IHS Markit forecasts that the installed base of virtual reality headsets will grow from 4 million in 2015 to 81 million in 2020, driven by aggressive smartphone vendor promotion activity, along with the launch of premium smartphone solutions.IHS forecasts that consumer spending on VR headsets will reach US$7.9 billion in 2020, with spending on VR entertainment reaching US$3.3 billion.

IHS expects that consumer VR headset spending will reach US$1.6 billion this year, “bolstered heavily by the launch of high-end headsets from Oculus, HTC and Sony”, driving the average sales price of all headsets to close to US$85, up from US$26 last year, while spending on VR entertainment is forecast to reach US$310 million.

The average selling price for headsets is set to again climb sharply next year, with more sales of high-end headsets seeing it reach US$191, IHS forecasts.

“While the VR headset installed base will escalate significantly to 81 million by 2020, we predict that expensive, higher-end headsets will dominate content monetisation,” Piers Harding-Rolls, IHS Technology director of games analysis, commented.

“There will be a polarisation of the VR market between lower volume premium VR headsets, which will have strong paid content conversion rates, and higher volume cheaper smartphone VR headsets, which will monetise content at a lower rate.”

Cheaper pricing will see smartphone headsets representing the largest addressable market for content, Ian Fogg, IHS Technology senior director, observed.

“The smartphone VR base will be a major opportunity for VR content experimentation,” Fogg commented. “Smartphone VR headsets’ share of the VR installed base will be 87 per cent at the end of 2016.”

IHS forecasts that Samsung’s Gear VR will have the largest installed base out of all the major branded headsets this year, with 5.4 million, however notes that the launch of Google’s Daydream View “will slowly disrupt Samsung’s dominant market position in the smartphone VR market”.

“While the high price of Google’s Pixel phone means the 2016 impact will be small, IHS Technology forecasts that Google Daydream View will become the most popular headset for VR by 2019,” IHS states.

“Google will overtake Samsung’s Gear VR due to broad industry support, a compelling $79 price point and the delivery of a premium smartphone VR experience.”

Meanwhile, IHS forecasts that Sony’s PlayStation VR will outsell the Oculus Rift and HTC Vive combined this year, however will be supply-constrained as Sony “plays it safe on stock inventory”.

IHS forecasts that 1.4 million PlayStation VR headsets will be sold this year, generating US$134 million in VR entertainment spending, with PC-based headsets generating US$69 million.

“Sony is well positioned to build an early lead in the high-end VR headset race because of its large addressable market of 53 million PS4s by the end of 2016, its lower total cost of ownership compared to the PC VR companies and its ability to get big franchises into VR,” Harding-Rolls commented.

“With VR content and users strongly aligned with the games market, Sony already has in place many of the components necessary to deliver to this new VR entertainment segment at the expense of its competitors.”

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