Jesse Schell, CEO of Schell Games and professor at the Entertainment Technology Center at Carnegie Mellon University, is one of the game industry’s finest speakers. We’ve interviewed him before, and we know he is passionate about virtual reality and augmented reality, and his company has published the groundbreaking VR game I Expect You To Die.

But Schell is very skeptical about predictions that VR will grow fast. He gave a talk about his predictions for VR and augmented reality for 2025 at the Augmented World Expo last week in Santa Clara, Calif.

In his 2025 predictions for VR and AR, he voiced concerns about the obstacles to growth for VR and the challenges that AR faces in just getting out the door. He believes VR will be a $7.5 billion to $22.5 billion market by 2025. That might seem optimistic, but he said that other predictions are wildly wrong. By 2025, he thinks VR will be no more than 5 percent to 15 percent of the overall game industry.

Image Credit: Jesse Schell

By contrast, Schell believes that Digi-Capital’s oft-quoted prediction that VR would be $30 billion and AR would be $90 billion by 2020 (later revised to a combined $108 billion by 2021) is “very very wrong.” While others have pointed out that VR will have a “gap of disappointment” or “trough of disillusionment,” Schell is being exceedingly conservative about the growth rates he foresees. That means that startups have to plan for a longer drought than they’re anticipating.

On top of that, Schell predicted that most interaction with VR worlds will be done through handheld controllers like the Oculus Touch, or the controllers for the HTC Vive VR headset. Those controllers give users a tactile feel for interactions, and they are likely to fare better than motion-sensing systems that detect your real hand movements, Schell said. That’s partly because the hand-sensing devices aren’t accurate and they don’t give you that tactile feedback.

Image Credit: Jesse Schell

Schell thinks that parasite VR systems, or lame experiences like Google Cardboard, are likely to be in the minority. And he thinks that AR revenue is going to be about 15 percent of VR revenue by 2025, which means it could be anywhere from $1.1 billion to $3.3 billion by 2025. That’s a pretty small market, and we’ll talk about the obstacles in a minute.

Schell’s big beef with AR is that he thinks it will take a long time before technology advances far enough so that AR glasses look no different from everyday optical eyeglasses. In the meantime, AR gear will be bulky, and “the glasses will look stupid,” Schell said. He reminded us of the catastrophic failure of Google Glass. The first AR glasses from Google had a big camera lens on the edge of a bulky glasses frame that stood out as socially awkward. Nobody wants to put on anything that makes them look so stupid, and the glasses will look stupid until we make some big hardware advances a few generations from now, Schell said.

“This was a giant, giant failure,” Schell said. “It was one of the biggest technical failures we’ve seen in the last 10 years. Nobody adopted this and they had to cut it out. It was a good product, well designed, and easy to use. There were so many great things about it. But the fact that it was socially awkward was the killer for it.”

Image Credit: Jesse Schell

Schell said that Microsoft’s HoloLens glasses are too dark, so that you can’t see the eyes of someone wearing them. And that means the glasses won’t be as socially inviting as Microsoft wants them to be, since they won’t have eye contact, Schell said.

“Many glasses are too ridiculous looking to wear on a daily basis,” he said. “We have to overcome that problem.”

On top of that, the camera itself suggests ubiquitous surveillance, and that is creepy to most people, he said.

“That black dot (the camera) is a giant problem,” Schell said. “It’s not a good feeling to feel like you are being watched.”

Image Credit: Jesse Schell

Schell also said that the limited field of view of AR is also a problem. Some experiences can be so immersive in VR, but AR glasses only let you see a narrow slice of the world at once. It is far too easy to encounter the edge of the world in AR, he said. Holograms produced by holographic wave guides promise a wider field of view, but they require large screens and supporting hardware at the moment. That isn’t good for bringing down the costs of the devices. Shrinking the holographic screens is a must.

“I’ll be damned if anyone knows how to do that,” Schell said.

Schell also said that the sensors for AR and the artificial intelligence to identify all those objects is still in its infancy. (ManoMotion had a nice demo of hand-sensing technology last week). He said that roughly 30 percent of the human brain is dedicated to our visual systems and identifying what we see. It takes an enormous amount of computing power, and we won’t have that kind of capability soon, he said.

Lastly, AR doesn’t have a killer app yet, Schell said. Now he did suggest that an AR virtual friend might be a good application for children. An AR friend could be that imaginary friend in your childhood. But adults are going to need more than that, Schell said, and he doesn’t know what it is.

Image Credit: Jesse Schell

More than 200 companies displayed some much-hyped products at the event, but Schell had a clear-eyed view of the future.

“We are designing the eyes of the next generation,” Schell said in conclusion. “So I urge you to all work together to make sure we make the best damn eyes the world has ever known.”