Our firm tends to stay out of the forecasting game for a variety of reasons. First, they almost always change. When we do a forecast, we attempt to come up with a reasonable set of assumptions and scenarios to explain a best, base, and worst case scenario for the growth of a segment. The caveat is, things will always change, so the updates to the forecasts and scenarios in any given year are the most valuable part of this work. This is why we tend to focus more on the short term when forecasting rather than the long term. Most forecasts that go five years out will be wrong and will need to be adjusted annually.
We are, however, perfectly happy to comment and share our thoughts on other people’s forecasts and articulate where we agree or disagree with them using our research. So today, we will look at some broader AR and VR forecasts from third party sources.
I looked around at a range of estimates, from larger Wall St. Hedge funds and third party firms like Gartner and IDC, to come up with some kind of consensus for projected revenues for VR and AR. From what I’ve gathered, this chart reflects the ranges of a number of sources:
The chart reflects total revenue from hardware and software and, as you can see, there is much more optimism around Augmented Reality than Virtual Reality in terms of market size and growth. I fully understand this assumption. An augmented reality product allows you to still be present in the physical world and, so the theory goes, you can use it for more applications throughout the day. VR, at the moment, is being positioned more within a core “immersive” experience set of functions and, therefore, the assumption is less time will be spent using VR than AR in the course of our day to day lives.
There is no hardware path that necessarily suggests these two dynamics stay separate. I can see hardware capable of both AR and VR experiences but that is technically not possible yet and won’t be for some time. The blending of these two experiences is often referred to as mixed reality, yet no one seems to be making a separate forecast or breakout for true mixed reality devices, instead lumping them into the AR category. I’m not sure I agree with this.
The below approach is one I’m fond of and, while I don’t have the space to outline all the scenarios for each of these forecast assumptions, it gives a look at some reasonable scenarios for shipment growth of AR and VR devices.
While I can slice this by type (standalone head mounted display, smartphone-based like Gear VR and Google Daydream, or PC/console based), I think looking at total units is helpful mostly to gauge how many consumers may have a VR or AR device in their possession at some point in time over the next four to five years.
The most bullish forecast here assumes prices come down dramatically over this time horizon, content catches up, an ecosystem develops, and that most of the hardware units are like Gear VR or Google Daydream since they will be lower cost. If I had to bet on which scenario plays out, I’m probably more in line with the medium adoption. I still think we have a ways to go, technologically, to create what is a mainstream consumer experience across all the vectors and visions for the industry.
With over 70% of consumers still not having tried any kind of VR experience, the context in which consumers try this first and what their initial experience with VR is will matter. While the Gear VR and Daydream type devices are lower cost, they are also a base level VR experience and perhaps not the true showcase of the full VR experience. For that, I’m optimistic something like the Playstation VR does well and may be the first true VR for many who try it at a friend’s or family members house.
2018 and 2019 is the time I think we can see real momentum for this space, as it lines up with both technology roadmaps and content developement timelines. We still have a lot of time before anyone is late to VR and AR but knowing the consumer experiences and behaviour patterns over the next few years will be key and the main focus of our market research.
