Virtual Reality is Either a $162B Market or it is Flash-in-the-pan bunch of Silicon Valley Nothing

Predictions of massive wealth lead the current VR buzz, promoted by Facebook. Problem is, that is what they said in the 90’s and VR never happened then either.

It turns out VR is only good for frightening grandmothers and 30 second trade show demos but nobody wants to use it again after the first sweaty, face herpes, nausea inducing, brain damaging, eye straining experience.

The virtual and augmented reality market will reach $162 billion by 2020

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Total revenue for virtual reality (VR) and augmented reality (AR) is projected to increase from $5.2 billion in 2016 to over $162 billion in 2020, according to the IDC. 

  • More than half of the revenue will come from VR/AR hardware sales. Additionally, service revenues are projected to increase over the period as demand grows for enterprise-class support. Software was also mentioned as a smaller, but notable revenue source, growing more than 200% year-over-year (YoY) in 2016. Nevertheless, services revenue will quickly surpass it, largely due to demand in the enterprise segment.
  • AR systems will ultimately contribute more revenue than VR systems. Games and paid content will be strong sources of revenue for VR systems, particularly in the next two years. However, this revenue will be eclipsed as AR systems are integrated into healthcare, product design and management-related uses.
  • Most revenue through 2020 will come from the US. The US, Western Europe, and Asia Pacific (excluding Japan) are projected to account for three-quarters of revenue for VR and AR. The US is projected to contribute a larger amount as time progresses.

The adoption of AR and VR headsets will be driven primarily by the introduction of less expensive models to the market, first powered by smartphones before mainstream adoption of stand-alone headsets. While early adopters will drive the initial wave of purchasing, sustainable growth will likely come from VR and AR app developers building a robust and engaging ecosystem of content that entices slower adopters. Lastly, as the underlying technology powering these devices increases, so too will the capabilities, creating new use cases in entertainment, workplaces, and education.

The tech industry has promoted the prospect of VR for the past few decades. But only now, with headsets backed by big names like Sony and Facebook, is VR finally becoming a concrete product with mass market potential. While VR technology is largely associated with the gaming industry, the platform offers a new set of content opportunities in entertainment, advertising, and more.

But where is it all going?

Margaret Boland, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on virtual reality content that examines how various VR headset categories will shape VR content development and looks at the trajectory for mobile gaming revenues to get a sense of how spending on VR content might develop. The report also lays out what types of content users and developers can expect on VR platforms, including gaming, video entertainment, and advertising.

Here are some key takeaways from the report:

  • VR headset manufacturers are driving both the development and distribution of VR content by investing significant technical and monetary resources in developers, in an effort to build up an exclusive content library.
  • High demand for VR headsets by mobile and console gamers will fuel demand for VR content. The VR content market will take an increasing portion of the mobile gaming software industry.
  • Beyond gaming, VR video entertainment will remain short form until demand for VR headsets increases.
  • Ads featured on VR headsets will likely have higher view-through rates than standard video ad spots.
  • Other industries are also beginning to experiment with VR content. Travel companies, publishers, e-commerce merchants, and social platforms are beginning to see potential in this new category.
  • VR content faces major hurdles that could keep developers from investing: The VR experience must be good enough for people to take up the devices. In addition, developers need to know that a sufficient user base exists to be worthy of the resource investment in VR content.
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