Pokémon Go continues to dominate the headlines, but as the world becomes captivated by the augmented reality (AR) experience, what can the industry expect from this growing market?
While some say that there’s nothing like the full immersive experience of virtual reality (VR), that experience may not be enough to keep it in front of AR for long.
According to Piers Harding-Rolls, Director of Games Research for IHS Markit, “The IHS Markit’s assumption is that eventually augmented – and mixed – reality technology and applications will become more commercially successful than virtual reality.”
There are two reasons for this expectation. “AR applications are more broadly relevant to a cross-section of consumer and industrial experiences and are often used to enhance an existing activity. They can be used in or out of the home or place of work and are often aligned to location-based services,” explains Harding-Rolls.
“AR experiences can also be delivered without the need for headsets through smartphones and tablets. Even so, we expect it to be at least two to three years before powerful AR headsets start to become more relevant to the everyday consumer and for computer vision to start delivering increasingly compelling applications,” he added.
Capitalizing on the technology is the key. Telcos’ initial role is to gradually garner their share of monetization as the delivery agent. They will win in the long run through the sale and distribution of increasingly powerful handsets that are pre-loaded with the most popular AR applications. In the meantime, however, while monetization possibilities from AR exist, they will likely not be immediately huge.
“As AR applications are often aligned to a location-based experience, delivered out of home and increasingly rich, the need for high bandwidth mobile data services comes into focus,” Harding-Rolls adds. “As such, operators will be watching the evolution of this market closely to see whether it impacts their decision making around network investment and high-speed next generation mobile networks.”
In an IHS report titled Virtual Reality and Entertainment Bubble: or Next Big Thing?, Harding-Rolls estimates that 77% of VR funding and acquisition deals of the past two years are related to entertainment content directly or indirectly. IHS sees smartphone-based headsets garnering the biggest share of installed base in 2016 at 64% and the paid VR games market will be USD496m in 2016. In the same period, the United States will represent 44% of the world’s spending for VR games. VR devices are expected to reach 17 million by the end of 2016, and pass 50 million by 2020. The immersive nature of VR technology has captured consumers, but AR will surpass it impressively.
According to a Digi-Capital report, AR/VR combined will hit USD150 billion in revenue by 2020, with AR claiming USD120 billion of the total. The reason, according the report, is that although VR targets games and 3D film, its closed headset limits its use by consumers to an indoors/seated setting. In comparison, AR is lacking the immersion factor of VR, but the headsets can be worn anywhere, untethered.
Digi-Capital compares the explosion of the AR market to the history of the smartphone/tablet market. There could be hundreds of millions of AR users, with hardware price points similar to smartphones and tablets. Device makers will win big and, as new AR applications roll out, there will also be a windfall for voice and data mobile network segments.