VR sales data we can count on

HTC Vive will be released WHEN?!?

HTC Vive will be released WHEN?!?

Special thanks to Dr. Jon Peddie and Jon Peddie Research for the fundamental sales data needed to make this analysis possible.  More than this, even though this article was originally only intended to be published in JPR’s Tech Watch publication, they agreed to allow this article to be public as everyone could discuss, learn, and hopefully benefit from it.  

A big stink is being made about HTC delaying the commercial release of their HTC Vive until April next year, and others are worried that Oculus has already missed the mark by delaying until 2016 altogether. It’s unbelievable how so few understand the VR market and the core metrics that make it tick. Oculus and HTC could effectively wait a whole year, and it wouldn’t harm their bottom line or lay a dent in any content or business relationship they are working to build.

How could this be, you ask? What bit of data makes it possible for all the VR HMD makers to sit back and relax and get things right? You’ll see.

Oculus Rift DK1

Oculus Rift DK1

When the Oculus Rift first made the scene, they overcame a major hurdle by using dirt cheap smartphone panels as the core of high field of view high resolution virtual reality displays. The technique effectively revalued VR devices that were formerly tens of thousands of dollars to just hundreds of dollars per unit in retail value. As major as this was, it’s a smaller piece of a much bigger challenge that is going to take years to overcome.

Oculus has been shying away from public sales commitments, though I think they are expecting big numbers given the hoopla they’ve received. HTC has been bolder in that they went on record that they expect non-smartphone revenue to account for 10 percent of their business next year.

I’ve seen all kinds of media study blurbs and claims about virtual reality. Everything from millions to tens of millions of units sold within the first year; most recently a study promoting the industry valued at $70 billion by 2020. With numbers like these, no wonder people think that virtual reality’s future is going to be determined within the next six months.

The good news is everyone can take their time and do things right.

First, we have to rule out the sales figures for SDKs and developer kits; those Ocul-i and Valve-i mind-tricks won’t work here. Unless otherwise stipulated, figure that the first 200,000 in declared sales for all platforms are in fact SDKs sold or sent to hopeful content makers and press. In many cases, they could be purchased in multiples per location so developers have it in their hands. Whether they buy it or not, it’s a valueless part of the equation. We are only interested in actual customers that just want to enjoy virtual reality and immersive tech and are not bound to the technology in any other way. The following numbers are based on this mindset.

Nvidia GTX980 AMD HD290 Series

To achieve what they consider the best virtual reality experience on their head-mounted displays, Oculus and HTC are each recommending an AMD 290 series or Nvidia GTX970 series graphics card or better. In fact, there are already signs that the Oculus SDK will detect if your graphics card isn’t up to spec and their software won’t work for you. So everything that performs less than these GPUs is out of the virtual reality universe — settled.

According to Jon Peddie Research, 33 to 34 million add-in boards were sold in 2015. Three to five million of these are high-end graphics cards. The Nvidia GTX 970/980 was only announced in September of 2014 and AMD’s R9 290 series was announced a year earlier, though AMD’s card wasn’t framed as a required-for-VR card until 2015.

For argument’s sake, let’s aggressively predict that by the end of 2016, 7 million high-end GPUs are sold, and this includes the qualified GPUs sold in 2013 and 2014. Factoring in that many gamer PCs use SLI or Crossfire, I estimate there will be three million gaming PCs powerful enough to play in virtual reality.

Whether it’s SLI or Crossfire or single GPU doesn’t matter –three million PCs is the potential universe for modern virtual reality. If an optimistic 10 percent of these PCs own a dedicated virtual reality device, the industry is looking at 300,000 head-mounted displays sold within 12 months from launch.

Not 300,000 for Oculus and 300,000 for HTC and 300,000 for other players coming to market — 300,000 for everyone.

The Simpsons

It takes anywhere from three to five years for today’s top grade graphics chips to be affordably mass marketable, and ten years for them to be inexpensive enough to work in a smartphone. This means that year over year, the VR market potential will have sequential growth, but it’s going to take time. I’d estimate that a potential market size would be about 20 million gaming PCs give or take within the next five years or so if the GPU flexibility is there.

The industry will likely have to come up with a recommended resolution limit on VR display hardware. Unless this happens, the GPU and display markets will never meet up at a mass market scale. The only way around this is if the GPU makers can arbitrarily surpass Moore’s Law — that circuitry doubles on a processor every two years — and that’s unlikely because Moore’s Law is struggling to keep pace as it is. This means that there is little to no room for major bumps in resolution from the head-mounted display makers; too many pixels, and they are trapped in that 300,000 universe all over again.

There are cheats that can help. Combined with eye tracking, foveated rendering makes it possible for the GPU to only render the pixels you physically see, but this won’t be enough to turn the tide. It will also be tempting for content makers to use horrible 2D+Depth techniques instead of true stereoscopic 3D rendering to compensate for missing horsepower. 2D+Depth killed stereoscopic 3D gaming in the past, so the market should run for the hills if this makes an appearance.

DirectX OpenGL

We also have to consider that DirectX and OpenGL get overhauled every two to three years with new features. Future content makers will have to support legacy APIs or they are going to quickly alienate the mass market consumers by limiting themselves to the latest generation graphics options.

Console and mobile which are practically available now face different metrics and realities entirely.

Samsung Gear VR

Samsung Gear VR

Estimate that with nearly 22 percent of the market share, Samsung sells 300 million units a year. 20 percent of these are high-end, so that means Samsung’s Gear VR has a potential reach of 60 million phones. If they can achieve an aggressive 5 percent early adoption rate within 12 months of Gear VR launch, that brings it to about three million units sold. I think that’s very aggressive, but it’s not crazy.

Just some of the Google Cardboard-compatible headsets on the market today.

Just some of the Google Cardboard-compatible headsets on the market today.

It’s actually more and I know the numbers won’t match up, but let’s calculate that there are around one billion Android phones sold each year. Estimate that 20 percent of these are mid to high-end phones that are virtual reality qualified.

If Google takes their Cardboard platform seriously, designs their own chips as pseudo-publicized a few weeks ago, and effectively flips the virtual reality switch in all their compliant phones, they have a potential reach of 200 million Android phones each year including Samsung’s.

Combined with their dirt cheap cardboard option and more premium clam-shell virtual reality vendors like ImmersiON-VRelia, they could achieve a 10 percent  adoption. So that brings their take to about 20 million Android phones within a twelve month period. When I say adoption, I mean people using the stuff and not just getting it in the mail or attached to their newspaper.

The challenge with mobile is that even though they have the sheer numbers potential, it’s not the same quality level of virtual reality as that of PC or console. So the virtual reality industry is going to be a constant battle between the marketing forces, the artistic forces, and the limited forces of available processing power.

Sony PSVR

Console in every way, shape, and form has it made. I estimate that Sony PlayStation 4 will have 35 to 40 forty million units sold by the end of 2015. Thanks to their console’s fixed specification and their head-mounted displays’ committed resolution limit, it’s an easy sell. If there are 35 million PS4’s in the world, and if they could sell the PlayStation VR head-mounted display to 10 percent of them — that’s 3.5 million units sold in the first year with sequential market growth to follow.

The genius of it is that PlayStation is suddenly in the display business as well as the console business. Even if they have a modest success, their hardware consistency makes for a promising future.

So what’s the moral of the story?

First, while we have a very exciting market to look forward to, it’s to no one’s advantage to rush products to store shelves to capture market share because… there is nothing to capture. The graphics market is not yet ready to handle the numbers of units that analysts are boasting about. The scalable technology doesn’t exist to make this happen.

At these early stages, I think it’s worthwhile for the PC hardware makers to consider selling their products for $1,000 a piece. They’ll make money on the mark-up, and the market segment that owns the required GPUs spend this kind of money anyway. This isn’t going to be a lower to mid-tier industry at the very beginning and this is the normal way of things. As the compliant GPU market grows, the display prices can drop.

Content makers are definitely going to have to get behind truly open standards and discussions because every head-mounted display sale is important. It’s the only way their product distribution will add up in the early days. The exception to the rule is if they can somehow garner a lucrative exclusivity pre-paid sponsorship deal, but there are only so many cheques to go around.

PC products and product mind-sets need to be designed to work in universes sized at hundreds of thousands to a few million later on. The peripheral business has been doing this for years, and it’s very possible to flourish if the players have the right strategy. Content makers can succeed too provided they can thrive with a dedicated audience of a few hundred thousand people at the high end, thousands to tens of thousands at the earliest stages.

The professional, public exhibition, and academic markets will do very well. Anything that doesn’t require millions of units right away to make their business work will benefit from virtual reality and immersive tech. I’m confident they will do even better than they were previously.

Don't Panic
Finally, for those concerned about when the Oculus CV1 or HTC Vive or PSVR or other promising option is released, or even developers who feel compelled to pledge their undying allegiance to a specific brand…relax. There is no meaningful advantage or disadvantage to launching first or getting tied down. The real market growth will happen further down the road – not this year or next. Just learn all you can, collaborate with industry friend and foe alike, and build.

Immersive Technology Alliance
These challenges exemplify why The Immersive Technology Alliance is so important. The industry is going to have to seriously get together in a safe and open forum so the market can figure these things out together and build towards a future that works. It’s the only way.

As Executive Director of The Immersive Technology Alliance, I’m very committed to helping grow this market because it’s something I’m very passionate and excited about it. This is my career, and I want to be working in this field for a very long time. Oculus got their launch on Meant to be Seen after all. As with any industry, the first years will be the most challenging, and we have to proactively plan for this to succeed.

I’m hopeful this analysis will help put the industry in perspective and financial strategies can be designed for the long term. With some planning, I feel confident that everyone’s hopes and dreams will become a reality — and not just a virtual one.

(This article reprinted with permission from Meant to be Seen.)

Neil Schneider

Neil Schneider is the executive director of The Immersive Technology Alliance and the founder of Meant to be Seen.

  • Neil —

    First, I think being conservative with numbers is a good idea for some kinds of business planning. But, in other areas, it might lead people to ignore the potential of these new markets, and miss giant business opportunities — as what happened to many tech companies in the mobile space.

    Second, I think you’re focusing on virtual reality as meaning “high-end gaming” to the exclusion of everything else. But recent user surveys — and sales in places like China — show that media consumption is just as big a draw. And it takes a LOT less processing power to watch a movie on a virtual screen. For that, most late-model smartphones work just well. Yes, there’s more lag. And they don’t really support a lot of interactivity, or complex games, or multi-user environments.

    But the mobile-based headsets are good enough for virtual reality documentaries, watching fun little GoPro videos, private movie theaters, and casual games — as well as for a million marketing projects such as VR movie previews, real estate walk-throughs, virtual campus tours, and automobile test drives.

    As of mid-fall, Google was estimating 16 million downloads of their Google Cardboard app. Not everyone with a VR headset downloads these — many Chinese headset manufacturers have their own apps, instead. And there are estimates coming out of China of 300,000 headsets being sold A MONTH. Also in October, Russian app developer Fibrum told me their VR Roller Coaster app was downloaded 4 million times — so this is a pretty good count of people who didn’t just get a cardboard headset in their newspaper or cereal box and immediately toss it, but went as far as to search for apps in the app stores and start playing around with them.

    So that was before the New York Times give-away, and before the holiday sales.

    I think it’s totally reasonable to estimate 20 million Google Cardboard-compatible headsets shipped last year.

    No, they’re nowhere near as good as the HTC Vive. But they’re still fun and very usable, and totally disposable. With prices ranging from $5 to $99, people can easily pick one up, then trade up as better ones come along. Or — since most of these are dumb headsets — keep the headset and upgrade the phone.

    • Neil Schneider

      Hi Maria,

      Thank you for your input. Please understand that I am very enthusiastic and excited about VR and immersive tech on all platforms – immersive tech has been my career for several years. The performance requirements have been set by the VR hardware makers and I’m just spelling out the ramifications. This is why the article was divided according to platform (PC, console, mobile platform 1, mobile platform 2) and their related projections. Also remember that this is an analysis for the first year; not the entire life cycle of the products.

      The enthusiast GPU sales counts aren’t limited to video games. These are all the applicable GPU sales counts at an international level. Professional use, consumer use – it doesn’t matter. The waning Moore’s law mixed with demand and limited supply is our industry’s law of physics. Whether I’m a hundred thousand off or a million off doesn’t matter. It will take five years for the PC platform to deliver mass market VR with expected deliverables, and it will take up to ten years for mobile to do the same thing at a similar visual level – give or take a couple of years.

      The point about Cardboard being good enough despite lag or getting away with casual games and movie theater experiences is actually part of the problem. When we’re at the point that quality takes second fiddle to numbers and everyone is A-OK with that, then we’re running the risk of being a gimmick and our market is doomed before it has even begun. It’s only ok if the goal is to do even better. This should by no stretch of the imagination be the status quot.

      I agree that 360 content is the lowest hanging fruit right now for the reasons you’ve described. It’s cheap to produce, it has few processing requirements at the receiving end, and if the technology makers could get a solid distortion-free stereoscopic 360 rig working with positional tracking, some real experiences could be shared and appreciated. I’m hoping we’ll get there soon.

      I got my numbers from actual GPU sales statistics and grew them from there. While nothing is perfect, a lot of investment and jobs are on the line – including my own – so the figures have to be based on something. If the market is dependent on wild fire front-loaded sales within the first six months, this industry isn’t going to last very long. Anyone who is in this market for real needs to be playing the long game.

      While the shared figures are encouraging, they only tell part of the story. If we look at the online communities, they haven’t really grown that much. The biggest Reddit VR community has under 60,000 subscribers, and that’s probably filled with duplicates and sextuplets and they haven’t significantly grown in months. Show me a community of 4+ million people talking about VR on Cardboard, and the numbers will hold more water. If we added the membership of every VR Meetup together, the numbers wouldn’t add up to those download figures. With time, I’m confident the numbers will add up the way we like.

      Just because people download an app – and lord knows we’ve all done it – doesn’t mean people are actively using the product or even wearing the HMD with the software. While it helps that newspapers are attaching the device to their publications and getting it out there through controlled circulation, it’s not a real attach rate or representative of people using the product. Again, we’ll get there; it’s not an overnight thing.

      Ever since this article was printed, there have been a slew of articles talking about the five year mark, several prominent Tweets from people working in the industry saying the same thing in different ways, and colleagues who have expressed relief that the messaging is out there because the unrealistic expectations would have crushed the market otherwise. This is all very realistic.

      It took ten years before HDTV was available on a mass market scale, and even now, few cable broadcasters send 1080P signals (they do 1080i or half resolution of what HDTVs can really do). Despite these 1080i signals, the industry has already moved on to 4K televisions for under $1,000. I assure you that everyone including customers were excited about flat HDTV panels from day one, and despite the demand, things had to take time and they still do.

      If we stick to our roots, what really got everyone excited about VR are those dynamic digital experiences for entertainment and professional use. That’s the expectation that was set and that’s what has primarily driven this VR firestorm. As we can’t break the laws of physics, the next best thing is to understand and build around them. Five years is completely normal for any industry that takes itself seriously. It’s actually abnormal to require that it take months instead of years. I think those are called fads – and I think we all want something much better and long term for consumer and industry alike.

      VR businesses will survive and build at each stage provided they design accordingly. If the market does better than what I’ve outlined here (which is actually very good in the first place), then it’s a bonus. I’m not married to these numbers; I just built from what I had to work with. Whether it’s five years or one year, I’m equally excited.

      Regards,
      Neil

      • Neil — For a gauge of consumer interest in VR, I don’t think Reddit or Google Communities are necessarily the best places to look.

        There have been a couple of consumer surveys that came out recently, PewDiePie is getting millions of views on his virtual reality game reviews, YouTube’s VR Videos channel is racking up big numbers for some of the videos — like the movie trailers.

        Links to recent surveys:

        http://www.hypergridbusiness.com/2015/11/9-insights-from-latest-vr-survey/
        (69-74% of people “excited to experience VR”)

        http://www.hypergridbusiness.com/2015/09/23-million-americans-have-tried-vr/
        (23 million Americans have already tried VR)

        http://www.hypergridbusiness.com/2015/10/75-of-top-brands-have-vr-projects/

        (75% of top brands have VR projects)

        • Neil Schneider

          Pewdiepie is an internet celebrity. He was on South Park! He could be talking about toilet bowl cleaner and still get the viewer counts. Yes, of course people are excited about VR! They are excited about hover cars too, but I know they are going to take time (even longer than the Back to the Future predicted 2015). Fortunately, VR is going to take a lot less time than hover cars.

          Wanting and having are different things. Of course everybody wants. I want too. It’s going to take time for everyone to have what they really want – it just is. What’s the rush? The industry players regularly say “we know nothing”. This is the time to take advantage and build and learn. The time will come.

  • Eddie Cranswick

    Hey Neil – Thank you for this post. I would like to discuss your results for VR adoption rates and also show you the VR App we’ve created if you had 5 minutes?