2016 Could Be The Year Of Virtual Reality; Here's Why

by CXOtoday News Desk    Apr 14, 2016

vr

This could be the year of virtual reality. According to estimates, smartphone-powered VR headsets such as the Samsung Gear VR and standalone devices such as the Oculus Rift will gain significant traction for the first time in 2016.

A report by Strategy Analytics sent to BI Intelligence, the research firm notes that adoption of VR headsets would likely be slow at first owing to high costs and low consumer awareness. But it expects VR headsets to generate up to $895 million in revenue this year.

Growth drivers

Premium devices such as the Oculus Rift, HTC Vive, and Sony PlayStation VR will represent most of the revenue but only a small portion of the shipments, the research reveals. “Early adopters would look to these devices and because of the higher price points, these headsets would make up 77% of the total revenue in 2016. This revenue share would represent 1.7 million units, or 13% of 12.8 million VR devices shipped,” says the research report.

On the downside, smartphone-powered devices such as the Samsung Gear VR will account for 87% of all VR devices shipped though that’s just 23% of the revenue. The accessibility of these devices, which stems from their frequent bundling with new smartphones, means they would act as a natural entry point to VR for many consumers who might be unsure about testing the waters of the VR market.

But consumer awareness is expected to surge in 2016, which would help spur shipment growth. The smartphone-powered devices are expected to rule in terms of adoption in the next few years because the standalone devices often require consumers to purchase a high-end gaming PC to power them. The HTC Vive, for example, costs $800, but a PC that can run the device would cost an additional $1,000, the report states.

Challenges ahead

The report also mentions that the VR market is poised to take off, but there is still plenty more to learn about the world of virtual reality hardware. It estimates shipments of VR headsets will grow at a swift 99% compound annual growth rate between 2015 and 2020. VR shipments will create a $2.8 billion hardware market by 2020, up from an estimated $37 million market this year. VR headsets are a fairly low-cost consumer electronics category, and this will help drive adoption, the report says.

According to the study, the devices will be priced similarly to smartwatches and also need to pair with another standalone computing device. Demand for VR headsets will be fueled by gaming on both mobile and console devices. BI Intelligence reveals there are 1.2 billion gamers worldwide, including nearly 1 billion mobile gamers alone. This creates a direct, addressable market for VR headsets.

Beyond gaming, VR will be an important platform for streaming content and even shopping. Oculus has already experimented with Story Studio, a platform for VR movie creation. In addition, many consumers claim the VR experience will drive them to shop more online rather than in stores, it concludes.