($100) and a PlayStation 4 ($250-$400). Since the upfront cost of buying the PlayStation VR is significantly cheaper than the Vive or Oculus, it is now the biggest dedicated VR headset on the market. Though Sony isn’t too far away from selling a million VR devices, that’s still relatively small compared to the amount of people who own a PlayStation 4. Games and software supporting the PlayStation VR are also few and far between, as the headset does not have any standout titles (like Call of Duty) to utilize it. Regardless, the company’s stock has increased over the last year thanks to their other endeavors. One could only hope that their place as “king of VR” helps further elevate their value.

Google and Samsung both make VR devices that require your phone.

Google’s ($GOOG) Daydream and Cardboard headsets are relatively inexpensive ($80 and $20+, respectively), but require a smart phone with a large screen to operate. Samsung’s ($005930) VR headset is priced around $70 and requires a Samsung phone for use. Both companies’ devices are significantly underpowered when compared to Sony, HTC, and Oculus, but provide an introductory way for users to experience fun, fast, and cheap virtual reality content. They also don’t require dedicated game consoles or computers to operate, lowering the cost of entry. While they can’t play graphics-intensive games, they can still browse 360-degree videos on YouTube and other sites offering VR content. Their low cost and high install base (Google has shipped millions of Cardboard devices in the last few years) could soon make them become the mainstream and most popular way to experience VR.

Should you invest in virtual reality? Companies like Warner Bros. and The New York Times, however, are deeply invested in working on virtual reality content, as are countless other media companies, startups, and businesses with a massive digital presence. Virtual reality users, on the other hand, are a niche, albeit a bigger one when the technology debuted over two decades ago. They have all the content in the world to play with, but there’s not a tremendous user base when compared to every other form of media.

If you think virtual reality users are going to grow and these companies will benefit from having a head-start in the product space, be sure to do your research before you invest. If you think virtual reality is a passing fad, you might want to invest in something else.