Commentary

Virtual Reality Revenue Headed To $5 Billion This Year

It looks like this will be a big year for virtual reality headsets.

Consumers also are moving up to better headsets, with those types of units increasing significantly from last year while sales of light mobile headsets drop, according to a new report, The Virtual Consumer, from SuperData Research.

This year, 21 million premium VR headsets will ship, more than triple the number from last year.

Shipments of the less advanced headsets, which at their low cost flooded the market last year, will drop from 84 million last year to 59 million this year.

Topping the list of premium VR headsets is Google Daydream, projected to lead in sales this year at 7 million units.

Retail demonstrations are the most popular way American consumers become interested in VR before buying, according to the report. Of course, poorly managed demos from sales associates without enough knowledge about how the technology works can actually decrease interest and adoption.

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For VR content, males over 35 years old gravitate to virtual tourism. Many (48%) females in the same age group try headsets at home, often using a family member’s device. Female millennials are most engaged when content features their favorite celebrities and artists (24%).

In terms of money, VR hardware, software and services will combine for a total of $5 billion globally, with projections to more than double next year.

As a breakdown, global VR hardware revenue is expected to hit $3.6 billion this year, up 142% over last year. Virtual reality revenue from software is another story, increasing to just over $1 billion, with North American sales accounting for almost half of that.

Longer term, virtual reality software is expected to reach $20 billion by 2020, surpassing hardware earnings for the first time.

Augmented reality is expected to stay flat in revenue this year, with the decreasing sales of Pokémon Go, which accounted for 96% of all AR software revenue in 2016.

As might be expected, millennials make up the majority (63%) of virtual reality consumers in the U.S.

The key is that the overall market has no signs of slowing.

VR and AR revenue is projected to reach $68 billion three years from now. And that’s not in virtual dollars.

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