Data Point of the Week is ARtillry’s weekly dive into data from around the XR universe. Spanning usage and market-sizing data, it’s meant to draw insights for XR players, or would-be entrants. To see an indexed archive of data briefs and slide bank, subscribe to ARtillry Pro

Consumer AR and VR content revenues will reach $11 billion by 2021. This is according to a recent report by IHS Markit. We’re talking sales of content, software and apps to consumers, so it excludes hardware (headset purchases). IHS also includes VR Arcade revenues.

Source: IHS Markit

The figures are reasonable: Much like ARtillry Intelligence’s market sizing and forecasting (below), AR will outweigh VR in content revenue. ARtillry’s total consumer XR software spend is a little bigger than IHS’s projections — closer to $19 billion in 2021, when adding up AR and VR.

The growth curves are similar though, and driven by factors likely recognized by both firms. For example AR and VR content revenue will accelerate as a function of a growing hardware installed base. In other words, hardware comes first and lays the foundation for software revenue.

In VR specifically, revenues in early years are hardware-dominant. But over time, software increases its share (see below). That happens for a few reasons, including software replacement cycles that outpace hardware as the latter penetrates and becomes more mature.

And by “replacement cycle,” we mean games, apps and content bought on a more frequent basis than hardware. In the enterprise — not covered in the above figures but similar dynamics — that same thing can happen but through SaaS packaging and pricing for a perennial revenue stream.

Either way, content is king just like everywhere else. There’s a sort of virtuous cycle: Hardware penetration (slow but happening), incentivizes developers to build content. More content further motivates consumer hardware purchases, which in turn drive more apps… and around we go.

As for the above market sizing figures, we’re in the process of a twice-annual forecast refresh and will have updated numbers in a report that will be ready for ARtillry Pro subscribers by the end of the month.

For deeper XR data and intelligence, join ARtillry PRO and subscribe to the free ARtillry Weekly newsletter. 

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.

Header image credit: Microsoft