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People wear Samsung Gear VR devices as they attend the launching ceremony of new Samsung S7 and S7 edge smartphones during the Mobile World Congress in Barcelona
People wearing Samsung Gear VR devices at Mobile World Congress 2016. Photograph by Albert Gea — Reuters

How Virtual Reality Hype Exceeds Demand—For Now

Oct 13, 2016

As Sony plunges into the race for virtual reality dominance with its $399 PlayStation VR headset this week, it's still unclear how many consumers are ready to spend real money on virtual reality (VR) gear.

But new research takes a stab at it. For all the hype around the new Sony (sne) PlayStation VR, Microsoft (msft) HoloLens, or Nolan Bushnell's new Modal VR gear, just 6% of Americans will own any of these devices this year.

According to Strategy Analytics research, roughly 11.4 million American adults will pony up for one of the aforementioned devices—or a Google Cardboard or HTC Vive (htc), among other gizmos—by year's end. In aggregate, the category will drive almost $556 million in sales within the U.S. during that time period.

These devices will have higher penetration in the U.S. than elsewhere—largely thanks to aggressive "giveaways," according to Strategy Analytics' analyst David MacQueen. Google (goog), for example, has given away a ton of Cardboard units as has the New York Times, which distributed about 1.5 million of the $15 gadgets for free to print subscribers.

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These lower-end devices, which also include the Samsung Gear, must be paired with a smartphone to work.

Another category of VR headsets, including the Playstation VR, work in tangent with a game console and will account for 6% of VR headset sales this year. PC-based VR headsets—like Facebook's (fb) Oculus Rift ($599) or HTC Vive ($799)—will make up 1% of the market, according to MacQueen.

vr-headset-market

"Despite the rush of companies eager to jump in, the reality is that VR take-up among the U.S. public will be a slow burn and dominated by low-cost headsets," wrote MacQueen. He likened the VR headset market to the auto market—where the vast majority of consumers buy Ford or Toyota vehicles, while a good chunk buy Porsches, and relatively few spring for a Ferrari.

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While 6% doesn't seem an earthshaking number, it's a pretty good adoption rate for a nascent technology, MacQueen noted. The Apple (aapl) iPhone penetration rate was roughly the same in 2009, two years after its launch, he noted.

For more, read: This Is the Ultimate Virtual Reality Buyer’s Guide

By the end of 2017, MacQueen expects 16% of American adults will own a VR headset, growing to 27% the following year.

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