The popular media will often use the phrases Augmented Reality (AR), Virtual Reality (VR), Mixed Reality (MR), and eXtended Reality (XR) to mean slightly different things, but in general, the terms are used as follows:

Augmented Reality (AR) is mainly reality with some virtual content added.

Mixed Reality (MR) is still reality but has a lot more virtual content added.

Virtual Reality (VR) is complete virtual content with actual reality excluded.

Extended Reality (XR) is anything in which at least some virtual content is added (i.e., AR, MR, VR).

But with the market for these products and services exploding, I think we need to take a more nuanced view of the full XR spectrum.

The following figure and text below captures my current thinking of the different market segments along the XR spectrum.

FR - Full reality. No virtual content is added. This is what we normally see and experience right now. As AR glasses begin entering the market, FR will simply be the mode for these glasses when all virtual content is turned off. Mark Zuckerberg is investing huge sums of Facebook’s money to see AR glasses (their AR glasses) supplant iPhone and Android phones. If AR glasses do supplant smart phones in our lives, we may use the phrase FR to describe when we are fully engage in reality.

HUD - Head Up Display. Data is displayed in the user’s periphery. Examples include a speedometer displayed for the user on their vehicle’s windscreen or a text message or image displayed in Google glass. Google Glass Enterprise Edition currently dominates this market.

AR - Augmented Reality. A small amount of virtual content is displayed in a way that makes it look like it is part of the the real world. The virtual content’s interaction with the real world is typically fairly limited, usually placed on a surface (the floor, a table top, or a wall). Examples include creatures shown on the ground while the user is outside playing Pokémon Go or the user trying to see how a piece of furniture will look in their room with IKEA Place. AR will usually support a full 6DOF (“six degrees of freedom” - 3 degrees of looking around and and 3 degrees of moving around).

AR on phones have been fairly successful, at least with a few popular apps such as Pokémon Go. However, the consumer AR market on phones requires that the user hold the phone or table in their hands up near their eyes limiting its appeal for long-term use.

MR - Mixed Reality. A significant amount of virtual content is placed in the real world. You still know you are in the real world (e.g., your living room or office), but the increased amount of virtual content added to the view creates a very different experience. The virtual content can also interact much more with the real world by bouncing off the floor or furniture, moving around the living room while avoiding furniture and walls, or a virtual person sitting in a real-world chair. MR usually supports a full 6DOF.

In addition to phone-based AR/MR solutions (mostly apps for the consumer market), there are expensive hands-free headsets (mostly for the enterprise market) such as Microsoft’s HoloLens and Magic Leap. Microsoft has a multi-billion dollar contract with the military, but otherwise there hasn’t been strong indications that other products are profitable in this space.

Mostly VR - Mostly Virtual Reality. You are immersed in virtual reality, but real-world objects are still represented in some fictionalized form in the virtual space. For example, the couch in the living room may look like a high tech couch on a spaceship, and the living room walls may look like metal walls inside the spaceship. Thus things in the real world exist in the virtual world, but they look different. Currently there is not a lot of content in this space on the XR spectrum, but what is there usually supports a full 6DOF.

3DOF VR - Three Degrees of Freedom for Virtual Reality. The world is fully virtual, and no elements of the real world appear in the view. 3DOF refers to the fact that the user has three degrees of freedom to look around (up-down, side-to-side, and rotate/twist the head), but their movement forward & back or left & right are not reflected in the view.

3DOF is largely a failed segment of the market, with early popular products such as Google’s Cardboard and Daydream and Samsung’s Gear VR all discontinued with no replacement products announced.

6DOF S-VR - Six Degrees of Freedom for Stationary Virtual Reality. The user has a full 6DOF but the software presumes the user is largely stationary, either sitting (e.g., Oculus Quest’s stationary mode) or standing but mostly staying the the same place (e.g., Oculus Quest’s room mode). The stationary aspect is largely enforced by the fact that most of the products in this space are physically tethered to a PC (PC VR) or a game console (namely Sony’s Playstation, PSVR). There is also a certain amount risk of the user tripping over furniture, running into the wall, or knocking a lamp over, especially for action games where the user wants to move quickly to avoid being attacked or get in position to attack.

Economically, this is the dominant market for consumer VR, including Sony PSVR, a variety of PC VR systems such as HTC Vive and HP Reverb, and Facebook’s Oculus Quest 2 (which can be tethered to a PC or used stand-alone).

6DOF C-VR - Six Degrees of Freedom for Cozy Virtual Reality. This is similar to 6DOF S-VR, but the user is encouraged to move around a little bit. This is different than Oculus Quest’s room mode because the user is encouraged to move around while Oculus’s Room Mode still tries to keep the user mostly in one place while standing, although often waving their arms around or maybe squatting or lunging. The key difference is that with Cozy VR the movements are slow and controlled (hence the word “cozy”, like a “cozy mystery”) making it safer than what can be achieved in fast action games that are popular on the PSVR, PC VR, and Oculus Quest.

This is largely an untapped market.

6DOF VR - Full Six Degrees of Freedom Virtual Reality. There isn’t a lot of full 6DOF VR content for home users. There are risks with full 6DOF VR of the user tripping over furniture, running into the wall, or stepping out into traffic. There are some “escape the room” type locations that encourage users to move around in a small to moderate sized room. Examples include Enterspace VR Center, VRCAVE, and the recently defunct The VOID. Unfortunately, many of these places opened just before the global pandemic hit. It will be interesting to see how successful this market is as the world returns to normal.

Where is Apple?

Apple plays a fairly dominant role in the phone-based AR market, but Bloomberg’s Mark Gurman and many others expect Apple to enter the AR/VR headset market within the next year and the AR glasses market a few years after that. For now, however, Apple remains tight lipped.