Virtual Reality To Be Worth $7 Billion By 2020: Deutsche Bank

Virtual Reality To Be Worth $7 Billion By 2020: Deutsche Bank

Deutsche Bank projects that the Virtual Reality Segment would have a total addressable market of $7 billion in the next five years, with the medium gaining mainstream consumer adoption by next year

By Mohid Ahmed on Sep 11, 2015 at 3:25 pm EST

Deutsche bank released a report earlier today, wherein it discussed where the VR segments currently stands and where it’s heading in the next five years. Analysts at firm project that the space would start gaining consumer adoption in 2016, as Facebook Inc. (NASDAQ:FB), Sony Corp (ADR) (NYSE:SNE), and HTC launch their respective offerings.

The firm estimates that Facebook would be able to earn $600 million in revenues from its Virtual Reality business during 2016, which represents hardware sales of 1.5 million units with an average selling price of $350. The figure also represents nearly half of the Desktop VR market across the globe. In addition to this, Facebook also stands to earn an incremental $75–100 million through paid downloads, in-app purchases, and subscriptions.

However, according to the firm, the primary growth catalyst for the Virtual Reality segment will be mobile. A major reason for this is the large smartphones user-base, with trends showing an increasing shift from desktop to mobile. Over the years, smartphones have become the major medium for computer-based recreation, due to low cost of ownership, high-end processing capacity, and a user-friendly interface.

As a result, virtual reality is likely to see its major share gains through mobile-compatible VR headsets. Deutsche Bank projects that mobile VR attach rates would go from roughly 0% in the current year to around 3% in the next five years; this translates into an overall installed base of 25 million users. Desktop Virtual Reality would likely lag significantly from mobile, given its much higher cost of ownership that, according to Deutsche Bank, is nearly $1,500. Overall, the firm believes that by 2020, the total addressable market for Virtual reality would be worth $7 billion; hardware and content sales are projected to represent $3 billion of this amount, while the rest would be on account of advertising.

Google Inc. (NASDAQ:GOOG) has already showcased its respective product offering in this regard. Facebook, which bought pioneer virtual reality startup Occulus for $2 billion back in March last year, is mainly aiming to tap into the mainstream video game audience; it has already secured deals with companies like Valve and Epic games to develop content accessible through its new device.

Occulus, when launched, would also come with an Xbox one controller; this indicates that the device would be compatible with Microsoft Corporation’s (NASDAQ:MSFT) much-successful gaming console. Sony has similar ambitions with its Project Morpheus, which would have integration with the company’s flagship gaming console, the Playstation 4.

While both these companies will make their respect offerings available for sale by early 2016, the mobile end of this segment is witnessing a modest growth in its audience base, with Google Cardboard VR headset and Samsung Group’s (OTCMKTS:SSNLF) VR Gear generating a positive response from the public. However, it is quite difficult to assess exactly when this technology would start gaining mainstream approval, as Virtual Reality currently has a minute installed base that is not big enough to push premium content development.

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