Heavy attrition
The growing investment in VR doesn't mean VR investments are bulletproof. In 2014, there were more than 200 companies that had gotten into the VR device manufacturing game, but only 60 survived into 2015, Liu Yun, founder of industry information site vrzinc.com, was cited by the Securities Daily as saying on Monday.
"There are many hurdles in the fledgling VR industry, such as costly research and development (R&D) and weak user demand, that make it difficult for start-ups to make further technological breakthroughs," said Chen Lu, head of overseas development of the VR unit of LeEco, a Beijing-based Internet company.
Traditional tech companies have made an aggressive foray into the rapidly growing sector, which will make life harder for start-ups, Chen told the Global Times on Monday.
Approaching the end of 2015, China's three tech mammoths - Baidu Inc, Tencent Holdings and Alibaba - started to test the VR waters. International electronics makers including Sony, Microsoft Corp and HTC Corp also expressed intentions to ride the wave.
International Data Corp said in a report on May 25 that international companies like Sony have taken a lead in developing VR technology, while Chinese companies have an advantage in marketing.
In China, many VR device makers do not have their own VR technology, so they can easily be replaced, according to media reports.
The Securities Daily reported that 70 percent of VR headsets made in China are developed by the same manufacturer. The only difference is the brand name.
Switching to content
Due to the ferocious competition in hardware manufacturing, many VR companies have switched their focus to developing content, which Chen said is the core of the VR industry.
Like many other VR start-ups, LeEco, which runs a content streaming site, has bet on online videos and games.
Deutsche Bank stressed in a March report that the popularity of desktop VR content is essential.
Before gamers spend the $600 or more on a VR headset, they need to know that there are quality games out there that they can play with the device, the report said. Many developers are waiting for high-quality games to determine which VR development platform they should develop games for.
Oculus, Google and Chinese peers like LeEco and HTC are beefing up investment in the developer ecosystem of the content.
Sony PlayStation VR, which is set to come out in October, relies on Sony's vast user base and gaming content resources to magnify its edge in content and make up for the loss it takes on the hardware.
As of February, Chinese companies had developed 2,700 online videos and 800 games for VR users, according to iResearch.
But none of it is a must-have, making it almost impossible to stimulate demand for either the content or the devices.
Still, analysts believe VR might live up to the hype. It is new. It may not be essential now for people's everyday lives, but it has already changed companies' promotion and marketing methods, She Shuanglin, an industry analyst with Analysys International, told the Global Times on Monday.
Deutsche Bank estimated the industry will be worth $7 billion by the end of 2020.
VR has the potential to be a huge market, but it will take several years to develop, the bank said.
