Virtual Reality: Meta Dominates A Small Market

Facebook guardian Meta Platforms (FB) has staked its future on the metaverse — and says one of the simplest ways to expertise it’s with its Quest digital actuality headsets. But to this point, VR gear has been a distinct segment market, and a few analysts level to augmented actuality catching on with customers as a substitute.


The metaverse is a next-generation model of the web the place immersive 3D digital worlds exchange static 2D web sites. To date, solely a comparatively small proportion of individuals appear prepared to strap on a headset that blocks out the true world. That begs the query: Will digital actuality ever break by way of to the mainstream?

Probably not, says IDC analyst Jitesh Ubrani. Most main expertise corporations, together with Apple (AAPL) and Microsoft (MSFT), have determined to give attention to augmented actuality headsets as a substitute, as a result of that is seemingly a a lot bigger market, he stated. He sees the marketplace for digital actuality headsets at tens of thousands and thousands of items vs. tons of of thousands and thousands for augmented actuality gear.

“Most of the big tech companies have at least tried their hand at VR,” Ubrani stated. “But VR ultimately doesn’t have the broad appeal that AR does. Today, VR is mostly limited to gaming on the consumer side, with fitness being the next biggest use case. On the commercial side, it is being used for training for both hard and soft skills.”

Meta Dominates Virtual Reality Headsets

In 2021, distributors shipped 10.95 million digital actuality headsets worldwide, with Meta grabbing 80% market share, analysis agency IDC says. In 2020, digital actuality headset shipments totaled 5.56 million items, with Meta taking 62% share.

IDC is forecasting digital actuality shipments to achieve 38.3 million items yearly in 2026. Meanwhile, it sees augmented actuality headsets reaching 12.2 million shipments in 2026.

“AR is a tiny market today, but we do expect it to ramp up in the outer years,” Ubrani stated. “For AR, the use cases are broader for both consumer and commercial. Unfortunately, the technology isn’t there yet.”

While digital actuality headsets immerse wearers in a very digital world, augmented actuality headsets overlay digital info onto an individual’s area of view.

Apple Prepping Mixed-Reality Gear

Apple is rumored to be engaged on a mixed-reality headset that might marry digital actuality and augmented actuality expertise in a high-end headset. That machine is prone to come out in early 2023, Goldman Sachs analyst Rod Hall stated in a latest notice to purchasers.

“While VR platform technology is improving, we note that the category has, so far, failed to resonate with a broad base of users,” Hall stated. “Having said this, our own VR unit forecast for 19.4 million units in 2023 is more bullish than IDC estimates due to our belief that the platform is likely to be seen as an improved way to collaborate remotely.”

IDC has forecast gross sales of 18.9 million in digital actuality headsets in 2023, Hall stated.

The vacation quarter was a significant driver for Meta’s Quest 2 headset gross sales final yr, Ubrani stated.

After Meta, the following greatest digital actuality headset makers are China’s DPVR and ByteDance, the guardian of social media app TikTookay. Rounding out the highest 5 are Taiwan-based HTC and China-based iQiyi (IQ).

Meta will face harder competitors when Sony (SONY) launches its PlayStation VR2 headset in late 2022. The PSVR2 will hyperlink to the PlayStation 5 console for enhanced gaming experiences.

Meta Looking Beyond VR Headsets

However, Meta plans to launch a brand new high-end digital actuality headset later this yr. It calls the machine the Quest Pro.

Meanwhile, Meta is trying to broaden the functions for its Quest headsets past gaming. It is selling its Horizon Worlds software for socializing within the metaverse. It additionally has an enterprise model known as Horizon Workrooms.

Recognizing that not everybody will wish to placed on a digital actuality headset to expertise the metaverse, Meta is engaged on a conventional internet model of Horizon Worlds. Rival digital worlds corresponding to these from Epic Games, Roblox (RBLX) and Sandbox will be accessed by way of PCs and cellular units.

“The biggest mistake that any of these companies could make would be to make a VR headset a requirement to experience the metaverse,” Ubrani stated.

Adult Content Driving VR Usage

In addition to gaming, one other software that has been profitable on digital actuality headsets is pornography. Adult content material beforehand fueled early adoption of such applied sciences as videocassette recorders and the industrial web.

A Juniper Research research estimated that gross sales of X-rated content material for digital actuality headsets totaled $716 million in 2021. It predicted that digital actuality porn would develop to $19 billion in income by 2026. Most of the digital actuality porn income can be from subscription-based providers, Juniper stated.

“The U.S. will emerge as a key market for VR adult content; accounting for 33% of market spend by 2026,” Juniper analyst Scarlett Woodford stated in a information launch.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for extra tales on shopper expertise, software program and semiconductor shares.


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