VR Sales Are Tanking, But Is the Market In a Tailspin?

VR Sales Are Tanking, But Is the Market In a Tailspin?

When the first virtual reality headsets went on sale in 2016, it was obvious that it would take time to build any kind of market share. Over the past 18 months, the Oculus Rift and HTC Vive have both dropped in price and added a few additional features thanks to software updates and improved compatibility. The GPUs required to power both cards have also come down in cost, though the recent cryptocurrency boom ate some of that advantage. But recent reports have also suggested that overall sales are down sharply in 2018.

VR Sales Are Tanking, But Is the Market In a Tailspin?

Much of the decline occurred due to the unbundling of screenless VR headsets during the quarter. For much of 2017, vendors bundled these headsets free with the purchase of a high-end smartphone, but that practice largely came to an end by the start of 2018. Despite a poor start to 2018, IDC anticipates the overall market will return to growth over the remainder of the year as more vendors target the commercial AR and VR markets and low-cost standalone VR headsets such as the Oculus Go make their way into stores. IDC forecasts the overall AR and VR headset market to grow to 8.9 million units in 2018, up 6% from the prior year. That growth will continue throughout the forecast period, reaching 65.9 million units by 2022.

VR Sales Are Tanking, But Is the Market In a Tailspin?

Overall, IDC suggests that VR and AR will continue to grow at a rapid pace despite a weak 2018, with VR shipments continuing to account for more volume than AR. But then, in an unrelated follow-up last week, Digital Trends took a survey of the current VR market based on Amazon sales rankings. What they found was pretty awful. In every case, without exception, shipments of all VR hardware have fallen. The Oculus Go is an instructive example:

VR Sales Are Tanking, But Is the Market In a Tailspin?

HTC pushed back against the DT piece with its own argument basically blaming the Vive’s falling sales on a short-term availability crunch, and with some sales data suggesting HTC continues to win the largest piece of the overall VR revenue pie. (DT, for its part, notes that this doesn’t really address the question of whether the market is growing or shrinking.) And, as DT states, the reason we’re stuck estimating sales using sales rankings and secondary data is because the companies that manufacture these products refuse to release sales data. That’s not what companies do when they’re excited about how a market is exploding.

So what are we to make of all this? Right now, VR is still niche territory. The games that are shipping for VR are mostly smaller indie titles, with a few AAA exceptions. There are no must-have VR games right now, and there aren’t a ton of virtual reality games coming in the immediate future. And part of the problem is undoubtedly the slowing pace of PC evolution. Consider this: If VR had launched in 2004 and this were 2006, we’d be on our second new GPU architecture just since VR debuted. Back then, it was normal for GPU performance to nearly double every year. Instead, AMD and Nvidia have launched one new architecture each since VR deployed. This matters, because new architectures are how the GPU market principally drives performance to lower price points. There also needs to be better clarity regarding what kinds of VR experiences are practically supported on hardware, to avoid situations in which someone buys an Oculus Go thinking they’ll be getting something they can use for PC or console gaming. As the market grows (assuming it does), those kinds of confusions will become more commonplace.

If I’m being honest, I’m more pessimistic about VR’s success than HTC is. It’s not a lack of enjoying the medium, but the fact that we still have yet to see much in the way of killer apps. I think VR still has some time to solve that problem, but not too much of it. If VR hasn’t established itself as a player by 2019, the chances that Sony will continue the experiment with the PS5 seem slim — and if Sony and MS don’t support VR on next-generation consoles, the chances of it gathering much momentum seem that much steeper. VR and AR could still succeed in commercial markets, but so far we aren’t seeing the consumer impact we’d hoped to see more than two years after launch.

Top image credit: Getty Images

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