After years of slow growth and limited use cases, the Virtual Reality (VR) market is now forecast to grow significantly over the next five years. Consumer interest in VR games and media continues to grow after the COVID-19 pandemic accelerated activity.
At the same time, the need for employee enablement and immersive content within the enterprise environment remains strong. According to the latest market study by ABI Research, over 90 million Head Mounted Display (HMD) shipments in 2027 will drive total VR market revenues to reach over $95 billion across hardware, software, and services.
Virtual Reality Market Development
"The virtual reality market is no stranger to false starts, with identifiable efforts in VR dating back to the 1980s and 1990s. While the technology never found purchase results, the increased capability of VR hardware combined with the demand for immersive content in numerous markets, presents a significant opportunity," says Eric Abbruzzese, research director at ABI Research.
While the intense focus on the 'Metaverse' is partly responsible for this increase, shorter-term and smaller scale opportunities are driving the expected new growth in the coming months and years.
Among devices, standalone HMDs make up most shipments through the forecast period, with 79 million expected shipments in 2027, growing at a 40 percent CAGR.
Tethered and mobile-based VR devices make up the rest, with tethered favored for gaming by consumers and simulation and training applications for enterprises.
Among these shipments, consumer shipments make up 80 percent of the total. Education accounts for 16 percent of total shipments but is growing the most quickly at an 88 percent CAGR through 2027.
Other enterprise markets do not account for a significant portion of shipments. But will significantly grow in some areas. As an example, Location-based Transportation and Automotive both will grow at over an 80 percent CAGR through 2027.
Meta’s Quest 2 remains the most popular VR device, standalone or otherwise, and by all accounts had a record-breaking 2021. Sony’s PSVR2 has been confirmed and will target an impressive PlayStation 5 install base that has also set records despite supply shortages.
Apple has a planned headset possibly launching in 2022, while Meta also has confirmed a new standalone device. Pico and DPVR are worth watching on the affordable end, and Pimax is pushing capability at the high end.
Mobile devices, such as the abandoned Samsung Gear and Google Daydream, do still have a presence in the market, although somewhat limited. The low cost and accessibility of these device types remain valuable and will still be treated as an option against the dominant standalone form factor.
Outlook for Virtual Reality Applications Growth
According to the ABI assessment, hardware, software, and services must align with the perceived market value and demand to allow an emerging technology, such as VR applications, to flourish.
To date, this has only happened in siloes and at a small scale so far, such as with VR gaming, but cross-market investment and offerings are now being met with increased demand.
"The need for immersive visualization tools can only increase, and without the once glaring holes in enabling technology capability or value to users, the path forward is a promising one -- not just in small segments but across ecosystems," concludes Abbruzzese.
That said, I believe the enterprise market will continue to be a nascent upside opportunity for the foreseeable future. The most compelling business-related VR applications are in niche sectors of the overall market.
So, will the Metaverse combined with VR applications enter the business sector? So far, it's unclear when any new use cases may enter the commercial app mainstream, and drive new growth.