What’s Driving VR Market Development?. Like many analyst companies, market sizing… | by AR Insider | Mar, 2023

Like many analyst companies, market sizing is likely one of the ongoing practices of AR Insider’s analysis arm, ARtillery Intelligence. Just a few instances per yr, it goes into isolation and buries itself deep in monetary modeling. One such train not too long ago zeroed in on VR revenues.

This takes the insights and observations accrued all year long and synthesizes them into onerous numbers for spatial computing ( see the methodology and inclusions/exclusions). It’s all about an intensive forecast mannequin coupled with rigor in assembling dependable inputs.

So what did the most recent VR forecast uncover? At a excessive degree, international VR income is projected to develop from U.S. $8.3 billion in 2021 to U.S. $28.8 billion in 2026, a 28.3 p.c compound annual development fee (CAGR). This represents pretty wholesome development however a slow road to scale.

Drilling down, our newest Behind the Numbers installment breaks down these figures and elements. What’s driving VR income technology right now and going ahead? What gamers are greatest positioned to realize market share? And what are the positioning methods they’re making use of?

Beginning on the prime, international VR income is projected to develop from U.S. $8.3 billion in 2021 to U.S. $28.8 billion in 2026, as famous, a 28.3 p.c compound annual development fee (CAGR). This consists of shopper ($7.25 billion in 2022) and enterprise ($4.73 billion in 2022) spending.

Shopper spending is pushed by gaming’s lead as a VR use case. VR, conversely has worthwhile however relatively-narrow use in enterprise settings resulting from its sensory immersion that compromises security and situational consciousness. Immersive coaching is an exception; that’s displaying ample traction.

{Hardware} leads VR income because it typically dominates income share in rising tech sectors. Over time, software program spending share grows because it builds on a bigger cumulative put in base of in-market {hardware}. This shift is already underway in VR as {hardware} traction progressively escalates.

All of the above is pushed by Meta’s VR investments and loss-leader pricing — notably for Quest 2 — because it “trades margins for market share” to jumpstart an early market share lead and community impact. Meta will additional escalate that mission, albeit to a lesser diploma, with Quest Professional.

That is all underway. Although VR is much from mainstream, Meta is working towards VR’s flywheel impact. That is Mark Zuckerberg’s goal of promoting sufficient items that appeal to content material builders, which in flip drives extra {hardware} gross sales. Meta is already at 20 million in-market items.

Nevertheless it’s not nearly Meta. There are notable gamers within the VR panorama, together with Valve Index in PC VR, PSVR 2 in console-based VR, and Pico 4 in standalone VR. The latter might problem Quest 2 with a aggressive spec sheet, although it’s having some challenges out of the gate.

However the fascinating half about Pico (or the scary half, if you happen to’re Meta) is its capability to compete on worth. In contrast to different rivals Meta has confronted, Pico shares its capability to subsidize {hardware}, given its deep-pocketed proprietor Byte Dance. Actually, it’s borrowing proper from Meta’s playbook.

In different phrases, ByteDance’s VR play by means of Pico includes a social media large utilizing advert income to put money into constructing VR market share. If that sounds acquainted, it’s as a result of it’s Meta’s go-to-market modus operandi. Throw in the truth that Pico has an edge within the large China market.

Conversely, Meta has a technological edge within the competencies creating on the well-funded Meta Actuality Labs. Furthermore, like most issues, VR is all about content material. And Pico has some deficiencies in its developer ecosystem and video games library. That would be the issue to look at.

Past all that, one other lesson from market share leaders — Quest 2 and PSVR — is to maintain the worth proposition fun and simple. They take a Nintendo-like strategy by avoiding a specs arms race in favor of promoting enjoyable (to not point out low-cost). That’s the successful play thus far.