Virtual Reality (VR) Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The number of global virtual reality device shipments is expected to register a CAGR of 33.85% during the forecast period (2022-2027). The COVID-19 crisis impacted several VR tech companies. VR gaming centers were closed due to stay-at-home orders during the initial months of the pandemic. For instance, Sandbox was operating 10 VR centers in North America and Asia, which allowed groups of customers to step into virtual worlds. Apart from Sandbox, several operators of VR centers and arcades, including The Void, Zero Latency, Dreamscape, and Spaces, were forced to shut down their retail locations amid the pandemic and are facing major financial and logistical challenges post the brunt of the pandemic.

Key Highlights

• Virtual reality is the usage of computer technology, primarily to create a simulated environment. Unlike the traditional user interface, VR places the user inside an experience, which means instead of viewing a monitor screen in front of them, users are immersed and are able to interact with the 3D world. With the simulation of as many senses as possible, such as vision, touch, hearing, and even smell, technology has transformed the world.
• Moreover, across various educational fields, teachers have been increasingly turning to virtual reality technology to help provide a better standard of education. For example, on a basic level, the introduction of VR in the education sector enabled the students to be immersed in a VR tech world. The technology also gives students a more visual and absorbing lesson, which can be provided at lower costs.
• Virtual reality technology carved its space within the gaming industry in the past few years. VR has given shape to a new generation of gaming that is giving the players immersive, first-person perspective experiences. Over the past few years, developers such as Oculus and HTC have worked toward making virtual reality more accessible and affordable. Previously, Oculus launched its Oculus Quest, which is a standalone wireless virtual reality headset.
• Moreover, the growing pervasiveness of AI technology across VR applications is also enhancing the intelligence of virtual characters, thereby delivering a rich, immersive environment. Google's machine learning tools add 6DoF controller-tracking capabilities to any standalone headset, while Facebook's DeepFocus framework makes use of AI to create focus effects in VR, and LG makes use of AI to minimize motion sickness among VR users. The Chinese tech leaders Baidu and Tencent are also working on integrating AI and VR into mobile solutions and video games.
• Game developers across emerging economies are also continually striving to enhance gamers' experience by launching and rewriting codes for diverse console/platforms, such as PlayStation, Xbox, and Windows PC, incorporated into a standalone product and provided to gamers through a cloud platform.
• In order to run a game with notably ultra-low latency, the platform requires a good internet speed, which is still lacking worldwide as per the current network infrastructure. 5G is in the testing phase, and such enhancements in the network coverage will enable streaming to become faster, compared to the current situation, where emerging economies with colossal gamer deposition do not have access to the necessary speed or are priced at premiums.
• Further, 5G is also driving the mobile-based VR market. For instance, in May 2020, Archiact announced its partnership with Migu, a subsidiary of telecom provider China Mobile, for Archiact's games, which would be the first VR games to be playable via Migu's 5G cloud gaming platform, named Migu Quick Gaming. By partnering with Migu, Archiact states that it can work together to build the future of 5G VR cloud gaming, thus making VR even more accessible.

Key Market Trends

Gaming Segment Accounted for the Largest Market Share

• There has been a rapid growth in the AR and VR gamers across the world, which expands the horizon for the market. According to NewGenApps, a provider of Artificial Intelligence, Machine Learning, Big Data Analytics, and AR/VR solutions, the global user base of AR and VR games is expected to increase to 216 million users by 2025.
• On similar lines, according to the figures released by the Entertainment Software Association in March of 2020, 29% of the gamers in the United States pointed out that they have a VR system in place. The association also suggested that the advances in virtual reality and augmented reality are major drivers for the growth of the gaming industry in the United States.
• Furthermore, the increased comfort levels of consumers in situational uses, such as VR gaming and VR calls, are among the factors that suggest a positive outlook for VR technology in gaming. According to the consumer survey by Myplanet of 500 US respondents in November 2020, 26% of the respondents expressed active comfort in using VR headsets for situational uses. In addition, consumers expressed a 32% comfort level with virtual reality gaming.
• Also, in April 2021, Sony Interactive Entertainment filed a patent, which suggests that the company is working on machine-learning for image upscaling on the PS5 VR games. The patent also creates an opportunity to improve the PS5 VR headset without sacrificing the processing power for running the new and improved VR games.
• Further, n July 2021, Virtex announced that it was planning to launch a virtual reality stadium, “Virtex Stadium”, that lets the fans watch the game together with their friends from the center of the field. The launch is in line with the growing popularity of e-sports and the growing affordability and performance of VR consumer devices. According to VentureBeat, the eSports audience across the world accounted for 474 million in 2021, and it is expected to reach 577.2 million by 2024.

North America Holds Significant Market Share

• North America is one of the prominent regions for the virtual reality market. It has also been a pioneer in adopting innovations, which provides North America with an edge over other regions.
• Further, the region has the highest number of startups focusing on bringing innovative VR technologies to various industries. According to Tracxn Technologies, there are approximately 951 Virtual Reality startups in the United States. A few of them include Orbbec, JauntVR, Dreamscape, and Sandbox VR. Dreamscape is creating a location-based immersive virtual reality entertainment.
• The company aims to open a VR multiplex in Los Angeles which will use untethered VR headsets, which means that participants will be wearing VR headsets powered by a computer carried around in a custom backpack, which will allow them to move freely through space and interact with real and virtual objects as well as with each other.
• Moreover, the investors in this region are actively looking to invest in diverse VR technology startups working in the region. For instance, the GFR Fund has invested in 17 North American startup companies based on VR technology. Such investments are expected to continue and are estimated to drive market growth in the forecast period.
• Various research centers and academics in the region have also been working to explore the potential of virtual reality technology. For instance, Iowa State University’s Virtual Reality Applications Center (VRAC) is an interdisciplinary research center focused on the intersection of humans and technology. The Medical Virtual Reality group at the University of Southern California Institute for Creative Technologies is dedicated to studying and advancing the uses of VR simulation technology for clinical purposes.
• Also, in February 2021, Elsevier, a research publishing and information analytics provider, launched the Simulation Learning System (SLS) for RN with Virtual Reality (SLS with VR). This new digital solution combines virtual reality technology from SimX with the healthcare content of Elsevier to bring realistic and highly effective VR simulations to nursing schools.

Competitive Landscape

The global virtual reality market is witnessing a rise in competitiveness among companies. The market consists of various major players, such as Oculus, Google, HTC, Samsung, Sony, and Lenovo. In terms of market share, these significant players currently dominate the market. However, with increasing technology innovations, many companies are increasing their market presence by securing new contracts and tapping new markets. Some of the recent developments in the market are:

• August 2021 - The PlayStation VR 2 will include two OLED screens that support high-dynamic-range (HDR) video, making it brighter, more colorful, and capable of deeper blacks and more brilliant whites. The first PSVR headset has an LCD with a standard dynamic range (SDR). Also, PlayStation virtual reality headset will have a 110-degree field of view, up 10 degrees from the previous model and 20 degrees greater than the Oculus Quest 2.
• May 2021 - HTC Vive announced the launch of two VR headsets, a new VR headset connected to the PC, and the HTC Vive Focus 3, a standalone VR headset. These products cover both high-end and low-end VR markets.
• March 2021 - Pico Interactive, a global tech company that creates innovative virtual reality (VR) and enterprise solutions, closed a USD 37.4 million B+ funding round, which will support Pico's B2C presence in Asia as well as Pico's initiatives in Western markets by increasing the number of B2B partners and accelerating new product development.
• January 2021 - Samsung's bug-eye VR headgear was granted patents in Europe. It appears to be considerably more ergonomic than prior Samsung headsets and, to be accurate, most competing headsets and the controller come complete with shiny silver joysticks.

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