Virtual Reality Market Brief: Industry Trends & Analysis February 2015

VIRTUAL REALITY

MARKET BRIEFFEBRUARY 2015

INDUSTRY TRENDS & ANALYSES

| Playable media & games market research

Virtual Reality Market Brief 2015 | Copyright © 2015 SuperData Research. All rights reserved. | www.superdataresearch.com

http://www.superdataresearch.com

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Executive summary★ Virtual reality will reach 10.8 million

users by the end of 2016. After the first wave of head-mounted displays launch this year, virtual reality’s player base will grow tenfold.

★ Games make up 76% of all virtual reality content. Mobile is the fastest growing virtual reality platform due to its low barrier to entry.

★ Small studios and children’s entertainment see the most potential from virtual reality. Despite being a long way from full-length video content, demand in other sectors provides new opportunities to game developers.

★ Investments in virtual and augmented reality reached $2.6B in 2014. In addition to Facebook’s acquisition,18 virtual reality companies received $590 in investments.




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Virtual reality will reach 11MM users by 2016E Although few devices are ready for retail, VR will become commercially viable in 2016.


Console devices, like Sony’s Morpheus, will have similar capabilities to PC head-mounted displays.

Types of virtual reality head-mounted displays (HMD)

PC devices like the Oculus Rift have the highest capabilities and track head and body movements. Retail versions will launch later this year.

Light Mobile devices are smartphone attachments that render a crude virtual reality experience using Google Cardboard VR software.

Premium Mobile devices, like Samsung Gear VR, use smartphones as screens but offer advanced features like positional tracking.


*Estimate as of February 2015.

$2.6B Amount invested in virtual and augmented reality companies in 2014

1.3MM Number of head-mounted displays (HMD) sold in 2014

286 Currently available virtual reality applications*

There are currently over 200 developers working on virtual reality projects and 15 different virtual reality HMDs at different stages of completion. A wave of PC devices will launch in mid 2015 while the first console device will launch in mid to late 2016.

26%

28%

46%

PCConsoleMobile

10.8 MILLION Virtual reality

users in 2016E


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Games will drive initial adoption of virtual reality Video games are currently the only viable entertainment market for virtual reality.



7%

32%

37%

PCMobileConsole

Games make up 76% of all virtual reality

content

Video games continue to be at the core of virtual reality. Due to technical limitations, AAA games and long-form video content for virtual reality are still years away. However, small independent titles and mobile games are already possible and are relatively low risk.

Mobile is the fastest growing VR platform. The release of Google Cardboard and Samsung Gear VR has led to an explosion of virtual reality content for mobile, positioning it as the default platform for casual games and other short-form content.

Console is a limited but promising market. Consoles have a much smaller audience than mobile or PC, but players are on average wealthier and more likely to buy peripherals.

Most VR games require advanced hardware. Content has been largely aimed at dedicated players who play on powerful PCs, which constitute the bulk of early adopters.

Large publishers will be slow to follow as nimble new-comers carve out market share. Speaking at the Games Developers Conference in 2014, Ubisoft’s creative VP told the crowd that “VR would need to sell at least 1 million units to be viable for development”.


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The new View-Master by Google and Mattel highlights the potential for virtual reality for children. Technical limitations make it difficult to develop complex content but the simplistic nature of children’s games and entertainment lends itself to the capabilities of current devices.

Small studios can acquire VR players without competing against major publishers. The high production costs of AAA titles has made large developers reluctant to jump into virtual reality. In a recent interview with Bloomberg TV, Take-Two CEO Strauss Zelnick said the company would “prefer to be a fast follower” in the space.

Virtual reality is still a long way from full-length video content. Virtual reality technology is still not able to support photo-realistic content seamlessly as almost eight times the current resolution capabilities are required. Video content for the platform will largely be limited to promotional content, select live events and short animated videos for at least the next five years.


Small studios best suited to seize improving tech Virtual reality has many applications but it is not yet a platform for standard video content.

1080p 8000pCurrent VR resolution Required VR resolution

Demand for virtual reality in other sectors will provide new opportunities for game developers. Industries like medicine, education and design have applicable uses for virtual reality and can provide funding and research that is mutually beneficial for games.

Images (left to right): Imangi Studios, Veterans Today


March 2013 - First Oculus Rift developer kits are shipped.

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Oculus revitalizes the promise of virtual reality The Oculus-powered Samsung Gear was the first retail virtual reality device.



June 2014 - Google Cardboard instructions are published. Paired with the Android app, the DIY device creates a VR experience for under $20.

2015 - Expected launch of first consumer Oculus Rift.

Oculus VR reignited the market after crowdsourcing $2.4 million on Kickstarter. The first attempts at VR devices were in 1980’s, finding limited commercial success and technological limitations. However, innovations by Oculus VR in 2012 led to renewed interest not only for the gaming industry but other sectors like television and education. Since its Kickstarter campaign, Oculus VR has sold roughly 160,000 development kits for its device and was acquired by Facebook for $2 billion.

Virtual reality timeline

March 2014 - Sony announces Project Morpheus, a VR device for the PS4.

December 2014 - Samsung Gear VR is launched as the first retail VR device. It works with the Galaxy Note 4 and has a library of mobile VR content.

March 2014 - Facebook acquires Oculus VR for $2B.


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EVERYTHING ELSE




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MARKET-LEVEL DATA

50 CONTRIBUTING PUBLISHERS

4 KEY METRICS

450+ UNIQUE TITLES

37MM UNIQUE PAYING USERS

200MM+ TRANSACTIONS

country-level and regional data available

regional data available only

We take a ‘big data' approach when establishing market size. By analyzing millions of transactions worldwide, we are able to gain both a macro- and micro-level grasp on how digital gamers pay and play. Our transactional dataset goes back over a decade and offers reliable payment insights that we couple with other market data such as device penetration rates, population and spending power to create our proprietary model. We report on key metrics such as monthly active users, conversion rates, average revenue per paying user by both month and year. Our estimates span across six key digital gaming segments, including mobile, social, free-to-play and pay-to-play MMO, PC and console.

6 GAMING SEGMENTS

26 COUNTRIES

10 YEARS OF DATA

Market data




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About usSuperData provides market intelligence on the online, digital and mobile games industry. By collecting behavioral data directly from publishers and developers, SuperData identifies key trends, establishes revenue estimates, and analyzes market changes for popular online games, including MMOs, FPS, casino, virtual worlds, mobile and social games.

SuperData publishes industry-relevant key performance indicators. Using our proprietary data set—pulled directly from publishers and developers—on millions of paying digital gamers, we establish monthly benchmarks such as ARPPU, conversion rates, lifetime value, and revenues. Customers use our data to evaluate their performance, identify key growth opportunities, assess revenue potential, optimize their efforts, and better understand their audience’s wants and needs. SuperData’s client base includes brand owners, developers, retailers, publishers, VCs, and payment service providers.

VP, Product and Business Development Sam Barberie [email protected]

401 Park Ave South, 10th floor, New York, NY 10016 (646) 248 5281 www.superdataresearch.com Twitter @_SuperData





Technology

Virtual Reality Market Brief: Industry Trends & Analysis February 2015