SuperData, the leading provider of market intelligence on playable media and digital games, today released its VR Gaming Market Brief 2016 on the worldwide market for virtual reality-based gaming. Valuing the total market at $5.1 billion in 2016E, early indicators suggest that the worldwide install base for virtual reality hardware will reach 56 million consumers by the end of the year. Hotly anticipated hardware like the Oculus Rift and PlayStation VR are set to release this year, and are expected to fuel VR’s overall market momentum.

“Initially, affordable smartphone devices will drive the bulk of sales as consumers first explore virtual reality before committing to the more expensive platforms,” said SuperData Director of Research Stephanie Llamas. “After this first wave, consumers will likely move more high-end VR devices on PC.” In its most recent study, SuperData found that it is especially younger consumer groups that show a strong interest in virtual reality. In a survey, 74% of US respondents under 18 years of age indicated that they were “very interested” in VR. For Millennials that was 65%, Gen Xers 54% and among Baby Boomers only 42% were very interested. (Full graph available in accompanying report. See below.)

The report raises a critical issue with regards to consumers’ willingness to spend on virtual reality gaming. As hardware manufacturers seek to become the dominant platform, they face the challenge of ramping up an audience in order to attract third-party developers. However, even hardcore gamers, a group generally known for its appetite, indicated to be willing to spend around $300 on a virtual reality gaming device. This suggests that platform holders will initially have to heavily subsidize their hardware to claim significant market share. Most likely, the report finds, consumers will initially familiarize themselves with virtual reality on their smartphones and less expensive options, before committing to a bigger expense.

Following a combined $6.1B in investment in the sector over the last three years, investors are eager to see some initial proof of concept, hoping that consumers will quickly take to the new technology. In late November, the Samsung Gear VR did well when it was first released, selling out within 48 hours. The Oculus Rift is currently slated for Q1 and its Touch controllers for the second half of this year. Like last year, the expectations are low during the Consumer Electronics Show that takes place in Las Vegas this week. Instead, the various firms developing the hardware have already hinted at making more substantial announcements during the 2016 edition of the Game Developer Conference in San Francisco in March.

SuperData is currently leading the effort to help game companies and interactive media firms understand the virtual reality marketplace. If you’d like to receive more information, please reach out via the contact details below.

Key data points on the current market for virtual reality:

  • The worldwide market for VR gaming will reach $5.1B in revenues in 2016E and an install base of 55.8M consumers. The European market will lead with $1.9B in total sales.

  • Low barriers to entry for will allow light mobile VR to initially reach 71% of the consumer market with 27M units in 2016E, as is best positioned to capture the largest install base.

  • Virtual reality gaming presents opportunity for small studios and indies, who are currently developing 829 VR games, collectively, as large publishers have decided to wait and see.

  • Total investments in virtual and augmented reality reached a combined $6.1B between 2012 and 2015, triggering the current market momentum and growing industry expectations.

To download the full report, please go here (Dropbox):