Before the release of consumer-grade virtual reality hardware, HTC wasn’t anywhere near the household name that Oculus was, but since then it’s become the most recognizable brand for high-end, PC-based virtual reality. Its Vive headset is still the one we recommend for a cutting-edge VR experience and it has a lot of content to go along with it.

Now a year on from its original release, the headset is a little lighter and a new audio strap is in the works, and HTC has expanded its software base with Viveport. It also offers a monthly subscription service for game delivery and even partnered up with a number of non-gaming firms to develop uses for virtual reality outside of the home-PC.

To find out how this first year of commercial virtual reality has gone and what it has planned for the future, we organized a digital sit down with Daniel O’Brien, the general manager of HTC’s Vive division, who told us how the last 12 months have been.

Digital Trends: How happy have you been with the uptake of the HTC Vive and its software over the past year?

Daniel O’Brien: We’re really happy with the volume of content and with its monetization. We’ve seen many of our developers making over a million dollars in revenue and a number of small teams experimenting with VR making over $250,000. What that shows us, is there’s good traction towards what we thought would happen in the first year.

We met our [headset sales] goals in year one and we’re on track for year two. We’re holding a very good position with retailers and we’re expanding our relationship with them in 2017, where we feel that some of our competitors are going in the other direction.

We’ve now reached 1,500 content pieces for the Vive on Steam. In the early days of VR, there were a lot of tech demos in there, but I believe that some of the true promises of VR can already be found today on Steam and Viveport.

You also launched your own content store, Viveport last year. What’s the uptake been like for that?

“We’re really excited about having a store that can have a non-game focus.”

Viveport is in its infancy and is just beginning its first year of a new content store for distribution. We’re really excited about having a store that can have a non-game focus. Although gamers are going to be the main audience for VR for another year or so, by giving another marketing avenue for non-games, it’s actually working out really well for us. It’s expanding the ecosystem for the kinds of content you can actually promote.

You’ve also recently launched a subscription model for Viveport, where users can pay $7 a month to have access to five applications on a rotating basis. What’s the response been like?

That’s actually got a really high attach rate right now, which is something we’re really excited about. It gives our developers a new revenue channel and is a low risk way for consumers to try out different content pieces.

What are some of your favorite games that you’ve seen come to the Vive over the past year?

It’s hard for me to pick an outright favorite, because I always get to see the next big thing that’s on the horizon that hasn’t commercialized yet.

My favorite right now is the Rick and Morty game. It’s so engaging, but I’ve only had a chance to play maybe an hour or so. I love the puzzle games like The Gallery. That’s always been a favorite of mine, even before we launched the Vive. Google Earth is something I spend a lot of time in.

I’m also really enjoying the new innovations that are happening to locomotion in games too, like what Survios has done with Sprint Vector. We actually have a leaderboard for that game in our house and my son is beating me handily.

What are some of the new controller types and innovations you’ve been impressed with using the Vive tracker?

While we’re seeing obvious innovations like the gun and the sword, what we’re really excited about is the wide variety of solutions. Full body tracking is something that’s doable with the tracker. All you need is three trackers, the Vive and the controllers and you literally have your whole body tracked in virtual space.

We’ve also seen knuckle controllers, phones that can see into VR. We’ve seen a lot of experiments in the input area.

What’s important about the tracker though, is that it’s removing thousands of man hours of engineering and research and development to build their own tracked peripheral or object.

The movie and entertainment industry is now starting to use these trackers rather than motion capture as part of their development tool set too. While I can’t confirm which AAA studios are using the Vive, I can tell you that every single one of them is developing with trackers and looking at innovative ways for their IPs.

When do you think we’ll see the first AAA games start to appear on the Vive?

We’re very excited about Valve committing to VR with the three titles it’s making for it, and Bethesda announced its Fallout strategy. We do know of other partners that are working on various large IP projects with the Vive — they just haven’t announced those yet.

The second half of 2017, I think we’ll see a lot more announcements and a lot of projects on the horizon. We’re going to start to see stuff that’s more relevant to that later this year and in 2018 there will be a lot more content coming.

We would expect that to be a turning point for the industry, where until those big experiences and IPs occur, hardware revenues will continue to outpace software revenues. As we get closer to 2020, we’re going to start to see content revenue outpace hardware. That’s a pretty normal path for what we think is going to happen with this sort of industry.

Valve and HTC both offered classes and courses for developers to help get them started with development in VR. How important have those been in helping to kickstart that over the past 12 months?

I think it’s been very critical. We wanted to produce the hardware, we wanted to produce the platform to make it possible to get the content launched. I think we did a good job of doing that as a foundation for the industry.

“We want to try and keep things as open as possible as we expand the developer base.”

We’re also starting to see a lot of university programs which are great, hackathons. These guys are all really proactive in their communities and in organizing events for developers to meet up and talk about the tools that they’re using and the application for them.

If you look at the mixed reality filming setups that we use at every conference and event that we go to, that was developed by the Northway Games and Radial Games teams. They gave that software away and it made it much easier for other developers to create trailers and to advertise their games. We’re still in this phase where people are openly sharing their software and their code and ideas and I think that’s really positive. We want to try and keep things as open as possible as we continue to expand the developer base.

In our original interview last year, we spoke about exclusivity of VR games and platforms and you were quite clear that HTC was staunchly against such a practice. Is that something you maintain now a year on from release?

For us it’s very important. [Being open] is the best way for developers to monetize their content. Developers need to be able to make money. We spend a lot of time working on these platforms, but if a developer can make something for the Vive and then take their game to other VR platforms, we’re completely open for that.

From a typical or historical model in the console market, a developer could be really successful with a large install base of consoles. That’s not necessarily the case with VR right now. For a developer to be hamstrung or restricted to one store or platform only, that’s really limiting their ability to generate revenue and evolve their content.

That’s why we work so hard not to close things down, because that only limits developers further. We want them to have long term health and success.

HTC has been keen to sponsor VR arcades over the past year. Do you think VR has the potential to bring back the public arcade experience?

I think so. We’re seeing already early success of that. Just looking at IMAX theaters, they’re already claiming to have run 20,000+ people through them. I went to a birthday party last weekend at a Seattle warehouse for my son’s friends and the whole place was a virtual sports zone. Those rooms were full all the time and for many people that was their first experience trying VR.

I think VR arcades have a distinct ability to attract a consumer and get them into VR and get them excited about it. This is a model that already exists in markets like China, for PC gaming, and we’re now seeing that same sort of public setting for VR show up in Europe and the Americas. People have some really great and innovative ideas about how to do it.

What we’re really working on now is how developers and arcade owners can monetize those experiences and not have to make their own deals with each other. They don’t necessarily have the relationships like we do, so we’re acting as a path for that.

The one thing that didn’t exist in the original arcades that does today is a gaming audience. The kind of people that like to watch other people play games. Today you have these global leaderboards, you have Esports audiences, streamers, entertainment companies getting behind gameplay. I look at arcades and see a whole other method for people to get excited about what’s happening in VR.

How has the Vive been used to help product design through tools like MakeVR?

“I don’t know a single major automotive company that isn’t using a Vive for design and engineering decisions.”

I can say with confidence, that I don’t know a single major automotive company that isn’t using a Vive to experiment with and use for design and engineering decisions. We’re seeing it in the architecture design industry and we’re starting to see the medical industry really take hold of VR technology.

These companies would love to not pay hundreds of millions of dollars to make mockups of new cars and products.

It’s not just about design but collaboration. You can literally take 20 of your designers and put them in the room with the design of the product and go, “ok, let’s make design decisions about this.” Instead of putting people on planes, you can now make those sorts of design decisions in VR.

You’ve continued to make changes to the Vive’s design over the past year. Why were some of those innovations not present in the original version?

On this first headset there were things we wanted to do that we didn’t get a chance to. It wasn’t that we didn’t do them because we had to get to market at a specific time, it was that we didn’t have a solution to make it better and this is what works.

We originally wanted to launch with built-in audio, but the design we had at the time just wasn’t comfortable, so we decided to move forward as we did. As a phone manufacturer, we had a lot of experience with the question of, ‘do we want to launch with audio in the box or not?’ There are a lot of people who like their own audio. We know who our early adopter, ‘innovators’ are, these people are really discerning about the type of audio products they use. Yes there are some people who are going to use the in-box earbuds, but a lot of early adopters want to have their own choice of audio. Especially if they’re hardcore gamers.

Jessica Lee Star/Digital Trends

We made a conscious decision with the launch of the Vive to leave the audio strap for now and give people the option. Now we’re getting into a different consumer as we grow the consumer base and that is an audience that is more interested in being given an embedded audio solution.

As we grow the audience further, we’re growing the peripherals that go with it. We’re listening to audiences and developers and basing a lot of our design decisions off of that. If we can bring a lighter tether that makes it more comfortable mid-generation, there’s no harm in us doing that.

When it comes to major jumps like resolution, that’s new-new products.

When can we expect to learn more about the Vive 2?

We’re always continuing to listen to developers, what they think is the most beneficial next-generation improvements and that’s how we’re solving the next headset and when that will come to market. It’s not about picking a production cycle and timeline, it’s about bringing really meaningful innovation that helps the developer community to create compelling new experiences.

When third parties like TPCast are developing technology like wireless virtual reality, is that something that HTC will co-opt, or can we expect it to have its own solution with a next-generation headset?

TPCast is actually a ViveX company that we invested in and we’re helping them come to market. That is an add-on. In 2017 I feel like wireless is going to be an option for consumers. Later on in 2018, wireless will be an expected feature.

I think there’s going to be multiple wireless solutions together. We’ve seen models where partners are building their own proprietary wirelesss solutions as an add-on and would rather just design a reference design and license out the solution to HTC or TPCast. Developers who spend five or more hours in virtual reality are really looking forward to wireless and a more comfortable head strap. It just makes it easier for users to use VR. As you get closer to wireless, a lighter more versatile headset, you broaden that consumer audience and what they are ready to buy.

Have you noticed a trend over the past year that new graphics card releases aid VR adoption?

Absolutely. When you look at the adoption rate of VR, in the early days we knew there were eight to 10 million people just on Steam alone, who had a PC that didn’t need to update at all to run a Vive. We also knew that there was another base of around 15-20 million consumers who only needed a graphics card upgrade to be ‘VR ready.’ We know that the GPU is the next addressable market, so as the cost of those graphics cards comes down, as the performance of them has improved, we’ve seen an immediate positive impact on sales. Like when we bundle a Vive with a graphics card.

“Valve is an invaluable resource in terms of feedback and thoughts on future designs.”

When we look at the adoption curve, we’re moving through the innovators with the high-end systems and now we’re going through the early adopter phase. These are people who understand what GPUs, CPUs are and what they need and that’s very different than when you reach adoption in a mass consumer base.

Is augmented reality something that HTC plans to implement in the Vive in the future or address in another hardware solution somehow?

Augmented reality is something that will absolutely occur. Is it going to happen next year in a meaningful way? No, but within four to five years, for sure.

AR is still on [HTC’s] mind and as that market evolves, we will very much look to have our brand in that space as well. You won’t hear from us on that until we have something to say that is meaningful to the developer community.

What is the relationship like between HTC and Valve today?

We’ve really not changed our model of collaboration. We share concepts and designs and thoughts about future products. We worked with Valve on the trackers and the new headstrap design. Valve is an invaluable resource in terms of feedback and thoughts on future designs.

Updated 05/09/2017 by Jon Martindale – corrected earnings for some developers and clarified Steam content statement.

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