Cautious Optimism for Virtual Reality

According to the Diffusion Group, virtual reality - which has a strong presence at CES this year - has good growth possibilities, but also some ...

TDG: All major TV networks to stream direct by 2022
TDG: All major TV networks to stream direct by 2022
According to the Diffusion Group, virtual reality - which has a strong presence at CES this year - has good growth possibilities, but also some built-in drawbacks that will tend to limit its potential.

Virtual reality (VR) involves the use of a head-mounted display that tracks the user's head movements and translates them into an immersive wide-angle video display. Before one can accurately assess the relevance of VR to non-gaming video experiences (e.g., watching TV shows and movies), it is necessary to grasp the changing nature of video viewing, TDG says. For example, video viewing is becoming increasingly personalized and is shifting from social to individual viewing contexts.

Joel Espelien, TDG senior analyst, says video viewing has evolved from a social medium (traditionally understood as groups of viewers sitting together in a living room to watch TV programs on a television set) to an individual experience (defined by solitary viewing on smaller, more personal screens with audio delivered via headphones).

When all devices are considered, a majority of video viewing is done alone as opposed to in a social context. Even TV viewing time (both linear and streaming) is almost evenly split between solitary and social. Espelien says the fragmentation of viewing among multiple screens and the trend toward individual viewing is key to understanding the future of VR viewing.

"Driven initially by gaming applications, the trend toward personalized video experiences will pave the way for the adoption of virtual reality (VR) as the next screen," Espelien said. "Low-cost, mass-market VR headsets (using either a smartphone or PC for processing) will hit the market in 2016, and content providers and advertisers of all stripes are currently developing content for this new platform."

But VR faces strong forces that will limit its growth, TDG says, including an aging population (reluctant to accept the VR experience); physical limitations (including VR nausea); social concerns and constraints; and competition from other screens.

Despite those challenges, sales of VR headsets are expected to experience notable growth over the next decade (2016-2025), which can be expected to drive content sales and VR video viewing. By 2025, VR is expected to have a global user base of more than 275 million (60 million in the United States alone). As well, global VR-related revenue is expected to top $18 billion by 2025.

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