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As we enter a new year, it’s time for our annual ritual of synthesizing the lessons from the past twelve months and formulating the outlook for the next twelve. 2022 was an incremental year for AR & VR, which both continue to gradually push forward in gaining mainstream traction.
Highlights include mobile AR engagement & monetization, continued R&D in AR glasses, and the gradual march of VR. Amidst all this, the last year was also defined by the continued and irrational rise of metaverse mania. The hype machine is still in high gear, generating lots of vapor.
So where is spatial computing, and where is it headed? Aligned with the annual outlook of our research arm, ARtillery Intelligence, we’ve devised 5 predictions. We’ll break them down on AR Insider, continuing here with prediction 5: VR’s installed base reaches 46 million.
Collision Course
VR isn’t the revolutionary technology it was once touted to be. However, it’s also not dead as some punditry may have you believe. In fact, it’s progressing at a gradual and somewhat-healthy pace. ARtillery Intelligence projects that unit sales will reach 18.79 million this year.
That correlates to an installed base of 46 million. To define these terms, annual sales represent units sold in a given period. Installed base meanwhile represents the cumulative total of units in the market. It factors in replacement cycles of older hardware, which is about 3 years.
Breaking down these figures, Meta will be the market share leader with 8.37 million Quest 2 and Quest Pro units sold in 2023. Most of its sales will be for the former, as Quest Pro has a relatively-limited market, partially diminished by the pro designation… and price tag.
We could also see some market share gains for Pico. This is mostly due to Pico 4, which has an attractive quality/price ratio (like Quest 2). However, it will face the same headwinds seen throughout the VR sector, including discretionary spending dynamics in a downturn.
And Pico has already seen some stumbles out of the gate in terms of volume sales. But the headline for Pico is that it’s owned by a social media giant (ByteDance) that can apply ad revenue to subsidize its VR ambitions and compete aggressively on price (the Meta VR playbook).
Stepping Stone
Another VR hopeful is PSVR 2. Like its predecessor, it will be targeted toward mainstream gamers and carry a fun and simple persona. This, plus a low-price tag, worked well for PSVR. It’s a diminished “all-in” price tag for anyone dealing with the sunk cost of a PS5 console.
But it’s not all good news for PSVR 2. As Bloomberg reported this week, Sony has scaled back its production volume for PSVR2 in 2023 due to early demand signals (update). Those signals are likely secular and cyclical, with considerable influence from recessionary dynamics.
Like Quest 2, PSVR will also carry a robust games library. Meanwhile, these headsets share another attribute. They eschew the specs arms race in their marketing, campaigning instead on an unintimidating and fun experience. This Nintendo-like approach is working so far.
Speaking of simplicity, we’re also bullish on the emerging crop of VR personal entertainment devices (PEDs), such as Vive Flow. These 3DoF immersive entertainment devices are a stepping stone to VR for consumers that aren’t heavy gamers. As such, they address a much larger market.
Here, the value proposition focuses on the wide appeal of personal and immersive entertainment. Indeed, this VR use case – such as large-screen cinematic experiences – continues to score highest in our annual consumer VR surveys. That demand will be met with more supply in 2023.
We’ll pause there and circle back in the next installment with another prediction. Meanwhile, see the full report here.
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