Earlier in this series, we learned that VR (virtual reality) and AR (augmented reality) are among the key themes expected to drive $13 trillion dollars in the new computing cycle. VR is an artificial environment, generated by computer software and hardware, that looks and feels real. AR is a sort of virtual reality. It is formed by overlapping audio, graphics, and other sensory enhancements against a real-world environment displayed in real time.
Microsoft (MSFT), through its HoloLens, which is still in development, aims to benefit from the expected growth in the AR and VR space in 2016. HoloLens, a complete computing platform, is designed to serve as a comprehensive communication, entertainment, and productivity platform for Windows 10. The success of Nintendo’s (NTDOY) AR mobile game, Pokémon GO, demonstrates the paradigm shift led by VR and AR.
In the past, we learned that, according to TechCrunch, console games, 3D films, and “niche enterprise users,” such as education, military, and medical professionals, make up the core market for VR. Meanwhile, the smartphone and tablet markets are a good match for AR.
Despite the massive success of Pokémon Go, Nintendo’s core video game business is suffering. Apart from stiff competition posed by Microsoft’s Xbox and Sony’s (SNE) PS (PlayStation) in the gaming space, the growing usage of smartphones as an alternative gaming platform has impacted Nintendo’s video game business. PCs (personal computers) continue to be the top gaming platform in terms of developer support, despite consistent sluggishness in the PC market. VR is rapidly emerging as the future gaming platform.
This development explains why Microsoft announced, in late October 2016, that it has partnered with technology companies Dell, HP (HPQ), Lenovo (LNVGY), Asus, and Acer to release several PC-tethered VR headsets. Microsoft continues to invest in the PC market as it is the source of most of its revenue.