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VR market forecast to grow in 2020 on new headsets, tech advancements

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VR market forecast to grow in 2020 on new headsets, tech advancements

The virtual reality headset market is set for a global resurgence in 2020, as analysts expect new headsets launched this year will appeal to a wider range of users.

2019 marked a transitional year for VR: Unit sales continued to fall, though at a slower pace than in 2018, while revenue improved following new headset releases from Facebook Inc.'s Oculus, HTC Corp. and Valve Corp. Declining interest in snap-on smartphone-powered devices such as Samsung Electronics Co. Ltd.'s discontinued Gear VR remained a drag on global consumer headset shipments in 2019, which are projected to fall by 13% for the year to 11.2 million, according to research from Kagan, a media market research group within S&P Global Market Intelligence.

Shipments should return to growth in 2020, with Kagan projecting 13 million global consumer VR device sales next year, driving $4.6 billion in revenue.

Anshel Sag, consumer and chip tech analyst at Moor Insights & Strategy, called 2019 a crucial year for the VR market and its future growth.

"A lot of people were starting to wonder whether VR was just another fad," Sag said. "This changed after the much-needed launches of new headsets this year."

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Untethering VR

Of the new headsets, analysts pointed to the Oculus Quest as a game-changer for the VR market. The device, which launched in May, is a stand-alone VR headset that does not need to be tethered to a computer, making it a more versatile and compelling buy for consumers, Sag said. Those who want to run applications or games that are only accessible through a PC can connect the Quest via the Oculus Link software.

"This two-in-one approach just increases the device's value for consumers," Sag said. "The reality is that not everyone is going to be able to afford multiple headsets, so something like the Quest that can do it all is going to stand out from the bunch."

Jitesh Ubrani, a research manager who covers worldwide mobile device trackers at IDC, expects other VR headset makers to follow in the Quest's footsteps and develop more stand-alone devices, which are likely to appeal to consumer and enterprise users, he said.

"We've already seen big announcements of stand-alone VR headsets being used in commercial settings, such as Walmart using the Oculus Go to train employees," Ubrani said. "There have also been large commercial deployments in other verticals aside from retail, such as the hospitality industry, with hotels using headsets to train employees how to do room maintenance, or the medical industry, with surgeons practicing virtual surgeries."

Sag noted that tethered headsets are still necessary for some VR tasks that require more extensive processing power. That leaves room at the top of the market for more expensive devices like the Valve Index, which starts at $999.

Content ambitions

Valve has dabbled in PC-gaming hardware, but its new Index headset marks its most ambitious device yet in terms of hardware specifications and content. Valve is packaging the Index with a free copy of Half-Life: Alyx, the upcoming installment in its popular Half-Life video game franchise. Half-Life played an integral role in establishing Valve as a PC gaming powerhouse, and game analysts expect its massive fan base will support Index sales.

While Alyx will be playable with a variety of tethered headsets, Valve claims the best gameplay experience for the title will be on its device, which will also come with exclusive content.

"In the end, it is the content that drives hardware sales, and Valve has a very significant title," said Moor Insights' Sag. "They are sure to sell a ton of headsets ... This, in turn, will have a huge impact on the PC VR market and will pave the way for more ambitious titles in the future."

However, pricing may prove a barrier for some, especially when the cost of a tethered PC is considered.

"When consoles launch, we talk about the $400 game. That's the title that gets people so excited that it pushes them to buy into the console. With 'Alyx,' we're talking about a $1,000 game, or the $2,000 game, depending on how much you want to future proof your PC. That's a tall order," said Kagan analyst Neil Barbour.