VR has been coming into its own this year, and the standalone headset Oculus Quest has certainly played a significant role in boosting the VR ecosystem. According to the XR Q3 2019 Update from Nielsen-owned SuperData Research, the market for VR hardware and consumer software will climb from $2.5 billion last year to $3.2 billion in 2019, and it’s expected to continue its steady growth, reaching $6.8 billion in 2022.
Oculus Quest, which only launched a few months ago, has now reached an estimated installed base of 400,000, having sold 180,000 units during Q3, “nearly double the combined sales figures for the Oculus Rift S and Oculus Go,” according to SuperData. With Facebook about to enable the Link feature for Quest so that it can act as a PC headset (effectively replacing Rift or Rift S) and the company preparing to launch controller-free hand tracking next year, it’s become clear that the company its putting its VR eggs into the Quest basket.
“Oculus Quest is currently selling better than Rift and Vive were at the same point in their respective life cycles, and we expect the gap to widen during the holiday season,” Carter Rogers, Principal Analyst at SuperData told GameDaily. “The Quest is an especially ‘giftable’ device compared to early VR headsets. It’s cheaper than those devices were at launch and gift buyers don’t have to know if the person they’re buying it for has a compatible PC.
“We also expect the Quest and standalone devices to leapfrog PC headset sales, especially as Oculus focuses on the device instead of the Rift.”
While Quest has roughly a third of the installed base compared to high-end PC headsets like Rift or HTC Vive, and a mere fraction of the PSVR’s 4.7 million units, developers immediately noticed a sales impact for their games when they brought them to Quest. Tie ratios for software on Quest would appear to be better out of the gate, but whether that phenomena can last is unclear.
“Oculus Quest users who wanted to get the most out of their device likely purchased plenty of content on day one. Most of the top VR games did not hit previous headsets on launch day and therefore did not benefit from an influx of users who were hungry to buy games for their shiny new device,” Rogers noted.
On the other side of the VR spectrum is the Valve Index, which SuperData said sold just 46,000 units in its first quarter on the market, putting it behind the launches of other PC headsets. This may not be a big surprise, as “Valve’s device is designed to reach the most dedicated enthusiasts given its price of up to $1000,” SuperData said.
VR on the whole is getting an even bigger boost from businesses. While consumer applications are gaining traction, SuperData reported that enterprise headset revenue is on track to jump by 69% during 2019. “Businesses have been sold on the potential of VR. Enterprise customers are rapidly adopting VR for purposes like employee training and automotive design,” the report stated.
SuperData’s report shows AR lagging behind VR, with mobile AR reaching $2.2 billion in 2022 and AR/MR headsets hitting $4.6 billion (compared with VR’s $6.8 billion mentioned earlier). Many in the industry have long said that AR holds the greater mainstream potential and long-term impact, and SuperData still sees AR winning out despite these early estimates.
“Augmented and Mixed Reality (MR) are set to surpass VR in the long run, and it’s important to remember that AR/MR isn’t limited to head-mounted devices. While our revenue figures don’t include advertising revenue, branded content is already a huge part of the AR industry due to things like sponsored Snapchat filters,” Rogers said. “Smartphone-based AR has been truly ‘mainstream’ for a while now with well over 1 billion users. No matter how affordable and accessible VR becomes, AR will always be able to serve a wider audience due to the reach of mobile AR.”
And one should not discount the potential impact that a behemoth like Apple could have. Rumors are spreading like wildfire that Apple is preparing to launch a set of AR glasses in 2020.
“The Apple name (and their marketing prowess) is certain to introduce some consumers to the concept of head-mounted AR/MR for the first time,” Rogers remarked. “However, questions abound like how feature-rich the hypothetical hardware will be. If Apple’s AR solution more closely resembles Google Glass than devices like Magic Leap and Microsoft HoloLens, it’s hard to see how monetized software (like games) could be hugely successful on the device in the short term.”
Right now, we can only speculate on what AR gaming from Apple might look like, but what we do know is that AR on mobile is not a guarantee of success. Not everyone can see sales on a level with Pokémon GO.
“Pokémon GO from Niantic had its second-best month ever in terms of revenue in August 2019. Meanwhile, the company’s new title Harry Potter: Wizards Unite had a strong launch in terms of player numbers, but it only earned 1% of the revenue Pokémon GO did from June to August,” Roger said.
Google hasn’t done much with VR/AR recently either. In fact, the company just discontinued its Daydream VR device and from a games perspective its next big bet is on the cloud with Stadia launching next month. It’s conceivable that at some point in the future Google’s cloud ambitions could be leveraged for a new kind of VR/AR headset that’s powered entirely by the cloud, opening all kinds of content possibilities but there are a plethora of hurdles to clear first.
“Cloud-based VR is likely even further away than mainstream cloud-based gaming. Latency that would potentially just be inconvenient in a traditional game could make a user nauseous in VR,” said Rogers.
VR was a victim of a mismatch in expectations during its first couple years, but it’s become clear that the technology isn’t going away. Now it’s time for developers to discover how to take this exciting medium to the next level.
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