STEADY GROWTH EDGES VR CLOSER TO DEEPER MAINSTREAM WATERS

By CHRIS McGOWAN 

VR is going mainstream next year. VR is going nowhere. AR will be bigger than VR. 

There is no consensus on where virtual reality and augmented reality are headed and how soon they will get there. But although the virtual reality and augmented reality platforms are still far from mass acceptance, certain positive signs indicate that they really will become large, viable businesses, growing steadily over the next several years. 

Tuong H. Nguyen, Senior Principal Analyst for Gartner, Inc., comments, “AR and VR have been hyped as being ready for widespread adoption for a long time, but the technology, use cases, content and ecosystem readiness have yet to live up to the hype.” Nguyen believes that VR in particular will go mainstream when it has three Cs – content, convenience and control. He notes, “While we’ve made progress on all these fronts, we’re still far from reaching the point where each of those aspects are sufficiently mature to make VR go mainstream. It will become mainstream, but I don’t expect it to happen until five to 10 years from now.” 

Others are pessimistic that VR will ever become mainstream. “The answer is never. Sorry. Here’s why. People don’t like wearing stuff on their face and getting sick doing it, and having to pay a lot of money for the privilege,” says Jon Peddie, President of Jon Peddie Research and author of the book Augmented Reality, Where We Will All Live. “The VR market has bifurcated into industrial and scientific – where it started in the 1990s – and consumer. The consumer portion is a small group of gamers and a few – very few – people who watch 360 videos.” 

On the other hand, in the opinion of Maze Theory CEO Ian Hambleton, the point has passed for people to doubt VR’s future. “With over 10 million active headsets on Oculus Quest sold now, it’s an active ecosystem. The 10 million unit number is often cited as a crucial stepping point.” Maze Theory developed the VR title Dr. Who and the Edge of Time. 

In November, Qualcomm CEO Cristiano Amon announced at the company’s 2021 investor day that Meta had sold 10 million Oculus Quest 2 headsets worldwide (Qualcomm’s Snapdragon XR2 chipset powers the Quest 2). A Qualcomm spokesperson later clarified that the number wasn’t meant to be official and came from market-size estimates from industry analysts. But as Qualcomm obviously knows how many Snapdragon XR2 chips it has sold to Meta, the cat seemed to be out of the bag. 

Meta’s Oculus VR app marked another key milestone at the end of 2021, when it was the most popular download on Apple’s App Store on Christmas Day. The Oculus app beat out long-standing leaders like TikTok, YouTube, Snapchat and Instagram for having the most downloads. 

And the category’s size is bigger than Quest 2. There are also Sony PlayStation VR, HP Reverb G2, Valve Index VR, HTC Vive Pro 2 and HTC Vive Cosmos, among other headsets. And PlayStation’s Next Generation VR (NGVR) is also joining the mix. 

Research firm Statista estimates that the total cumulative installed base of VR headsets worldwide reached 16.4 million units in 2021 and that the cumulative installed base will surpass 34 million in 2024. And Statista predicts the global VR market size will grow from $5 billion in 2021 to $12 billion by 2024. Another firm, Reportlinker.com, foresees 62 million units shipped by 2026. 

Hambleton thinks the launch of the next-generation Sony PlayStation VR (sometimes called NGVR) will give a major boost to VR. “[It’s] really important. NGVR will be huge. That’s our prediction. It’s got some great new features and sorted out many of the issues of the previous headset, including inside-out tracking and much better controllers. So long as they ensure there’s a strong pipeline of content for NGVR, we think it will do really well.” The latter support is likely – the current PlayStation VR has released over 500 VR games and experiences since the format’s debut in October, 2016. 

Another indication of a growing market came when Oculus announced in February 2021 that the rhythm game Beat Saber had sold over four million copies across all platforms and over 40 million songs from paid DLCs. In an October Oculus blog, it was revealed that Beat Saber had surpassed $100 million in gross lifetime revenue on the Quest platform alone. 

In February 2021, Facebook announced that more than 60 VR games available for Oculus Quest and Quest 2 had garnered over $1 million since the beginning of 2020, with six topping $10 million, including Skydance Interactive’s The Walking Dead: Saints and Sinners, released on Oculus in January 2020. The latter title has grossed more than $50 million across all platforms, it was announced by Skydance late last year. 

“VR is definitely at an inflection point. It’s starting to look like the early PC evolution, which expanded from just hardcore enthusiasts and tinkerers and hobbyists to everyday use for a whole lot of people. That’s happening with VR now — people beyond the initial core believers are buying headsets and making it a regular part of their lives,” says Johanna Peace, Manager of Technology Communications at Meta, formerly Facebook. 

She continues, “A lot of that is thanks to Quest 2. Before Quest 2, there hadn’t been a high-resolution, all-in-one form factor headset at that price point yet, so when we built it, people really responded. A big part of this is because the headset is so intuitive and approachable. With a small and portable form factor, no wires or external sensors, anyone can pick it up and in seconds they’ll be immersed in a VR experience. That simplicity is incredibly powerful, and it removes big barriers to adopting VR.” She adds, “Quest 2 sales are strong and have surpassed our expectations, and we’re thrilled to see the community’s response to Quest 2.” 

Peace notes that other genres growing in popularity in VR include fitness/wellness/meditation such as Supernatural and FitXR, multiplayer/social games like POPULATION: ONE and adventure games like Star Wars: Tales from the Galaxy’s Edge.

Vicki Dobbs Beck, ILMxLAB Vice President of Immersive Content Innovation, believes that VR has already begun its breakout and will continue to be adopted by a more mainstream audience given the headsets’ (such as Meta Quest 2) accessibility and ease of use. She comments, “In addition to a robust array of premium game titles, new content categories are further helping to drive growth.” ILMxLAB has shown its interest in the format with its production of the Star Wars: Tales from the Galaxy’s Edge interactive VR game titles, compatible with the Oculus Quest systems.

Beck also sees social VR sites having a positive effect on the acceptance of VR. She comments, “Against the backdrop of the pandemic and the desire to reconnect across geographies, we’ve seen a rise in engagement through social VR sites like VRChat and AltSpaceVR. Whether to experience immersive theater, remote viewing parties, engage in collaboration or just ‘be’ with friends, I expect such use will meaningfully increase in the year ahead.” Other popular social VR sites include Rec Rom, Bigscreen VR, and Meta’s Horizon Home and Horizon Worlds.

The Metaverse, a predicted global network of immersive virtual worlds, is expected to boost virtual reality, one of its key components. “VR’s greatest strengths are the power of ‘being there’ and the power of ‘connection.’ While there is neither a single definition of the Metaverse nor a universal strategy for engagement, I believe that VR will be one of the most compelling ways to explore and experience new worlds [and] emerging stories and establish relationships with characters,” says Beck.

Peace adds, “VR will be one of many entry points into the Metaverse, similar to how phones, laptops and other devices are entry points to the Internet today. The Metaverse won’t happen overnight, and it will take years to be fully realized. But VR today shows a glimpse of the immersive, social experiences that can be possible in the Metaverse, and these experiences will continue to develop as VR hardware advances and as the building blocks of the Metaverse are built.”

Augmented Reality has also not yet hit the mainstream, but it has plenty of believers, as it only requires special glasses or goggles, not headsets. Peddie comments, “AR has the biggest potential long-term. AR properly done will change our lives – for the better. When done right, it will be like wearing sunglasses or normal corrective lenses. It won’t be conspicuous or obnoxious, and it won’t take you out of the now – it expands it. AR has nothing in common with VR.” 

“With over 10 million active headsets on Oculus Quest sold now, it’s an active ecosystem. The 10 million unit number is often cited as a crucial stepping point.” 

—Ian Hambleton, CEO, Maze Theory 

Nguyen comments, “AR continues to mature. Much of the maturation and adoption are driven by the enterprise frontline work of AR. Companies like Snap and Niantic, as well as use cases like virtual try-on, and Google AR dinosaurs, animals and [Google] Maps arrow [Live View], have raised the profile for consumer AR, but we’ll still far from mainstream.” 

Beck notes that while there is growing interest in AR and some novel applications, the pivotal shift will come with the introduction of compelling AR glasses. She comments, “The kinds of experiences we can create when people do not have to hold a phone or tablet could be truly transformational. A key will be the seamless blend of our digital and physical realities.” 

Mobile AR is already widely used with smart phones, tablets and other mobile devices. The most notable example is the Niantic game Pokémon Go, developed and published in collaboration with Nintendo and The Pokémon Company for iOS and Android devices. Pokémon Go has over 150 million worldwide active users (its peak was 232 million users in 2016) and has passed one billion downloads, according to Niantic. Pokémon Go’s in-app purchases account for a large proportion of consumer mobile AR spending, according to Statista, which predicts that the number of mobile AR users will grow from 800 million in 2021 to 1.7 billion by 2024. 

Microsoft HoloLens 2, Magic Leap One, Google Glass Enterprise Edition 2, Ray-Ban Stories and Vuzix Blade are examples of AR glasses on the market. Apple is expected to launch either AR or MR (mixed reality) glasses by early 2023. Statista forecasts AR glasses sales rising from 410,000 units in 2021 to 3.9 million units in 2024. The firm predicts that enterprise spending on AR glasses will rise from $2 billion in 2021 to almost $12 billion in 2024. 

Nguyen concludes, “AR and VR will continue to see forward momentum. The pace and trajectory of AR and VR haven’t changed. The difference will be the level of hype and the mismatch between that hype and the reality. Regardless, it’ll take five to 10 years.”