VR Downloads Grow Exponentially
April 24, 2017

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Last year, global downloads of VR games and apps from the App Store and Google Play grew 276% Y/Y, totaling 226 million downloads, according to new data from Sensor Tower. The data suggests there's healthy demand for VR content, despite sluggish adoption of dedicated VR headsets. As with traditional mobile apps, games represented the largest category of VR apps, at 56% of total downloads. That was followed by entertainment apps with 17%, and photo and video apps with 10%. Of note is the large volume of VR apps from the App Store, notwithstanding Apple’s lack of a headset. App Store downloads increased 727% in 2016, while Google Play downloads grew 424% Y/Y. Download growth will likely continue through 2017, Sensor Tower notes. This growth will be driven by three primary factors:

• Increased adoption of smartphone-powered VR headsets. Although smartphone-powered VR is driving usage — largely a result of Samsung’s bundling the Gear VR with its Galaxy phones — overall adoption is still in infancy. However, smartphone-powered VR device shipments are forecast to grow 60% in 2017, reaching 6.4 million units, according to BI Intelligence projections.
• More willing VR developers. As adoption of VR headsets takes off, VR developers will likely begin to see greater opportunity and benefit in making content for the platform. This will help increase interest from consumers, driving demand, and creating a virtuous cycle.
• More marketing from VR vendors, like Google. Consumer awareness is of paramount importance for any new technology to gain traction, however, in 2016, 34% of US consumers hadn’t come across VR technology, according to ClickZ Intelligence.

Given these factors, VR will likely see its Pokémon Go moment arrive in 2017, BI Intelligence projects. The mid-2016 smash hit was the windfall moment for AR. And the increasing investment, along with strong developer interest, consumer appetite, and hardware advances, make it increasingly likely that the first VR app to achieve massive popularity will be released sometime in 2017. That would mark a monumental breakthrough for the VR market because, much as was the case for the smartphone, mass-market adoption of VR will be driven by content. 
In 2016, new VR headsets like the Oculus Rift and the HTC Vive debuted amid great consumer anticipation, while VR content launches kept pace, with Batman: Arkham VR and Chair In A Room garnering encouraging download totals. At the same time, industry groups and conferences brought developers, investors, and content producers together, helping to further ramp up buzz in this nascent space.  BI Intelligence, Business Insider’s premium research service, forecasts shipments of VR headsets to spike by 1047% year-over-year (Y/Y) to 8.2 million in 2016. This growth will help propel the virtual reality space to exceed $1 billion in revenue for the first time, according to research by Deloitte. Powering that growth is an estimated 271% increase in investment in AR (augmented reality) and VR companies from 2015, according to estimates from CB Insights.
VR headset shipments are expected to grow in the years ahead, driven by the introduction of new content that will appeal to a broad swath of users. Jessica Smith, research analyst for BI Intelligence, has compiled a detailed report on virtual reality that explores the highly fragmented and volatile VR market that emerged in 2016, lays out the future growth potential in numerous key VR hardware categories as driven by major VR platforms, and examines consumer sentiment and developer excitement for VR, presenting which headset categories and platforms are most poised for success in the near- to mid-term.


Here are some key takeaways from the report:

• This has been an important foundational year for the VR market. New hardware and content have brought more options to market to appeal to a wider set of consumers. 
• But the growth seen this year is merely a foreshadowing of the future. The highly fragmented VR market today will eventually narrow as the market grows and matures.
• After considerable progress in 2016, the VR market is ripe for transformation in 2017. Developers, consumers, investors, and hardware makers have a host of options from which to choose, each with their own strengths and shortcomings.
• The environment is poised for the first killer VR app to hit the market sometime in 2017, which will be a major catalyst for consumer adoption of VR hardware.
• Not all headset categories and platforms will emerge as winners in the near future. More immersive headsets that offer the best VR experiences are too expensive for most consumers. Alternately, affordable headsets that rely on smartphones as processors offer sub-par experiences that can induce sickness.

 
Figure 1: Cumulative VR App Downloads (m)

Source: Sensor Tower 2017

virtual reality revenues will reach $7.17 billion by the end of this year, according to a new report by Greenlight Insights, which is also predicting that global VR revenues will total close to $75 billion by 2021.

Figure 2: Global VR Industry Revenue Forecast 2017-2021

Source: Sensor Tower 2017

More than 65 percent of all VR revenues will come from headset sales this year, according to Greenlight. Consumer content will make up for around 12 percent, and VR cameras will make up another 11.6 percent. Over the next five years, the revenue split will slowly shift, with enterprise — think VR for construction companies, education etc. — making up for 24.2 percent of all revenue in 2021.
 
Figure 3: VR—Source of Revenue Comparison 2017 & 2021

Source: Greenlight
 
Greenlight also forecast that location-based virtual reality in malls and movie theaters is going to grow into a significant part of the industry. In 2017, location-based VR will bring in $222 million worldwide; by 2021, that amount will have grown to almost $1.2 billion. These estimates have to be taken with a grain of salt — it’s a nascent industry, after all. Adding to the uncertainty is the fact that many of the major headset manufacturers, including Oculus, HTC and Google, have yet to release any actual sales numbers for their devices.

• Data shared by adult VR video company last week suggested that there may be a reason for why some of the manufacturers have yet to release any sales numbers. Samsung’s Gear VR, of which the company has sold more than 5 million units thus far, outperformed Google’s Daydream VR headset by 13X during the first three months of this year, according to Badoink

 

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