Virtual reality is still a relatively uncharted field, and many questions remain about how the technology will evolve. But as the sector continues to grow, so too does the interest of investors. The following examines the activity and investment patterns of four major categories of VR buyers.
Entertainment
The entertainment sector includes anything to do with recreation or leisure, and includes both hardware and software. People play digital games on a variety of platforms, including mobile phones and tablets, as well as desktops and laptops, and some games require no equipment at all (e.g., Pokémon Go). They watch movies and television series on streaming services or downloaded from Netflix or other similar services. And they listen to music, either stored on a mobile phone, a tablet, or a computer, or produced and streamed online.
This sector has been a driver of the VR market, both in terms of interest and investment. The entertainment industry has been quick to adopt the technology, with many games, movies, and TV shows becoming available in VR format. This is especially pronounced in light of the COVID-19 pandemic, as virtual reality has proven to be a safe and effective way to provide entertainment while also following social distancing protocols.
It is estimated that the VR entertainment market will reach $24.9 billion by 2027.
The biggest beneficiary of this trend has been gaming. Gaming revenue reached $15.7 billion in 2021 and is projected to hit $30.9 billion by 2027.
The sector has also seen an increase in institutional investment, alongside rising M&A activity. According to Trefis, a research firm that specializes in the gaming industry, the merger and acquisition (M&A) activity in the sector reached a record $24.9 billion in 2021, up from $20.8 billion in 2019 and $19.4 billion in 2018.
“We’re at the forefront of a movement that will fundamentally change how we consume content and interact with one another,” said Jason Atherton, CEO of NextVR, a company that provides virtual reality content and software for businesses and individuals. “With the world shifting to a digital sphere, it’s interesting to see just how much interest there is in VR from a financial perspective.”
Commerce And Industry
The commerce and industry sector includes businesses that provide products or services to individuals but are not closely related to the entertainment industry (e.g., apparel manufacturers, furniture companies, etc.). This sector has also seen a massive rise in interest and investment, with some companies going so far as to make dedicated VR centers within their facilities to accommodate the growing interest.
This sector’s revenue is projected to hit $12.6 billion by 2027, a jump from $10.3 billion in 2020 and $7.8 billion in 2019. This is mainly due to an increase in the number of people using VR for work purposes.
Specifically, businesses in this sector use VR for site inspections, customer education, and other such applications. For example, in the manufacturing industry, VR can be used to look at ways to cut back on production waste and improve efficiency. Also, furniture companies and other manufacturers use VR to show customers what their products look like and how they are designed.
Health
The health sector includes anything to do with health care and health-related products and services, such as medical devices, pharmaceuticals, and health food and supplements. Due to the importance of this sector in maintaining a viable population, there has been a lot of interest in medical devices, especially for use in surgery. This sector has also seen a rise in investment, with venture capital (VC) and private equity (PE) groups increasing their allocations to the sector.
This trend is likely to continue, given the importance of medical devices to improving people’s lives. It is estimated that the medical device industry will hit $26.2 billion in 2021 and is projected to hit $36.3 billion in 2027.
It is also likely that this trend will provide a stimulus for other sectors, such as pharmaceuticals, which have seen an uptick in research and development, as well as the manufacturing of medical devices. If a drug is going to be approved for market use, it usually needs to be tested in human subjects.
According to a report by Red Ventures, a venture capital firm that focuses on early-stage investing in health and life sciences, “the pandemic has accelerated the adoption of medical devices, particularly in the area of surgeries.” While many medical devices are being used to help battle COVID-19, there is also interest in using them to prepare for or recover from the pandemic. For instance, a surgical headset could be used to practice walking, talking, and eating after surgery, which is often done to improve patients’ recovery time.
Science And Research
The science and research sector includes any business or institution that is directly or indirectly involved in scientific research and development, including academic research laboratories, pharmaceutical companies, and other organizations that engage in scientific and technological advancement. This sector has also seen an increase in investment, with venture capital and private equity groups allocating more funds to the sector.
According to the NPD group, a marketplace that tracks consumer trends, 66% of US adults between 18-29 use some kind of healthcare product and service, with 49% using a medical device, 15% using pharmaceuticals, and 11% using organic food. It would appear that as people live longer, we’re seeing more interest in maintaining a healthy lifestyle instead of just treating illnesses.
This trend is likely to continue, as people are living longer and being diagnosed with multiple diseases, making them more interested in preventing the ailments that plague others.
As people are relying more on technology in their day-to-day lives, we’re likely to see more investment in the future. However, it’s important to keep in mind that the overall market for virtual reality is still in its early stages and many people are still trying to figure out how exactly this technology will fit into their lives.
Overall, the demand for virtual reality is expected to grow 29.2% year from 2020 to 2025, reaching $62.8 billion in 2025.