Virtual Reality’s $182 Billion Future

Two significant endorsements recently for the value of virtual reality — from Goldman Sachs and Deloitte consultants — are escalating the hype about VR, which was virtually ubiquitous at CES this month. In addition, Google, which has been on the VR fringes, confirmed this week it has created a VR division, headed by a senior executive, Clay Bavor, who has run Google’s apps units, according to published reports.

Goldman Sachs analyst Heather Bellini, in a 58-page outlook on virtual reality and augmented reality, predicted the technologies have “the potential to become the next big computing platform.” Her most optimistic growth estimate expects VR and AR could generate up to $182 billion in revenue, including hardware and software/content, by 2025 — exceeding television revenue.

Even at a slower pace, VR could generate $80 billion by then, she said. Bellini’s forecast cites nine categories for VR and AR adoption. Video games will represent about one-third of the revenue, with live events, video entertainment and retail collectively pulling in about another quarter of the money; healthcare, engineering, military and real estate applications will also use VR to varying degrees, according to the Goldman Sachs forecast.

Separately, consulting firm Deloitte Global, as part of its 2016 Telecommunications/Media/Telecom outlook, forecast that this year will be VR’s first billion-dollar year. It expects “full feature” VR — based on consoles and wired devices — will initially exceed the market for “mobile VR,” which may rely on high-resolution smartphones for displays.

“VR’s capability is likely to improve further still over the years as processors improve, screen resolution increases yet further, and content creators learn how to create for the format,” Deloitte’s report observed. But it acknowledged, “As can happen with emerging technologies, there is considerable hype about the impact of VR in the near term.”

For cable operators, the VR/AR juggernaut poses countless questions, ranging from the capability of home gateway devices to signal latency for live events. There will also be challenges in dealing with the VR vanguard, which now includes Facebook’s Oculus subsidiary, HTC/Vive and Sony, in addition to Google.

CableLabs is working out “what cable operators need to do to prepare for a large market adoption of VR,” said Steve Glennon, principal architect at CableLabs’ Advanced Technology Group, who is focused on VR. CableLabs’s recent consumer survey about the value of technology found “an overwhelmingly positive consumer response on the value, comfort and lack of nausea problems using the goggles,” he said in an interview after CES.

“We’ve been trying to understand the bandwidth needs and have found a good consumer experience needs between 30 and 40 Mbps for 360-degree content with current technology.” he said. “This is far above current video streaming bandwidth requirements for online video like Netflix and Hulu.”

Glennon said CableLabs is continuing “to look for tactical opportunities to speed the consumer adoption of the VR technology.”

At CES, “It was pleasing to see how mainstream this technology is becoming,” Glennon added.

“I think this will quickly move from HD content for the VR sphere up to 4K,” he observed, citing several immersive VR demos that were “not for the faint of heart.”

Prior to CES, CableLabs CEO Phil McKinney characterized VR developments as “beyond the goggles,” referring to the limited hardware demonstrations of previous years. “What we’re going to see is content,” McKinney told USA Today, emphasizing that sports and travel-related VR content are the most likely initial products.

Skeptics have noted the new VR buzz resembles the 3D TV hype a few years ago, which fizzled away. Bellini, in the Goldman Sachs report, waves off such cynicism, insisting VR and AR are laying the groundwork for new kinds of devices “beyond PCs and phones” that include controls via head and hand motions.

This article was first published in MultiChannel News