The State of Virtual Reality Adoption

the-state-of-virtual-reality-adoption

Sony and Google put forth news updates this week that provide a glimpse into the state of virtual reality (VR) market adoption. Andrew House of Sony Interactive Entertainment told The New York Times on February 26 that Sony had sold 915,000 PlayStation VR (PSVR) headsets as of February 19, just 4 months after they went on sale. In Barcelona at the Mobile World Congress on February 28, Amit Singh, Google’s Vice President of VR, revealed that 10 million Cardboard VR viewers have shipped and that 160 million Cardboard apps have been downloaded to date.

From Tractica’s point of view, these data points reflect the gradual market adoption trajectory forecast in our series of three VR reports published between December 2016 and February 2017.

Gradual Growth for Sony’s PlayStation VR Headsets

Let us look further at Sony’s news. The reported 915,000 PSVR units sold is slightly under our expectations of where the numbers would be at this point. Tractica forecasted that Sony would sell 900,000 units by December 31, 2016. In our forecast, we expected approximately 2% of the estimated installed base of 42 million PS4 console owners to purchase PSVR headsets, and they did, more or less. Tractica expects Sony to sell 1.8 million PSVR headsets in 2017, further penetrating the installed base of PS4 owners to reach approximately 6% of the installed base.

This gradual growth pattern versus a more aggressive one is due to the ramp-up of game content. Game developers are in the learning stages of what is possible with VR and, in time, VR games will become increasingly desirable to serious gamers.

A second factor in PSVR growth is the current requirement to purchase additional camera sensors for room-scale experiences. Consumers can buy two packages for PlayStation VR: the first at $399 includes the PlayStation VR headset, headphones, and cabling; the second package adds the PlayStation camera, two Move motion controllers, and the game title “VR Worlds.” It should be noted that you cannot use the VR headset without a PlayStation camera, so the package at the $399 price point is intended for consumers who already have the camera and controllers. This means the realistic price point for a good portion of the public will be $499.

Mobile Is Sparking Momentum for Google Cardboard Shipments

Google’s Cardboard news provides a second data point to reinforce Tractica’s VR outlook, in which we see increasing momentum for VR sparked by mobile. Remember that Google launched Cardboard in 2014, and it works with a range of original equipment manufacturer (OEM) partners who build Cardboard-ready head-mounted displays (HMDs). Google’s 10 million Cardboard shipments since inception represents a little less than half of what Tractica estimates were the mobile HMD shipments over that period (21 million). This ratio and total number tracks well within our guidance of the trajectory of mobile HMDs. In January, Samsung stated that it had sold 5 million Gear VR headsets, to date, and Tractica believes the majority of the remaining 5 million mobile HMD shipments came from non-Cardboard mobile HMDs in the Chinese market.

Projecting Virtual Reality’s Trajectory

So, what happens next for VR in 2017 and 2018? Below are some possible outcomes:

  • PC-Based VR Becomes Increasingly Enterprise-Focused and PC-less: Oculus and VIVE will collectively ship 1.7 million HMDs in 2017. Both companies will introduce commercially available all-in-one units, which will not require tethers or a PC. Nearly 500,000 of the 1.7 million HMDs, or 28%, will be for enterprise use. In 2018, Oculus and VIVE will collectively ship 5.5 million HMDs, with 2.1 million or 38%, for enterprise use. VIVE will likely introduce a mobile HMD, while Oculus will begin to shift into reference device mode. Tractica does not believe Facebook will remain in the hardware business for an extended amount of time, but rather will shift to VR content and platform services.
  • Console-Based VR Is Sony’s Game: Sony will remain the sole console-based VR player for most of 2017 and will ship 1.8 million units this year. In 2018, Nintendo and Microsoft (Xbox) will introduce VR HMDs. Console-based VR HMD shipments will reach 3.3 million in 2018.
  • Mobile-Based VR: Smartphone-based VR will continue to be the leader in developing VR market penetration. Mobile HMD shipments will reach 23 million in 2017, with 1 million of those units purchased for enterprise use. In 2018, mobile HMD shipments will reach 45.3 million, with 2 million units purchased for enterprise use.

In summary, the VR market is on track. The next 2 years will be marked by steady improvement in VR experience and gradual user growth. Driving this gradual VR adoption will be a number of factors, including maturing VR content (game developers gaining experience, VR video gaining traction) and use case development (e-commerce, multiple enterprise use cases), technological advancements, which will reduce the amount of equipment required, and hardware price reductions.

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