The Oculus Quest headset doesn’t appear to have been a smash hit as expected. Market insights from Nielsen’s market research firm SuperData Researcher paints a more sobering picture of the headset’s performance in the last quarter.

XR Q3 2019 Update from Nielsen Owned SuperData Research
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XR Q3 2019 Update from Nielsen Owned SuperData Research

Like other analysts, SuperData, too, had seen the Oculus Quest headset as a potential game-changer and in early 2019, it had predicted that 1.3 million units of the standalone VR headset would be sold by the end of this year.  The latest data from the market research firm, however, indicate that only 180,000 units of the Quest headset were sold in the third quarter of this year, a period running from the beginning of July to September 30. The lifetime sales of the standalone virtual reality headset now stands at 400,000 units. That is still impressive sales but in the overall scheme of things, it is a drop in the ocean and far below expectations.

The good news for the industry is that players are increasingly buying games for all kinds of virtual reality headsets. According to SuperData, consumer VR software revenue is set surpass $1 billion for the first time in 2019.

A Giftable VR Headset

The holiday season is also around the corner and SuperData expects Oculus Quest to make a great showing during the shopping season as it will be one of the most giftable VR devices for shoppers looking for VR gifts for friends and loved ones. Oculus Quest also offers consumers the advantage of simplicity since it is standalone device that does not need plugging to a PC or gaming console. Apart from Oculus Quest, Oculus Go and PlayStation VR also saw a massive bump in quarterly sales volumes for the just concluded Q3, in the first holiday season on the market.

Facebook appears to be betting big on the Quest headset. It recently enabled a Link feature for Oculus Quest that enables the standalone headset to interface with a PC and thereby act as a PC headset which effectively replaces Facebook’s other PC-based headsets Rift and Rift S. Next year, Facebook is also planning to roll out a controller-free hand-tracking functionality. As Facebook continues to focus on the standalone device, it is expected that the Quest sales and that of other standalone VR devices will eventually leapfrog the PC-based headset sales.

At the moment, however, the Quest headset still has a very limited reach. Its installed base adds up to just a third of that of the high-end PC-based virtual reality headsets such as Oculus Rift and HTC Vive and only a fraction of the whopping 4.7 million PSVR units shipped so far. But Quest is showing great promise. Developers have so far noted an immediate sales impact on their games whenever they bring them to the Quest platform.

According to SuperData Research estimate, annual consumer headset revenues for 2019 will grow by 16% over the previous year’s revenues. The enterprise VR headset revenue is also set to rise 69% over the same period. The enterprise market is one of the most promising this year with customers quickly adopting virtual reality for uses such as design and staff training.

The SuperData Research market data shows that Valve Index sold 46,000 units in the first quarter. The number is smaller compared to that of other leading VR headsets but the Valve Index is a high-end VR headset that targets the most dedicated VR enthusiasts and carries a hefty price tag of up to $1,000.

The SuperData Research report shows that VR hardware and consumer market will grow from $2.5 billion by the end of 2018 to $3.2 billion by the of this year. The industry is set to see a steady growth over the next few years with the market hitting $6.8 billion in 2022.

The SuperData market report shows that augmented reality is still lagging behind virtual reality with mobile AR market projected to hit $2.2 billion in 2022 and AR/MR headsets set to hit $4.6 billion in the same year, compared to $6.8 billion for VR headsets. Industry analysts contend that AR holds the greatest mainstream potential as well as the most promising long-term impact. In spite of the sobering estimates, SuperData Research, too, sees augmented reality winning over the long run in spite of the modest near-term estimates.

AR is boosted by smartphone AR which already has a reach of 1 billion users. This is a massive user-base and whatever happens in the VR hardware market, AR will always have a much wider audience thanks to the reach of smartphone AR.

Apple’s entry into the augmented reality market could, potentially, also have a massive industry market. As a technological behemoth whose technologies straddles multiple segments with a massive reach, Apple has the wherewithal to push AR into the mainstream. Rumors are already rife that the Apple AR glasses are arriving by the first half of 2020.

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