How many VR headsets have been sold to date, and by whom? What games and apps are seeing the most traction? And for both hardware and software, what are the biggest success factors so far? These are a few questions we tackled in the latest ARtillry Intelligence Briefing.

Published monthly, Intelligence Briefings are a combination of data and narrative insights. They zero in on top takeaways from the current AR and VR industry landscapes. Below is an excerpt from the latest installment and you can see a preview here.

Part III. Insights on Performance

A question that arises from the above figures is: Why are the above app leaders
performing well? There are a few common attributes that can answer this question:

Native Functionality
Games that utilize the unique aspects of VR immersion tend to perform best. Those
that simply take existing 2d media and shoehorn it into a stereoscopic VR view
conversely do not resonate. This is analogous to the “native thinking” that was a
success factor among smartphone apps. Apps that utilized the unique hardware
functions (accelerometer, GPS, camera, etc.) generally outperformed apps that simply
put existing media on a smaller screen. A few examples of this principle are Waze,
Shazam and Pokemon Go. In VR, those that exhibit this native thinking so far are best
sellers like Job Simulator (utilizes spatial 3D rendering and touch control), and Arizona
Sunshine (has a realistic “locomotion” effect).

Platform Alignment

Apps developed on platforms with greater reach tend to have more commercial
success and market share. Again, this is analogous to the lessons learned in the
smartphone era. There, developers making a choice of platform (e.g. iOS, Android)
must weigh that platform’s technical alignment with an app’s desired functionality, as
well as its customer reach. The latter is not only quantitative but qualitative: weighing a
platform demographic alignment with the app’s target market. VR apps and games will
follow the same formula.

Looking Forward
Beyond the current market penetration figures, it’s important to forecast where the
market will go next. That will hinge on a few key factors.

Among the headset sales figures listed above, the tier 1 (tethered) headsets total 1.4M
units. Tier 2 and 3 (mobile) headsets total 10.3m units. Furthermore the addressable
market for mobile VR extends to the 2.6 billion smartphones on the planet. This makes
mobile the nearer term — albeit more rudimentary — modality for VR opportunity and
scale. Here is a recent presentation segment where we unpack this further.

Only 10 percent of potential VR consumers are willing to spend more than $400,
according to Eedar. Cost continues to come down for Tier 1 headsets as Moore’s Law
marches forward. More headsets in the market are also creating price competition. In
addition to the “big 3” headsets analyzed above (tier 1), there are several standalone
headsets entering the market such as FOVE. Microsoft has also recently entered the
market with its “windows holographic” program. Meant to drive sales of VR-compatible
windows PC’s this program is working with hardware manufacturers for high end
tethered VR headsets at a sub-$400 price point. The first to develop one is Lenovo,
which previewed its model at CES in January. Our presentation segment on this
pricing analysis can be seen here.

Because high-end VR hardware is currently cost-prohibitive for the majority of
consumers, there is an opportunity to bring VR to them in temporal ways. In other
words, the field of “location based VR” includes VR Arcades, theme parks and other
venues where consumers can pay to experience VR for a finite time period. This
presents a historical parallel in that it mirrors the arcades of the 80s and 90s that were
prevalent before at-home console gaming became ubiquitous. We’ll see the same
opportunity for VR in the near term, and the same market evolution towards home

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Disclosure: ARtillry has no financial stake in the companies mentioned in this post, nor received payment for its production. Disclosure and ethics policy can be seen here.