When Microsoft (NASDAQ: MSFT) announced it was building a "mixed reality" (which was really virtual reality, or VR) platform and partnering with headset manufacturers to bring the product to market, the industry expected the platform to be a formidable competitor to Facebook's (NASDAQ: FB) Oculus Rift and HTC's Vive. But Microsoft's foray into VR hasn't lived up to expectations.
New discounts on the already discounted headsets for Microsoft's Mixed Reality platform are a troubling sign for adoption and the company's long-term goals in mixed reality. If Microsoft can't gain even a small foothold in VR, what will it be able to do in augmented reality (AR), mixed reality (MR), or mass-market VR?
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Discounts spell trouble for Microsoft Mixed Reality
Road to VR recently highlighted that Microsoft Mixed Reality headsets are already being sold for as much as a 51% discount on Amazon (I'll note that Microsoft itself isn't discounting yet). Lenovo's Explorer headset with controllers is the highest priced at $275, and HP's (NYSE: HPQ) Windows Mixed Reality Headset with Controllers is being offered at $222, a 51% discount. This compares to $399 for Rift and $499 for Vive.
Microsoft's VR offering was supposed to be a low-cost, easy-to-use entry point that made VR accessible to consumers. It brought tracking into the headset, alleviating the need for trackers to be mounted around your VR play area. It also required less computing power than Rift or Vive, which Microsoft saw as an advantage for users who didn't have a high-power gaming computer.
While Microsoft Mixed Reality may have been more accessible, it also cut corners. Headset tracking left very noticeable blind spots that made some games hard to play out of the gates. Graphics were also subpar compared to other high-end VR systems. At the end of the day, Microsoft's Mixed Reality platform was a poor experience compared to other high-end VR systems, and discounting indicates that it isn't selling nearly as well as Microsoft hoped.
Is Microsoft getting left in the dust?
Failing to get out of the gates well in VR could make long-term success in the nascent market a challenge for the software giant. Meanwhile, Facebook and HTC are launching low-cost stand-alone headsets that will make VR more affordable to the masses, potentially making current Microsoft headsets obsolete.
The fact that Microsoft called the product Mixed Reality indicates plans to bring other reality devices -- augmented, mixed, virtual, etc. -- into the fold. But consumers may already be turned off by Microsoft's poor launch in the virtual reality arena.
More troublesome is that Microsoft may already be having problems getting people to adopt its mixed reality platform. For any platform to be profitable, it has to have wide adoption by users and developers. If the user side isn't gaining traction, it'll be tough to attract developers, eroding the platform's viability.
It's not likely Microsoft is giving up on mixed reality yet, but this is a troublesome start, to say the least.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Travis Hoium has no position in any of the stocks mentioned and owns a virtual reality start-up and has a family member who works at AMZN. The Motley Fool owns shares of and recommends AMZN and Facebook. The Motley Fool has a disclosure policy.