A few years ago, virtual reality was being pushed as the next big thing in gaming, and Microsoft Corporation (NASDAQ:MSFT) was talking up Project Scorpio touting VR as a big part of its Xbox plans. Now, the company is backing off. In the aftermath of this year’s E3 gaming conference, MSFT says Xbox VR support is on hold. The news hasn’t moved Microsoft stock yet, but it could.
For instance, if VR suddenly takes off, Microsoft has ceded the console market for the technology to rival Sony Corp. (ADR) (NYSE:SNE) and its Playstation VR.
Xbox VR is Now a “No”
E3 2018, the world’s biggest event dedicated to video games wrapped up last week. After the show wound down, Microsoft’s chief marketing officer for gaming gave an interview to gamesindustry.biz that happened to veer onto the subject of virtual reality and the Xbox. Based on what was said, it’s pretty clear that Xbox VR is not going to happen.
“We don’t have any plans specific to Xbox consoles in virtual reality or mixed reality… But as it relates to Xbox, no. Our focus is primarily on experiences you would play on your TV.”
That seems pretty clear: Xbox VR is a no-go.
An About Face
Go back to 2016 and virtual reality seemed to be on the verge of being the next big thing, especially in gaming.
Sony had announced the Playstation VR headset and controllers for the Playstation 4. Microsoft already had the HoloLens AR headset and was working with hardware OEMs on Windows Mixed Reality headsets for Windows; those began hitting shelves last year.
Then at E3 2016, Microsoft announced Project Scorpio (the Xbox One X) a souped up console aimed at reversing the PS4’s domination of this generation of video game console sales. The company hoped the high powered new Xbox hardware would become a must-have for gamers, boosting sales, gaming revenue and Microsoft stock.
The two key advantages of the new console were native 4K graphics and support for Xbox VR. The head of Microsoft’s Xbox division at the time told The Verge:
“Because as we saw 4K gaming and really high-end VR taking off in the PC space, we wanted to be able to bring that to console. Project Scorpio is actually an Xbox One that can natively run games in 4K and is built with the hardware capabilities to support the high-end VR that you see happening in the PC space today.”
Today, Sony’s Playstation VR is the only virtual reality system available for a game console. Sony sold over 2 million units in the Playstation VR’s first year of availability, with nearly 10 million games sold. Not game changing, but not chump change either. And it’s slowly but surely building a base.
The Bottom Line on Microsoft Stock
Microsoft was originally hoping for Xbox One sales in the 200 million range. That would have been a console record and the kind of numbers that could have had a real impact on Microsoft stock. Instead the Xbox One’s lifetime sales are estimated at about 36 million units to date, less than half the PS4’s 75 million.
Would an Xbox One VR headset have helped to prevent Sony from running away with the crown for this generation of video game consoles? Could it have helped Microsoft hit that lofty sales target?
It looks like Microsoft is throwing in the towel on virtual reality for its console, so we’ll never know. At this point, if VR finally gets that killer game and takes off, Sony’s PS4 will be the only game console in any position to take advantage of it. At least until the next generation of video game consoles hit…
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.