Who’s Going to Buy a Virtual Reality Headset?

Who’s Going to Buy a Virtual Reality Headset? Obviously this was a key question considered when we started to construct our market sizing analysis of the Consumer Virtual Reality market in late 2013.

Our market forecast covers the period 2014 to 2018 and takes into account the initial developer kits made available by headset manufacturers as well as the initial consumer markets that will embrace VR technology.

Three primary markets have been identified for consumer VR, as follows:

Enthusiasts, Hardcore Gamers and Innovators

The VR enthusiasts market purchased circa 60k units of the Oculus Rift DK1 and circa 30k units of the DK2 have already been pre-ordered. Who are these enthusiasts? Well, it’s the 9.5k people that backed Oculus VR on Kickstarter, supplemented (with overlap of course) with the 28k members of the highly active Oculus Reddit group. These people come from a mixture of IT, the game development industry, marketing/ad agencies and the like.

As more headset manufacturers release developer kits (we expect two more this year) we forecast total 2014 sales to exceed 200k. In 2015 we estimate this element of the market accounting for just over 1m unit sales as headsets such as the CV1 (from Oculus) along with the launch of the Morpheus headset from Sony and other start-ups bring their devices to market.  Unit sales from the Enthusiasts/Hardcore Gamer/Innovator segment are then predicted to rise to 2m in 2016 then up to 4m by 2018.

Perhaps the term ‘Hardcore Gamers’ is a little harsh or even slightly out of date. What is meant by this classification is consumers happy to spend significant amounts of their time and disposable income on gaming. And gaming in this sense is defined as MMORPG-type games along with virtual worlds such as Second Life. Importantly with this segment of the market the PC (as opposed to the console or tablet) is the access-point.

Before the other two primary consumer market drivers are explained, here’s a chart showing annual unit sales from all three segments.

Light Gamers / Early Adopters

The second major market segment driving the adoption of Consumer Virtual Reality is what we’re calling Light Gamers and the Early Adopters. These are people happy to spend money on social games and apps and also willing to embrace new technologies (similar to Innovators).

We believe that VR applications such as Social Virtual Reality will be key in stimulating this market to purchase. On this basis, this is the market segment presenting the most short to medium term value to a potential Facebook-driven virtual world. This segment is also key in multi-player (or more specifically multi-person) VR environments, using VR to engage in social activities.

The KZero forecast has no sales from this segment in 2014 but is estimated to reach 1.6m in 2015, 2.5m in 2016, just over 5m in 2017 and 8.8m in 2018. As illustrated in the chart above showing annual unit sales, this segment is expected to ramp-up from 2016.

Whereas the access point for the Hardcore Gamer element is the PC, the supporting kit for Light Gamers is mobile and tablet.

Kids, Tweens and Teens (KT&T) and the Early Majority

This segment of the market is driven more by the KT&T element in 2015 and 2016, then assisted by the Early Majority from 2017 onwards. This is the element of the market driven by console gaming devices, supported by mobile and tablet.

Splitting the KT&T market further, the Teen segment of this group in 2015 and 2016 will be key to Consumer Virtual Reality unit sales and is a market presenting high value to Sony as well as other large technology companies rumoured to be developing VR headsets.

Our upcoming KT&T user testing and research study (conducted in collaboration with Dubit) highlighted an expectation from the research group for companies like Microsoft and Samsung to release VR headsets. From 2016 onwards we also anticipate more traditional toy and game companies developing (or using white-label) VR headsets specifically for younger users, i.e. kids and tweens. In terms of what these users will do with their headsets in virtual reality, User Generated Spaces is a concept we believe will be extremely popular.

In terms of unit sales, we forecast just over 3m from this segment in 2015, growing to 6.3m 2016, 7.7m 2017 and 10.5m by 2018.

Summary

On an overall basis our market sizing forecast estimates total unit sales of 200k in 2014. In 2015, on the basis that at least two consumer headsets will be in the market, total unit sales are forecasted at 5.7m.

Annual unit sales are then forecasted to reach 10.9m in 2016 (with an assumption that at least four different headsets will be available), 16.1m in 2017 and 23.8m in 2018 (with an estimated seven headsets in the market).

These numbers are shown in the chart right.

In addition to the unit sales forecasts explained in this article, KZero market forecasts relating to active users and revenues (hardware and software) are contained in our Slideshare presentation below. A free high-res version of this report can be ordered here.