Virtual Reality Software Revenue Forecasts 2014 – 2018

This is our third post in the series presenting our market sizing forecast for the Consumer Virtual Reality sector. In the first post we scoped out addressable markets, HMD (and input device) penetration rates and unit sales. HMD and input device revenues were presented in the second post.  Completing our market sizing forecast from 2014 to 2018, this article looks at revenues from the software side. Order the full market sizing report here.

Within the general category of ‘software revenue’ we include the following:

• Revenues from Virtual Reality games: A combination of monthly access subscriptions and in-game microtransactions (MTX). As some background, we’ve been analysing these types of game revenues from virtual worlds and MMOs since 2006.
• Revenues from Social Virtual Reality applications: Primarily access-driven virtual goods revenues as well as decorative/functional virtual goods popular within social worlds. Virtual goods is another revenue segment we have a deep understanding of.
• Revenues from real-world video applications: Based around the video capture of live events (sports, music etc) and presentation via VR, this is a revenue stream expected to be driven via MTX. We include LifeLogging within this software revenue segment.

HMD Owner to Active User Ratio

Our starting point to forecast software revenues is to assess the relationship between HMD owners and active users. We believe the virtual reality sector is very much a ‘Check this out!’ concept, meaning HMD owners will actively promote and advocate using their headsets to other people. Furthermore, within the timeframe of our forecast (2014 to 2018) we expect HMD ownership to mirror game consoles, i.e. one console to several ‘users’ within a household. On this basis, shown below is our forecast for the HMD to active user ratio.

On an average basis we forecast the HMD to active user ratio to grow from 1.0 in 2014 through to 2.4 in 2016 then dip slightly to 2.05 by 2018. Of the three primary target markets we’ve segmented our forecast by, the Early Majority (including the Kids, Tween and Teen market) possesses the highest ratio as this group is most likely to contain families. The corresponding ratio for this segment peaks at 3.0 during 2015/6, falling to 2.5 from 2017 onwards. Continue reading →

VR HMD and Input System Device Revenue Forecasts 2014 – 2018

Taken from our latest market-sizing analysis for the consumer Virtual Reality market (order the free report here), this article present our forecasts and assumptions for hardware revenues. VR hardware revenue encompasses head mounted displays (HMDs) and input system devices such as gloves, treadmills and bodysuits as well as haptic feedback outputs.

The first post in this series detailed the addressable markets in the VR hardware market along with penetration assumptions and unit sales forecasts. As a recap:

• Forecasted penetration for consumer VR headsets to reach 8.8% by 2015.
• Forecasted penetration for consumer VR Input Systems to reach 26.3% by 2015.
• By 2018 we estimate total HMD unit sales of almost 39m globally. This equates to a cumulative total of 83m HMD unit sales over the five year period.
• By 2018 we estimate total VR Input System unit sales of almost 10m globally. This equates to a cumulative total of 18m unit sales over the five year period.

Retail Price Points

Shown below is our assessment of the retail price for consumer HMDs from 2014 to 2018. Due to factors such as component economies of scale, commoditisation and discounting to drive market share, we anticipate a steady annual fall in the retail price of HMDs, from $350 in 2014 down to $100 by 2018.

By 2017 we also expect subsidised pricing plans offsetting the hardware cost with rental/subscription plans, similar to the mobile device market. A full list of companies currently developing VR headsets is here.

We expect Input Systems to be very popular and we’re already tracking this market via our Hardware Radar. Looking at the selling price for Input Systems (controllers, haptics, body suits, stereoscopic cameras etc), we expect similar downward pressure of pricing. Continue reading →

VR Headset Sales Forecasts and Market Penetration 2014 – 2018

Building on our experience in producing market forecasts for the virtual world/MMO sector since 2006, in January 2014 we published the first ever market sizing forecast for the consumer virtual reality market. This forecast has now been updated and expanded to reflect the growing VR marketplace and the emergence of input devices to accompany HMDs. Our full (and free) updated VR market sizing report can be ordered here.

We’ll be diving into our findings in a series of articles, starting with addressable markets, HMD and input system penetration rates, available devices and overall unit sales forecasts for 2014 – 2018.

Addressable Markets and Penetration Rates

The starting point for our VR market sizing is the total global addressable market. We have defined the overall addressable market based on PC, Internet and Mobile Device availability, global gamers, socnet users and consumers residing in developed (as opposed to developing) countries.

On this basis we forecast the total universe for consumer VR at 800m consumers in 2014. Taking into account technology adoption rates and the fact that the VR market is in an emerging state, we have further refined the global universe from 800m down to 400m – this is the real addressable market.

From here we have segmented this total addressable market into three primary groups:

• Innovators / Hardcore Gamers: 2.5% of general popn.  Eager to try new ideas and willing to take risks with new tech. Youngest age group of all adopters and highest social class. Innovators are the gate-keepers of promoting new ideas. Developer kit market, digital markers and VR enthusiasts.

• Early Adopters / Light Gamers: 13.5% of general popn. A closer social structure than Innovators, meaning they’re ‘Localites’.  The highest ability to act as opinion formers across all other adoption types.  Older tablet, mobile and console gamers.

• Early Majority / KT&T: 34% of general popn and an above average social class, adopting new ideas just before the avg. person. They interact frequently with their peers (locally and globally) as the important link in the diffusion process. Driven heavily by Kids, Tween and Teen market and active tablet, mobile and console gamers.

Further insight into these three markets is explained here.  The chart below shows the addressable market for consumer VR by segment from 2014 to 2018.

We have then applied forecasted penetration rates of consumers purchasing VR headsets (HMDs) by each of the three target markets. This is shown below: Continue reading →

Developing Hardware for Virtual Reality?

Following the release of our Q2 Virtual Reality Hardware Radar map, we’re now in the process of updating it for Q3 2014. If you’re a start-up (pre or post funding) or operational company developing VR input systems including controllers, haptics, tracking devices and basically anything else VR related then let us know and we’ll include you in the update.

The KZero VR Hardware Radar (just like our Universe charts for the VW market) is being used by VCs and investors, the media and other interested parties to map out the virtual reality market. Here’s a segment of our Q2 Radar. Contact us here to be included.

25 Brands in Virtual Reality

In addition to our expertise in Virtual Product Placement into virtual worlds, MMOs and social games, we also track the overall market activity of brands in this space.

This now includes the virtual reality sector and we’ve just released our Q3 2014 update of branded experiences in VR. This assessment includes official projects (sanctioned by the brand owners) as well as unofficial initiatives (created by fans).

Since our last Q2 update, we’ve seen official VR demos and experiences created by the likes of the BBC, Bloomberg and Oakley. On an unofficial basis, VR experiences have been created for  brands/IPs such as Southpark, the Matrix and Serenity.

So, this recent activity brings the total number of official and unofficial brands to 25. Check them out in the presentation below.

Further information: