Virtual Reality Video Game Industry to Generate $5.1 Billion in 2016


Video games will be the key driver of virtual reality hardware this year, according to a new report from SuperData Research. Game developers will also have a global audience of 55.8 million virtual reality users and produce 38.9 million virtual reality devices this year, according to the report.

Consumers will spend $5.1 billion on virtual reality gaming hardware, accessories and software in 2016. That’s up from the $660 million spent in 2015, says the marketing leader. Meanwhile, the global market is expected to grow to $8.9 billion in 2017 and $12.3 billion in 2018.

A breakdown of this year’s $5.1 billion global market shows Europe in the lead with a $1.9 billion share and North America close behind with $1.6 billion. That’s followed by Asia with $1.1 billion, and the rest of the world accounting for $0.6 billion.

SIGN UP: Get Data Sheet, Fortune’s daily newsletter about the business of technology.

According to SuperData director of research Stephanie Llamas, light mobile virtual reality devices (like Google (GOOGL) Cardboard) will drive the market at first with an audience of 27.1 million. Premium mobile virtual reality hardware, like Samsung Gear VR, will account for 2.5 million units sold in 2016. However, PC virtual reality devices (like Facebook’s Oculus Rift and the HTC Vive) will only sell 6.6 million headsets, with Sony’s PlayStation VR selling 1.9 million units.

Breaking down the global virtual reality market, Llamas says Asia’s 2.5 billion smartphone users lead the mobile virtual reality market, with hardware like Google Cardboard accounting for almost 80% of new devices installed.

“Western markets with large PC and console user bases will ignite device sales for the two platforms,” Llamas says. “American gamers interested in VR look most forward to console and PC devices. One-third intend to purchase a Playstation VR and 13% look to buy the Oculus Rift.”

Who’s Willing to Pay to Play

While Facebook is expected to announce its Oculus Rift pricing at CES, HTC is holding off on pricing for the HTC Vive. Additionally, Sony isn’t expected to announce a PlayStation VR price until later this year, possibly at the March Game Developers Conference in San Francisco.

Looking at the consumer market in more detail, Llamas says that younger consumer groups show a stronger interest in virtual reality. According to the company’s recent survey, 74% of U.S. respondents under 18 years of age indicated that they were “very interested” in virtual reality. For Millennials that number dropped to 65% and 54% for Gen Xers in contrast to only 42% for Baby Boomers.

WATCH IT: To learn more about virtual reality, check out the video below:

The problem the ecosystem faces is that the consumers who are most interested in virtual reality do not have the spending power necessary to support high-end devices. Llamas says PC and console virtual reality’s high barrier to entry will cause three out of four early adopters to opt for more affordable mobile devices.

“It is the more mature demographics that have the disposable income, with 18-54 year olds saying they’re willing to spend around $280 for hardware,” Llamas says. “Likewise, emerging markets like China are volume-reliant since average user revenue is low.”

As a result, Llamas says virtual reality platform holders like Facebook (FB), HTC (HTC) , and Sony (SNE) will initially heavily subsidize their hardware to build up significant market share.

Investment Reality

While Llamas says total investments in virtual and augmented reality reached a combined $6.1B between 2012 and 2015—triggering the current market momentum and increasing industry expectations. Investment in this space grew from $15 million in 2012 to $1.9 billion in 2015. Game development accounted for 60% of this investment, while 360-degree camera technology was the target of 30% of investments.

SuperData Research forecasts investments in the virtual reality and augmented reality market will grow to $3 billion this year and nearly $4 billion by 2018.

“VR investments more than quadrupled after Oculus VR’s $91M funding rounds in 2013,” Llamas says. “Funding comes from a variety of sources, which not only highlights immense industry interest, but means funding will continue to steadily roll in through 2018.”

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.

Read More

Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward