virtual reality vr christmas

Virtual assistants reign over falling VR headset sales on Christmas wishlists

Virtual assistants are racking up significant sales this Christmas, but virtual reality (VR) headsets and drones have not been the smash hits they were anticipated to be.

As expected, interviews with nearly two dozen analysts indicate that electronics sales would be high over the season, but estimates have changed over what will bring in the most cash.

After dubbing VR as the “next mega tech theme” in a May 2015 industry report, brokerage Piper Jaffray will cut its 2016 estimate for sales of VR headsets by 65 per cent to 2.2 million units in an as yet unpublished report.

Sales of high-end VR headsets including Facebook’s £549 Oculus Rift and Sony’s £349 PlayStation VR headset altogether will be about 300,000, reflecting supply constraints at Sony and the technological reality of Oculus and the HTC Vive: only about six to seven million computers globally can run the software, said Paul Lee of Deloitte UK.

“With high-end VR for a family of four, one might be looking at $10,000,” said Lee.

The high price of entry for the more advanced VR systems will limit their success until the cost of the technology can be brought down.

One solution in the meantime are devices such as Samsung’s Gear VR headset, which is significantly cheaper because it uses a smartphone instead of a dedicated screen and accelerometer, and will be the volume winner this season because it will be given away with phones.

Virtual assistants are set to make a bigger splash due to high sales of devices such as Amazon’s Echo and Google Home, which was first introduced earlier this year. 

Both devices take the form of a hands free speaker and microphone that connect to the AI-powered Alexa or Google Assistant.

The virtual home assistant category is poised to beat out VR and possibly a few other high tech competitors, according to the Consumer Technology Association (CTA) which is based in the US.

Oppenheimer analyst Andrew Uerkwitz estimated nearly 10 to 12 million Amazon Echo and Google Home virtual assistants could sell during the holidays.

“Personal assistants are going to blow VR out of the water,” he said.

Google’s device has not launched in the UK yet, but is priced at $129 (£104) in the US, significantly more expensive than the £50 price of Amazon’s Echo Dot which is a miniaturised version of its original assistant device

Its long list of features resulting from its two-year lead time give the Echo the edge, said Tractica analyst Mark Beccue.

“I saw one feature in a hackathon where you list items in the fridge then Alexa tells you here’s what you can make for dinner tonight,” he said.

The CTA also forecasts 12.6 million wearables will be sold this holiday season, thanks largely to the Apple Watch, which is expected to sell 5.5 million units – nearly half the total market.

Fitness devices are losing ground – in market share terms to multipurpose watches, said Forrester analyst Julie Ask.

Meanwhile, GoPro recalled its highly anticipated Karma Drone in November, and industry sales for the year are expected to be 1.2 million according to the CTA. That is more than double than in 2015, helped by a wide range of prices, but drones have not broken beyond being a niche product.

“There are plenty of drones that are $100, $150, that would be more in competition with VR than anything else in terms of appeal for the same age groups,” said Atherton Research analyst Jean Baptiste Su.

Oppenheimer’s Uerkwitz put drones in the same basket as VR, given price and limited use: “probably going to underperform” the competition.

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