They have many changed at HTC in the decade since a small team broke out to form the mixed reality division. In fact, it is a fundamentally different business in many essential ways. For one thing, you can no longer call HTC a phone company. Contrary to popular belief, the Taiwanese company still makes handsets — mostly mid-range devices for the Asian market.
These days, the mixed-reality business makes up the “vast majority” of HTC’s global business, says Dan O’Brien. We sat down with Vive’s general manager at MWC earlier this week, along with John Dabill, the brand’s head of Product Operations. Just like last year, HTC got it right with the stand. It’s big and white, with several demo stations scattered throughout.
To get to the conference rooms in the back, you have to walk between the dancer and the group of half a dozen men aiming plastic guns in all directions. Beyond that, a number of third-party representatives discuss their own products, including Nord Space ApS, which helped customize an HTC headset for Danish ISS crew member Andreas Mogensen. The startup’s CTO notes that gravity plays a role in the tracking capabilities of many systems. It’s one of many things to address before spending the tens of thousands of dollars per kilo to ship it.
It’s perhaps telling that the two front demos are based on entertainment. Sure, watching someone play a wacky dance game is far more appealing to conference showcase buyers than, say, a business education app. Ultimately, however, the consumer business has shrunk dramatically relative to its business offerings.
“We were 50/50,” says O’Brien, “but now we’re getting closer to 70% [enterprise].” The executive notes that the seeds for a shift toward enterprise were planted near the beginning of Vive’s existence. In 2015, HTC shipped 27,000 headsets to developers in an effort to boost the Vive ecosystem. About 30% of that rate went to business developers. The company was ahead of the curve in this regard, internalizing a lesson that Magic Leap would learn the hard way years later.
“[Magic Leap was] confused about what the market could really bear,” O’Brien says. “They went so heavy on consumers and spent $10 million on a content deal. It launched with about 12 pieces of content for a $3,000 handset. It didn’t solve any problem. It was just for fun. You argue about free time. It’s a really tough battle. You have the Xbox and the PlayStation, your phone — you’re fighting for the time that people have to be entertained, and I think they quickly caught on and changed everything in the business. But even then, this is a really tough business.”
HTC’s initial focus on gaming was born in part from its early partnership with Valve. When the Vive team first came together, they started working on augmented reality prototypes. Steam’s parent company was also instrumental in the company’s shift to VR.
“When we met with Valve, we said, ‘Hey, we can work together, because you know content and developers,'” says O’Brien. “That wasn’t HTC’s core competency in 2014. We were a smartphone company. We thought we could create something special and come together here. So we made a deal and started working together.”
Gaming continues to be the key application on the consumer side, although the segmentation is a drop in the bucket compared to business — a gap that will likely continue to widen. In recent years, HTC hasn’t been in the headset conversation for most potential buyers. The Meta currently dominates the space, while Apple has more recently grabbed the spotlight with the Vision Pro (whether the $3,500 AVP can really be considered a consumer device, however, is another question).
Image Credits: Brian Heater
Meta, in particular, has sucked a lot of air out of the room. “I think Meta has adjusted the market’s perception of the cost of this technology,” says O’Brien. “Losing $12 billion a year in a business it certainly doesn’t feel like success. In 2021, Mark Zuckerberg confirmed that Meta was losing money on Quest headsets, noting: “We plan to continue to either subsidize our devices or sell them at cost to make them available to more people.
This is a game that you can play when you have a huge advertising business that supports the mixed reality game. For now, at least, Meta can continue to lose money on its handsets, and will do so as flooding the market with devices is fundamental to the wider game of conversion. HTC is now an augmented reality company, first and foremost. His income comes from the headphones, not in spite of them.
However, the company recognized the shortcomings of the consumer market early enough to take a significant lead over the likes of Magic Leap.
Education continues to be a long way from mainstream applications on the business side. Buying headphones in bulk is a big upfront cost, but some companies can see savings in the long run. There are a wide range of categories that could see potential benefits, including aerospace and healthcare. Fittingly, the company has received FDA certification for two of its headphones and FAA clearance for one.
In recent years, the Vive has expanded from a virtual reality focus to mixed reality, using passthrough technology similar to that found in the Vision Pro. It’s a move that also relies on augmented reality, the category the company abandoned early on. O’Brien insists this combination of technology is the only way forward for the industry.
“I’ve been very clear with the Magic Leap team and anyone else who asks that the future of wearables is a headset that can do VR, can do mixed reality, can do AR,” he explains. “This whole argument about who’s going to win, AR or VR, is based on the same technology going forward, but you’re going to make that stupid argument. We’re starting to see mixed reality applications where people can collaborate on a design in a physical space with a digital overlay of an object. This is just the beginning of mixed reality.”
Meta has impacted the industry in another key way. When you imagine the metaverse, what does it look like? There’s a good chance it’s an AI chat. Facebook has made the two inseparable for most people. However, HTC’s definition of the term is much broader, and corresponds to any virtual space where people connect with headsets or other hardware.
O’Brien cites a meeting with Wells Fargo as an example of metaverse applications on the business side. “It was like, ‘we’re just throwing 380 people into a town hall in Charlotte.’ We were like, ‘yeah, you can use one of those Mars Camtracks and instead of 300, you’ve got 300,000 people. You could have invited everyone and paid a few thousand dollars per person.”
Like the rest of the world, HTC is currently exploring how genetic AI can be integrated into its ecosystem.
“I think it’s a given,” says Dabill. “It already helps very quickly with 2D images and videos. We’re not there yet, but we’re definitely seeing it help grow the VR space. You don’t need the artistic and technical skills, you can just talk to the AI and create the space.”
This functionality is believed to be coming in the very near future. It will likely have a dramatic impact on VR’s ability to create virtual environments, including the ability to create infinite scenery on the fly.
