Why porn is virtual reality’s dirty little secret by John Gaudiosi @FortuneMagazine July 31, 2015, 8:17 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons Everyone’s been talking about how movies and video games will be key drivers of the virtual reality business. But there’s one dirty little secret that will help big companies like Google, Microsoft, Facebook-owned Oculus, HTC, and Valve sell VR headsets—porn. According to Piper Jaffray research analyst Travis Jakel, adult entertainment will be the number three driver of all VR content behind movies and games, and the porn VR business will grow into a $1 billion industry by 2020. Jakel forecasts that 3% of VR users will pay on average $35 for adult content in 2016 accounting for $13 million of the total market—compared to 5% of VR users spending on average $56.66 on games accounting for $35 million of the market, and 15% of VR users spending on average $8.19 on movies accounting for $15 million of the market. Gene Munster, senior research analyst at Piper Jaffray, estimates that today’s overall online and video adult entertainment market is a $25 billion industry with a core male demographic. “Whenever there’s a shift in content conception, it’s typically adult entertainment that’s the first monetizable app,” Munster says. “History repeats itself and we’ve seen adult entertainment drive sales of VHS, DVD, Blu-ray, high definition, mobile, and online video over the years.” Even though it’s not a topic for polite company, Munster believes adult entertainment plays an important role in technology companies getting the kinks worked out in stealth mode before the mainstream adopters move in. “When asked if his company would block adult content, Oculus founder Palmer Luckey replied that the Rift was an open platform and it was a big deal for them not to control what software can run on it,” says Craig Foster, a VR analyst at research firm Tractica. “Facebook is not expected to permit such content in its store, but VR porn is already for sale on dozens of websites and users will surely have little difficulty viewing whatever it is they want to watch.” One of the early producers of 360-degree VR adult entertainment, BaDoink, believes VR will become the standard in the industry for today’s younger male consumers. “I see it through a generational lens,” Todd Glider, CEO of BaDoink, says. “VR porn will not have a pronounced effect on the demographic born before 1980. However, for the generations born after, the ones that reach adulthood in a world where 24/7 access to adult content is just a mouse-click away, that’s the audience for VR porn, and it will be huge.” Tractica anticipates that the investment in VR by global tech giants will grow the combined revenue for head-mounted displays (HMDs), VR accessories, and VR content from $108.8 million in 2014 to $21.8 billion worldwide by 2020, with a compound annual growth rate of 142%. “As adoption begins to reach a critical mass, the market intelligence firm forecasts that the industry’s revenue mix will quickly shift from hardware sales to content,” Foster says. “Content sales will represent more than one-third of total VR revenue by 2017, and will quickly grow to nearly two-thirds of all VR revenue by 2020.” Jakel calls VR a new content consumption paradigm that may become the preferred way that people watch all types of entertainment, including porn. He expects VR to have an impact on generating revenue for porn, and other forms of entertainment, for a long period of time. Sign up for Data Sheet, Fortune’s daily morning newsletter about the business of technology.