Data and Insights in the VR Market

hi my name is Patrick Walker and I'm with the market research company edar so edar collects a a lot of video game data to help clients make Better Business decisions this is a really fun and exciting Time For Us in VR because we finally have VR data uh you know it was very hard uh when when there wasn't consumer systems on the market to ask people what they thought about VR we've tried VR and we know that uh you don't really understand it until you've tried it and now we have about six months of of great data not only sales but also uh just consumer engagement uh consumer attitudes towards the platform uh and that's what I'm going to be showing today that's also why the focus of my talk is going to be on VR rather than AR uh AR is very exciting uh I think a lot of people including Tim Cook think that AR is eventually going to be bigger than

VR uh but right now we have more data on on VR and that most both makes for a more interesting presentation uh and makes it a little bit easier to figure out where VR is going I'm going to be showing several data sets today uh data from our steam uh pulse data set which shows steam ownership uh steam engagement which is really great for understanding uh the Vive and then also data from our consumer tracker and several consumer surveys uh and then also um you know with ar I I one point I I don't really consider uh Pokémon go AR uh we do we do have data on AR and it mostly tells me uh that people turn off the AR functionality so that they can save their battery so this is VR VR Focus mostly you may have noticed uh VR is is pretty big right now it's pretty hot uh this is a picture of the moment that I realized okay I'm going to be speaking about uh VR from now on this was GDC 2016 and uh I was

giving a presentation just on the overall Market uh walked into this hallway of people doing VR presentations and it's like hm I am talking about the wrong thing right now so why are people so excited about VR well one reason is the amount of investment dollars that are flooding in all right so year-over-year we're seeing significant growth in investment on VR this chart doesn't even include magic leap uh and Magic leap has over a billion dollars of funding on its own right so we've hit over a billion dollars in 2016 uh of investment into V AR now there is also uh that fact that 2016 became when VR hype had to become VR reality uh and my favorite anecdote uh to explain this this shift in thinking or to think about this shift in thinking is uh the the quotes from Facebook right so in the tail end of 2014 uh Zuckerberg was talking about the rift and their their $2 billion investment and he said oh oh well for

that to be a a successful platform or a platform that matters we're going to have to move 50 to 100 million units right probably thinking about something like a you know the PS4 install base or you know Xbox One install base and then you know last year or this year uh the CEO is saying well if we can move 1 million units life to date uh then we'll be we'll be satisfied that that'll be great that'll be S fantastic a little bit of a coming down uh to to Earth in terms of the expectations for the platform right so where are we now what's the VR road map so this is the VR road map in November 2016 uh what we're seeing is really there's there's two types of platforms being released right there's the accessible platforms the mobile platforms able to move more units and there's the more immersive platforms right on the more immersive side we've got the Oculus and Vive accessible side we've got cardboard gear VR and now we've got the PlayStation uh VR coming in and that's pretty exciting because the install base of the PlayStation 4 uh 47 million units end a year uh means we first have the first platform that that

really has uh the potential to hit a little bit of that sweet spot right where it's both accessible a lot of people in the ecosystem but also offering that deep immersion also have some exciting platforms on the horizon right we got the Daydream uh coming out which we'll have a a hand controller and Google really investing into the into the ecosystem uh and then Microsoft has recently announced that they're going to try to make some uh third-party lower-end $200 systems over the next couple years so what does this look like well in terms of headset price you can see that relationship or as they're more immersive uh it increases Oculus is now 800 instead of 600 but it started out at 600 and then when we look at our uh install base right so what's the worldwide install base estimated by the end of the year there's this inverse relationship as you might expect uh for an $800 system you're not going to have 50 to 100 million units uh you're probably going to have closer to a couple hundred thousand which is where we're at now

uh you do see that in the middle uh the nice position that the psvr is in where they have both a pretty high price point but also uh the opportunity to move a million or two units uh which is really where when we look at the overall Revenue number uh billion and a half this year a lot of that is being generated by the psvr right because it's the first platform really has that uh that sweet spot met and it makes sense these are expensive systems and when we look at people and we ask them what's the amount that you're willing to spend on a VR headset it's pretty low percentage when you get to the you know 7800 price point where the Vive and the Oculus exist psvr is a little bit better uh I put it at$ 450 you know because it's somewhere between 4 and 500 depending on whether you have the camera and and hand controls uh and then when the full Market starts to be interested or say that they would be willing to buy that headset you're at a lower price point around where the the Daydream and the gear VR are it's just at that point you

know we start to lose some of the the aversion and it's it's a less high quality VR experience uh we also have a an install based situation where you know there's only 5 million gpus that can really even handle um the high-end PC headsets right so even if you attach 10% you're still in that 250 to 500,000 uh unit range which is where we're going to be at around the end of the year 45 million PS4 is a much uh better install base to hit all right so who are these early VR adopters you know what do they look like well for one thing they spend a lot of money right this is their spend on non-vr gaming right we see that for a PS a PC VR owner it's significantly higher than just a PC console gamer uh and higher than someone who is interested in purchasing a VR headset but has not purchased one yet interestingly they

don't necessarily play more than those who are interested right the the people who play the most are the ones who can't afford a pcvr headset yet but they're excited about it and they're interested in purchasing that also is a much larger group uh something like 10x 15x the size so there is a lot of excitement about VR it's just that the price points make it a little bit difficult at this point they're also uh consumers with money right so going to say you know make about $70,000 a year uh most have gone to college 72% male Which is higher than the typical 6040 split we see for console gaming as a general rule of thumb mobile is close to 50/50 male female split uh console is usually 60/40 uh this is about 7030 uh it's a very core gaming group uh in 20s uh and they're spending a lot on VR right now which is cool um you know it's about you know for of that one and 1.5 billion

about 250 million is likely to be software right for the number of people that are in ecosystem that's actually pretty good because people are spending a lot of money they're also so far satisfied with the systems and we ask you know are you satisfied with the virtual reality headset that you've purchased over 75% uh on both platforms say that they are so of critics critics have been pretty high on these systems right when we look across five to six seven top Tech sites and look at their reviews on on the platforms on the VR headsets we see an average review score for the most part uh above 80 right which is kind of that that standard for a good game uh which a lot of uh even like compensation plans are are tied to uh in in development Studios and each headset is has had pretty much its uh its USP or the thing that was called out about it the most right so so for the for the rift the the headset quality

um the the quality of the games the length of games the um the depth of the games was called out Vive had the plus of coming to the market with hand controls and the um the the room full room immersion which uh got called out in reviews a lot Oculus is now caught up with that and and now has touch controls and then for uh psvr it was all about the price point right this is a good enough experience this is a great VR experience and you don't have to pay as much for it and there's a lot of VR content that's already out there despite uh maybe that there's not a huge install base yet for these systems so this is the Oculus Rift uh game releases by uh release date and price point uh you can see the the launch there with uh software released at at each $10 increment uh if you've released uh a software for one of these systems you're a DOT on this chart there is the recent psvr release same strategy

where at different $10 price points uh we have content released now the openness of the Vive and and the valve platform has meant that there's a lot of content on that platform right generally at a lower price point U but it's already a a fairly saturated ecosystem only only 6 months in uh which we does mean that in order to stand out uh you really need to develop high quality content these launches when you look at them compared to traditional platform launches have actually had a lot more content uh than both you know the eighth gen consoles but also then I think what was previously the the last really big accessory uh the move and the connect so these have had way more software released across the Oculus psvr and Vive now when we look at must have you know the game that that critics agree upon saying that everyone needs to have that hasn't really happened yet right if

we say all right the must-have game on on Console has an average review score over 85 uh the only one we've seen is one one psvr title that that's come out that that did that so on these pcvr systems you know with the install base of a couple hundred thousand units uh there is a path to success of making a little bit over a bill a million dollars right that was uh some of like raw data where you know we're moving 30,000 units uh $40 a piece uh you know making a million and a half million dollar right I'd say that with the psvr where the install base be higher up uh could make you know3 to7 million uh but the price points that have made this happen are around $40 and then around $20 so the titles that are are doing lower price points at you know5 $10 are having trouble making as much money if you think about it when there's only 100,000 uh users out there 200,000 users out there uh it really is

difficult to move software based on price uh rather than quality right at this point the way to move software is really to keep the quality High get a high user score and keep your price point up around uh 20 to $4 also I'll point out that uh this is average price right so this is based on the average of daily steam pricing so uh we're not seeing a whole lot of uh summer steam uh uh scale just drastic price cutting uh you know down to $5 $10 to to move units uh the the software that is developing and making more money is is keeping the price point High over time those are some of the top titles there I'll show them on the next slide that has more that has more call outs if you want to take a picture of that one so one thing that does really matter uh and I think it's interesting because uh it's I hate to piggyback on bashing professional critics when bethesda's doing a lot of that lately with not

giving them early copies user score really matters um so when you look at the correlation between steam user score and revenue on the HTC Vive there's a really strong correlation uh I should point out that this is Max Revenue uh so this is taking the number of owners which we have really good data on and steam average pricing and multiplying them times each other because of things like uh giveaways and discounts and returns that's typically about 15 to 20% higher but it's a a good good number for just looking at these overall correlations here's some of the titles that have done the best your your top 15 performers on on Steam VR so virtual desktop hover Jers call starc to drift uh raw data what do we got there audio Shield space pirate trainer Vanishing realm SM approach a lot of these titles are also the ones that have been getting Awards um and what we see in these titles is a lot of emmersion right deep immersion in general the titles that are that are getting the awards that are that are moving the needle that people

are talking about are more about the uh immersion and making someone feel like they're being transported than they are about traditional game quality things like content length progression systems uh what we traditionally see moving uh user scores and review scores when we ask people why do you purchase uh VR content these user scores really seem to matter right it's the top Endor reason that people say that they Endor uh purchase these games interestingly price is lower down the list and I'll tell you what we ask this question across a lot of different platforms this is the only platform that price is is lower down the list right if we ask this on mobile price is not only at the top of the list it's almost you know a quarter in percentage past the next one down which is genre right so we ask this by mobile it's oh price and genre is it a is it a game that I know I know the content type and what's what's the price and then it goes to word of mouth uh so here on VR word of mouth

isn't as much because most people don't own these systems yet uh professional reviews are not up there people are going to user reviews and they're looking in these communities to see what people are saying about the game now one thing that doesn't seem to matter to drive user score which I think is important when you're thinking about developing this type of content is the relationship between user score and playtime right so we we don't see that the there's a strong correlation between what your user score is and the total time that people are putting into this content right the average number of minutes the the outlier here which I think is very interesting is virtual desktop right uh because that is a type of experience on VR that works well for uh putting in a lot of hours we have the best data for steam VR um I do know anecdotally that if this was showing gear VR and showing mobile apps it's Netflix right that's that's popping out and and uh showing a ton of average time right it's the functional use for

VR but what is heavily correlated is retention how often you're coming back to an app right so this is that same graph showing the max revenue or showing the user score versus how often people have come back what percentage have come back in the past two weeks a lot of VR is about sharing it a lot of VR I mean we all remember the first time we we took VR and and got into it we all also know that it's very rare to put somebody in it for the first time and their jaw not to drop right one of the most fun things about VR and what drives a lot of the system purchase is showing it off to other people and and getting that magical aha moment uh and these experiences that are getting the highest user score people do feel a need to show them off every couple of weeks uh or several times a day this retention metric is actually comparable to AAA at this point so this is showing five games or six games they

are games that came out uh in April of May of 2016 around the launch of the Oculus and the Vive these titles uh a couple big aaa's and then popular games on on Steam uh VR uh several of these titles are bundled in so they're the most owned games on the platform uh I think the lab which is valves demo by far the most owned uh HTC 5 game on the market um so we see that really the only VR experience that even comes close in terms of total play time to the a to the AAA titles is uh a functional application right his virtual desktop but when we look and we say all right what about retention it's actually very consistent right the all these VR titles have been returned to in the past two weeks about as often as these big AAA titles right so people are feeling a need to come back and check out this content when we we look at this overall

usage patterns I think we can start to see what are the experiences that are going to be driving the growth on the platform right these are some stock images that I pulled from a great article on the whoa on the LA Times there we go sweet yeah so basic there was a a pretty funny article that had some great stock imag you're looking for stock images that that are ridiculous that's a that's a great link to find them uh so but basically that there are two ways that VR content is is being used one is the functional accessible way um this is to connect with people uh things like virtual desktop Netflix uh alt space is a really great so social application uh and then there things that completely transport and immerse people uh so we're talking about the lab which is a set of immersive experiences raw data which as a game is only four levels um the progression systems aren't even that deep but it does a really great job of making you feel like you're there and because of that it's able to get a really high user score and move a lot of

units at $40 price point uh and then tiltbrush right just a wonderfully immersive experience uh of of painting in virtual reality all right so what does this look like if we want to go and say what's going to happen over the next two to three years right what are what is going to be the road maps the paths for these different use cases in VR well I think we're at VR 1.0 right and this is the Samsung Gear VR platform this is been the early adopters on on Steam VR really pushing immersion there's going to be a bridge uh over the next year or so where we're going to get a lot more people involved in VR because of PlayStation VR and the amount of units that it's going to put on the market the Daydream uh right now um it's a little going to be a little bit limited initially because of Google support for which phones it's on but as that pushes out to more Android phones that's also going to start to bring more immersion uh on mobile VR and more use cases because I think it will be more broadly developed for uh we're also going to get the touch

controls uh and the thing that's exciting about that is Oculus has pumped $500 million into custom content uh and proprietary content that's really going to move the needle uh in terms of what we would think of as AAA uh console development for VR then we're going into 3.0 which is I think where we really start to see some growth right what this is is Apple and Facebook whenever Apple decides that it's time to enter the the space which will be when they don't need to worry about their stock price taking a dive because VR is is here and they can be assured that the uh that their Hardware is is going to be great and sell a lot of units uh but then also on pcvr there's a lot of great techn technical uh improvements that are coming over the next couple years uh that will increase this immersion that I'm talking about the idea of going untethered is Big right that's huge the idea of uh ey tracking is Big right that lets you do uh more um rapid acceleration without

making people sick and then Microsoft entering the space with uh AR and mixed reality applications uh and more accessible uh more accessible VR I think is big as well all right so what does this look like in terms of Revenue growth well one thing that we all agree upon uh including John rello at Unity is that it's likely to be exponential right and the thing about an exponential curve is that you don't really feel the growth until the growth really happened right you're kind of walking along on flat and then it happens and you look back and you're like wow I'm really high but at the point before it happens you never even really see that you're right at the precipice about to take a a a quick acceleration up so if we take what I'm talking about and we turn that into an actual VR forecast this is our numbers I think we're at about 1.5 billion right now uh growth over the next year to about three two years to about eight and we have

those waves pushing that right now we're in the phase of early adoption right now that's kind of what we would say is VR 1.0 2.0 is going to be console VR uh Microsoft will likely P push into that as well uh as it makes sense for helping them catch back up in the in the console race but when it's really going to take off as mobile VR right that's the growth of the industry is all about scale and the platforms that have the opportunity to scale and that really comes from mobile right and I think that Apple moving in whenever they do uh will really push that to the next level when we'll really start to see exponential growth I think that the the key for developers is to realize what the upside is right now on which platforms right so maybe I can make a million and a half um on the pcvr platforms uh or I can get a first party deal which is which is sweet uh or you know there's a several million doll opportunity psvr over there next year until the the that install base

really grows but then being prepared to see when mobile VR takes off and thinking about what type of functional applications uh can really move the needle there and that's likely to be social right and thinking about how to connect people uh with with mobile VR applications okay that is my talk and it is time for questions thank you slides are available I know I threw a lot of data out there I already see a question we we we'll go there first um we also do free e r white papers check those out um going to be doing one on VR with some of this data and more of that consumer data uh over the next month so go there and and go back there often doing a mobile one as well and then uh there's an email for our you know our Solutions and we have uh several minutes for questions I believe yes I I I think I did hear the question though am I including Standalone VR uh talking about snap in VR on your

phone absolutely yeah um and if you if I go back to that to that slide um that's already um if you talk about like the number of units that are out there that's already uh the biggest by far I I uh in January Google announced that they moved over 5 million cardboards alone right I know that uh retail deals are are there's several million several million units of snap and VR is going to move through Walmart this year at least um so when we say we're probably at you know somewhere between 5 and 10 million right now I think after holiday this year we will'll be higher than that um I'm sure that we've all tried that right um that is at a point on the scale where accessibility is as high as it can be it's super easy it is going to be an early way that some come into to VR yeah see there we have so at the you know that $20 price point you're you know by far um the most units that that we're seeing uh it's just um without the

ability to hook into the phone the applications of what you can do are limited uh and I don't see a breakout functional use case happening on that platform uh before it would happen on kind of a sync in and mobile platform yeah thanks for the question so first let me say just uh thank you for this presentation is extremely informative uh for us for those of us making VR games so thank you a lot for that right uh one qu the question I had was was just looking at your stats on the number of uh PCS with uh VR capable gpus you had about 5 million can you talk a little bit about where that data came from I know that nvidia's claimed that they had you know earlier this year it was 10 or 13 million uh you know VR capable gpus where does that so that so that comes that comes from uh conversations with other people in the in the VR Hardware space that I would say are more of an expert on that than than myself um and I will say that I think it and it is

based on a VR compatible GPU being like a a Radeon 970 or above um or an AMD um the one below the the the 1060 so you mean the the radon 2 280 and the AMD or the Nvidia 970 correct Nvidia 970 and the and the the 280 correct right so does that take into account the recent uh announcement that that uh that the rift made about supporting the 960 like which is a lower level I think what we're seeing too is the is the movement down where because they're getting the technology better to support lower that I will say that this is a conservative number and I and I would agree that now I will say that it's I don't think it's much higher than you know maybe 10 million at at most okay but I will say that could be closer to 10 million okay thank you about geographies um first of all great great great information here thank

you um with the smartphones and internet penetration growing at massive uh levels in Emerging Markets uh I haven't in first the big question is how about Emerging Markets with this mobile VR penetration and adoption and if it's at some point correlated with the type of content that is going to be offered there right uh so the question is what about what about re and what about global regions and what's the opportunity there and this actually gets back to um talking about kind of the mobile VR because there's something that that I didn't think to mention which is uh okay so first of all uh we do have a good region data for these these Steam frr games in the HTC Vive uh and it is overwhelmingly Western markets it's about 50% United States uh then a big chunk maybe 35% Europe and then the whole rest of the world is is uh coming up with the rest of that and almost none of it is in Emerging Markets right so we look at the highend and as you would expect because these are expensive

systems they're almost all Western developed markets now I think that there is a huge opportunity for growth of getting people involved in VR uh and moving low-end VR headsets moving $20 VR headsets the problem is that there's not a lot of money to be made in software right now um there's not a lot of money to be made in premium software on mobile anyway right it's free to play and then um it's just very difficult to make these experiences on a Model that will move revenue on on a on for a snap-in uh mobile headset so what I would say is uh and when we look at that Pi of that a billion and a half um not a lot of it is uh mobile app Revenue right most of it is uh moved by those those premium headsets so if you are going to make um uh a low-end VR headset um that can snap in a smartphone I think there's a huge opportunity Emerging Markets I also

think that's a very competitive space working with some clients in that space with razor thin margins where you need really good um connections with big retailers uh but I think that as these um better Mobile Solutions become uh kind of more broadly available as has happened in Mobile the the growth areas years from now will be as those Emerging Markets catch up thank you great question oh there only more minutes to the next session questions outside okay awesome all right guys no more chance for questions but uh thank you so much if you had one catch me outside