The head mounted display (HMD) market increased by a total of 3.3 million units worldwide in 2018, according to Futuresource Consulting. This equates to 19% year-on-year growth, and represents a dramatic slowdown when compared with 2017, when HMD unit sales grew by close to 250% over the previous 12 months. However, when looking at 2018’s market value, growth was far more encouraging, increasing by 71%, which equates to US$1.5 billion at retail.
One of the most prominent factors behind the slowing pace of market development is the continuing decline in demand for smartphone HMDs. Smartphone HMDs had been on the threshold of providing affordable VR content to the mass market. However, an oversupply, and the limited quality of content and immersion capabilities of smartphone-based VR have ultimately led to the category’s decline. This was brought about by a series of giveaways and the promotional bundling of mobile HMDs by major smartphone manufacturers and retailers. As a result, the market increased at a disproportionate rate, when compared with the underlying consumer demand for headsets. Whilst smartphone VR has been an important learning curve and experimentation ground for VR, ultimately initial consumer interest has waned, and the industry moved on from smartphone delivery.
All-in-one (AIO) headsets, self-contained headsets that don’t require a smartphone or PC to power immersive experiences, are expected to fill the value gap that has been created by the slowdown in the smartphone headset market, whilst also providing top quality immersion rivalling PC VR headsets. AIOs are an emerging and exciting category, particularly following the launch of the Oculus Quest in 2019, a device which will set the benchmark for the industry moving forward. In 2023, Futuresource expects 30 million shipments in the device category, becoming the most popular segment of VR with the technology starting to cannibalise sales of other VR headsets.
Whilst the industry is excited with the initial growth of AIO headsets, there remains a robust market for PC powered headsets, driven by enthusiast PC VR gamers and enterprise users. The PC VR headset market is set to grow by 68% in 2019. Whilst PC headsets continue to provide some of the best levels of immersion for users, the price of devices alongside a high-end PC which can handle the graphics processing required for VR, remain prohibitively expensive. PC headsets remain one of the key areas for immersion innovation in VR, with features such as pressure sensitive controls and eye tracking coming to market in 2019.
PSVR continues to be one of the key consumer drivers of VR and the bestselling SKU across the market. With 2.4 million units expected to ship in 2019, the console VR market continues to attract users and offers an affordable entry point to VR gaming. With the PS5 launch expected in 2020, it will not be long until a revamped PSVR will hit the market, utilising the improved hardware, enabling what could be the first generation of AAA console VR titles.
The industry remains excited about the potential of VR moving forward, however shifts in the industry highlight the struggles already faced bringing immersive technology to a mass market. Whilst VR is expected to remain a niche in the short-term, there is a budding industry developing with a rich ecosystem of products, services and opportunity
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