Is VR living up to its promise?
We predicted a billion dollar revenue in 2016; is it on track?
In this year’s TMT Predictions we stated that Virtual Reality (VR) will generate 1 billion dollar in sales in 2016, with 70% coming from hardware sales and the remainder from content and services. In 2016 we have seen a large number of consumer-grade VR device product launches, including both high-end devices such as Oculus Rift and lower-end products such as the Samsung Gear VR (late 2015) and the LG 360 VR. However, most devices available to consumers have limited warranty and support (for example Razer OSVR HDK 2) as they are geared towards developers for further product and content development.
Virtual- and Augmented reality are the latest innovations in consumer experience. Virtual Reality allows users to immerse themselves in virtual surroundings being either a representation of a real world location or the depiction of an imaginary world. Augmented Reality blends a digital- and real life experience by overlaying content on whatever the user sees. Both technologies allow us to experience information and technology in completely new ways previously impossible or even unthinkable.
The development and marketing of VR devices is mainly focused on specific product characteristics such as angle of view, screen resolution, refresh rate and tracking accuracy. Although we have seen massive developments since first generation VR devices, both on content and technology, there is still a long road of technological innovation ahead. In parallel, developers are pushing the boundaries of connectivity, for example by combining VR devices with drones for a birds-eye view experience. The full potential for consumers remains to be determined, however with this year’s Global Mobile Consumer Survey (GMCS) we hope to discover more about consumer’s appetite for VR and AR.
The creation of content for VR devices is taking a giant leap. Marketing agencies, sports events and automobile manufacturers are already producing new content. For example, UEFA is using Nokia’s OZO cameras to capture 360-degree video inside stadiums and is testing the possibility to let users experience the game as if they were in the stadium. Further examples include Audi, who is planning to supply dealers with VR sets to enable their customers to customize, configure and experience their future Audi and Six Flags who will provide a synchronized virtual reality experience of an actual roller-coaster ride.
In the Augmented Reality (AR) space, we see an unprecedented hype revolving around the game Pokémon Go. This game has been a great success in user adoption, breaking app-store records. The game’s low threshold to use AR-content has even fueled demand with consumers ordinarily lagging in the adoption of innovations. In a similar fashion, Albert Heijn launched a loyalty program in which customers can collect Dino stickers that can be brought to life through the company’s app.
Investments and returns in the VR/AR industry
Investments in the Virtual Reality and Augmented Reality industry are soaring. In the first two months of 2016, capital expenditure already totaled a whopping $1,1Bn, superseding the total VR/AR investments in 2015 . Investors have high expectations, as some predictions go as far as claiming the industry will generate a combined revenue of $120Bn by 2020, split between $90Bn for AR and $30Bn for VR.
These high expectations were confirmed when Niantic launched Pokémon Go and Nintendo’s market value double in just two weeks . The appeal and popularity of the game are considered to be important drivers in opening up AR and VR technologies to the mass public.
Deloitte Global Mobile Survey – VR findings
Needless to say, the industry is gaining momentum and new applications are being developed at an increasing rate. The question is whether these developments will translate into higher penetration and significant adoption of VR (devices) in The Netherlands? Which type of consumer will be buying a VR set in the next 12 months? Will VR adoption substantially increase compared to last year? Stay tuned and find out more about VR adoption in Deloitte’s Global Mobile Consumer Survey.
Would you like to receive more information about VR or the Global Mobile Consumer Survey? Please do not hesitate to contact Michiel Mennen.