Why Virtual Reality Is about to Become a Very Real $5 Billion Industry; at This Year's Consumer Electronics Show, Everyone from Hollywood Insiders to Hardcore Pornographers Showed Up to Share Their Vision for the Virtual Future

By Perton, Marc | Newsweek, February 5, 2016 | Go to article overview

Why Virtual Reality Is about to Become a Very Real $5 Billion Industry; at This Year's Consumer Electronics Show, Everyone from Hollywood Insiders to Hardcore Pornographers Showed Up to Share Their Vision for the Virtual Future


Perton, Marc, Newsweek


Byline: Marc Perton

In a luxury suite 32 stories above the Las Vegas Strip, Ian Paul is explaining why virtual reality is so important to his company. Facing aggressive competition from free, ad-supported rivals, he believes VR can help him win over customers willing to pay a premium for an immersive, engaging experience. Paul could be an executive with the New York Times Co . , Fox or ESPN, all of which were at this year's Consumer Electronics Show (CES) to talk about how VR is going to change their respective businesses.

But he isn't. Ian Paul is a pornographer.

More specifically, he's the chief information officer for Naughty America, and he was in Las Vegas to show off his company's new VR porn offering, a $24.95-per-month service that he believes will give Naughty America an edge over ad-supported free porn sites. "Where would they put ads?" he asked. "On the walls?"

Welcome to the real world of virtual reality. At the same time Paul was explaining why his target customers don't need a 360-degree field of view ("They're primarily focused on what's going on in front of them"), movie studio Fox was hosting a private party for the launch of "The Martian VR Experience" an elevator ride away. According to a report issued by SuperData Research on the eve of CES, consumer VR will be a $5.1 billion industry this year, up from just $660 million in 2015.

Though it might seem like an overnight sensation, it has taken VR decades to reach this point. In the 1960s, pioneering computer scientist Ivan Sutherland created one of the first head-mounted displays--using tiny cathode ray tubes placed in front of each eye--though it was never commercialized. By the early 1980s, as liquid crystal display panels and personal computers began making their way into the marketplace, gaming company Atari launched a VR research lab.

Although the company shuttered the operation after just two years, Jaron Lanier and Thomas Zimmerman, two members of the Atari team, founded pioneering VR company VPL Research and began producing the EyePhone, a VR headset. They also invented the Data Glove, a version of which--Mattel's Power Glove--allowed users of early Nintendo gaming consoles to control (or attempt to control) their games through hand movements. The dreadlocked Lanier, often credited with coining the term "virtual reality," became the industry's poster boy, attaining rock star-like status among the technology's early fans.

There was just one problem. "The hardware just wasn't inexpensive enough," says Zimmerman. Prices for VPL's EyePhone started at about $10,000 in 1989, while other VR systems went for as much as $200,000.

There were other early attempts to create consumer VR products: Nintendo's Virtual Boy headset was a notable flop in the mid-'90s. But for close to two decades, VR was largely confined to research labs and high-end military or industrial applications. Consumer VR seemed to be something that, although tantalizingly close, was destined, like flying cars and jet packs, to remain part of a future imagined in the past.

VPL filed for bankruptcy in the early 1990s, and many early developers moved on to other fields. Zimmerman became a researcher at IBM, while Lanier recorded music and eventually took up residency as a researcher at Microsoft. "I didn't have a choice," says Brian Blau, speaking about leaving the industry in the '90s (he began working with VR as a graduate student in the 1980s). "Nobody did. We all had to quit."

The technology finally caught up with the vision for VR, thanks to advances like desktop computers that were more powerful than the supercomputers of the Lanier era, and ubiquitous smartphones with high-resolution displays. Then along came Palmer Luckey, a college student and hardware engineering prodigy. In 2012, he launched a Kickstarter campaign to fund development of his headsets. Within four hours, he had raised $250,000. …

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