Published on: November 13, 2019
Virtual Reality (VR) is a computer technology where both hardware and software are used to create an immersive simulated environment. Various devices such as VR headsets, Omni-directional treadmills, and special gloves are used to create a three-dimensional computer-generated environment. VR has a wide range of applications in the field of healthcare, gaming, retail entertainment, sports, industrial automation, architecture, and others. The global VR market is a part of the global interactive home entertainment market within the global media and entertainment market. The parent global media and entertainment market cover companies offering products, services, and solutions in advertising, broadcasting, cable and satellite, publishing, movies and entertainment, interactive home entertainment, and interactive media and services. The global interactive home entertainment market covers companies engaged in producing interactive gaming products, including mobile gaming applications. It also includes educational software used primarily in the home.
The global VR market was valued at USD 7.5 billion in 2018 and is expected to grow to USD 55.3 billion by 2023 growing at a CAGR of 49.12% during the forecast period. Within the VR market, consumer application has a dominant share with an increasing use of VR technology in gaming and entertainment. Based on devices, VR headsets dominate the market, however, gesture tracking devices witnessed the highest growth rate owing to the growing demand for gesture control devices like data gloves, treadmills, and controllers in healthcare applications such as surgeries.
Moreover, based on geography, the VR market in North America held around 41% share of the global VR market. Few of the prominent reason for the rising demand for VR in the North American market is the presence of prominent vendors and positive investment outlook. Also, many end-user industries like entertainment, healthcare, and gaming in North America are more open to the integration of VR technology. However, to compete with the North American market both Europe and APAC are witnessing a significant market investment which is expected to help them to close the gap or even surpass the North American market in the forecast period. The VR market in Europe is driven by the use of VR in applications like process manufacturing, automobile, and retail. In APAC, China and South Korea lead the race with a high preference for VR technology in the gaming and healthcare sector.
Global virtual reality market can be segmented into the following:
Many factors are expected to drive growth in the VR market during the forecast period. Our analysis identifies the following factors to be driving the growth in the VR market:
VR has been looked at as the technology that can provide innovative solutions in a wide range of markets. This has created a positive market outlook leading to a large number of public as well as private investments. Even governments are investing in VR technology to gain that competitive edge in the market. For instance, the UK government under its industrial strategy announced to invest a sum of around USD 42.67 million in areas including virtual reality (VR), augmented reality (AR) and mixed reality (MR).
Prominent companies in the VR market are working toward the implementation of AI technology in VR as it helps to increase operational efficiency and open new fields of applications. For instance, in April 2018, Facebook announced that the company is working toward the development of voice and AI assistant technologies that will work across all AR/VR products including Portal, Oculus and future products.
Collaborations and partnerships help the vendors in product development, geographical expansion, and gaining access to technological expertise. This also enables vendors to explore new opportunity areas for their products and services. For instance, in September 2019, Valcon signed a partnership agreement with Virsabi ApS, under which Valcon will use Virsabi’s VR expertise to improve its service offering.
VR is a high potential market which is in its early growth stage. Both government and private companies are investing to support the growth of this market. For instance, in January 2019, Microsoft announced to open an incubation center in China. This center will focus on the development of AI and VR technology and expected to attract a large number of start-ups to enter this market.
Meanwhile, the vendors operating in the market face numerous challenges in increasing their sales and improving profitability. Some of those challenges are:
There are several cost factors associated while developing VR content, which includes the creation and distribution cost of VR content and the cost of software and hardware. The true value of VR games depends on the interactive content offered and 360-degree cameras are used to create realistic panoramic content. The cost of adding the 360-degree functionality to a video can be above USD 10,000. To develop realistic VR content, 360-degree cameras, computer graphics, and high-end photorealistic cameras are required. The total cost of creating only the VR content can be more than USD 25,000. Developing software for a location-based VR project is also a major concern.
Development and implementation of VR based devices face various technological limitations leading to the hindrance for the growth of the market. From the mobility of the device to form factor, all leads to user’s reluctance for the adoption of such devices. Moreover, VR based devices require higher data transmission which faces limitation when operating on a 4G network. So, until full-scale 5G network deployment is achieved, the adoption of VR devices is expected to be slow.
Currently, content developers are facing increased pressure to make VR a mainstay for mass consumption. However, this will depend mainly on the quality of VR content offered. Poorly created content or the lack of quality VR content is one of the major issues faced by the VR market. Customers often complain of a VR experience that is poor, worse, or gimmicky. There are numerous VR games in the market developed by individuals and companies that fail to meet users' expectations. This is reducing the growth potential and acceptance of VR among consumers.
Our reports on global VR market covers several large and small vendors active in the market including Apple Inc., Facebook Inc., Google LLC, Hewlett-Packard Development Company L.P, Microsoft Corp., Nintendo Co. Ltd, Samsung Electronics Co. Ltd., and Sony Corp. Investment in the latest technology and startups, mergers and acquisitions, and introduction of new products are some of the strategies adopted by the manufacturers in the global VR market.
Following are few of the major developments in the VR market:
Backed with competitive intelligence and benchmarking, our research on the VR market is designed to provide entry support, customer and M&A assessment, as well as go-to-market strategy support.
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