• By 2025, 45m VR headsets will be actively used by consumers, who will spend $4bn on VR games and other media.
• The total hardware and software value of the consumer VR market will grow from $3.2bn in 2020 to $10bn in 2025.
• In 2020, 3.3m standalone headsets will be sold, outselling combined smartphone and tethered VR headsets for the first time.
• Spend on VR content will grow from $1.1 in 2020 to $4bn in 2025, overwhelmingly led by games.
• VR will remain a niche, but a growing consumer entertainment market over the next five years.

London, 04 December 2020: The latest outlook comes from Omdia's Consumer VR Headset and Content Revenue Forecast 2020-2025 report, a deep dive into the VR market with individual forecasts for 32 countries. It predicts that in 2020, 6.4 million headsets will be sold, while the spend on VR content will reach $1.1bn.

George Jijiashvili, senior analyst at Omdia, commented: “After getting caught up in the industry hype and proving unable to live up to the unrealistic expectations set in 2016, VR is now undergoing a much-needed period of readjustment. The product mix of the VR installed base is changing rapidly; away from rapidly-abandoned smartphone VR headsets to more engaging standalone and tethered VR headsets.”

Despite the persistent doom and gloom stories about the future of VR, Omdia believes that the VR market will continue to expand, albeit at a slower rate than previously anticipated.

Covid-19 lockdowns boost the VR category in 2020, but mass adoption remains over a decade away

As with the broader games market, the consumer VR segment experienced an uplift in spending during Covid-19 lockdowns in 2020, nudging the content spend just over the $1bn mark. Its full potential was however limited by manufacturing challenges in the first half of 2020 and the November launch of next-gen games consoles diverting gamers’ attention and budget.

Not accounting for multiple ownership of VR headsets, the household penetration at the end of 2020 will be a mere 1.2% across the leading 32 countries forecasted in Omdia’s report. This will only grow to 3% in 2025, highlighting the long road ahead for the mass adoption of VR.

Standalone headsets are broadening appeal of VR, spearheaded by Oculus Quest

Facebook’s Oculus Quest headset was able to successfully balance the all-in-one form factor with a high-quality immersive VR experience at an attractive price point. With the Quest 2’s price starting at $299, Facebook is making high-quality VR more accessible than ever before. As a hybrid headset, Quest straddles both standalone and PC-tethered categories, giving its owners flexibility and access to a wider selection of content. Omdia estimates that 1.2m units of Quest devices will be sold in 2020, growing to 5.6m units in 2025.

“Facebook’s aggressive loss-leader strategy has meant that other headset manufacturers simply can’t compete, leading to many shifting their focus to the adjacent enterprise VR category. We nevertheless expect more successful consumer standalone VR headsets to emerge over the coming years, particularly from China,” noted Jijiashvili. Omdia forecasts Facebook’s share of global standalone VR headset sales reducing from 48% in 2020 to 35% in 2025.

Games are set to further dominate the consumer VR content spend

VR content revenue will grow from $1.1bn in 2020 to $4bn in 2025, when games will be responsible for 90% of the total spend. 360-degree and interactive video content initially showed a lot of potential, but companies struggled to effectively monetize their content due to the low headset installed base and lackluster demand. This led to several prominent casualties in the VR video production space, including the BBC VR Hub, Google Spotlight Stories, Jaunt, and Oculus Story Studio.

In the future, Omdia expects interactive video monetization to be driven by advertising and media subscriptions, as exemplified by YouTube and Netflix’s approach to VR. Social VR is another category which has shown potential, but it has experienced similar challenges to interactive video. Facebook remains strongly committed to its long-term vision for its Horizon platform, but it remains to be seen if it can create a truly compelling social experience in VR.

-ENDS-

About Omdia
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We combine the expertise of more than 400 analysts across the entire technology spectrum covering 150 markets and publish over 3,000 research reports annually, reaching over 14,000 subscribers, and covering thousands of technology, media, and telecommunications companies.

Our exhaustive intelligence and deep technology expertise allow us to uncover actionable insights that help our customers connect the dots in today’s constantly evolving technology environment and empower them to improve their businesses – today and tomorrow.

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