An Overview and Outlook of Virtual Reality in Games and Beyond Newzoo Trend Report 2022

© Newzoo 2022 Growth continued even after 2020’s resurgence. Several VR developers shared record player numbers across the holiday season in 2021. Metaverse hype and investment also contributes to VR growth Some of the world's biggest technology companies, including , are working hard on the next generation of headsets. Meanwhile, PlayStation is reigniting its involvement with its upcoming PS VR2. . Now, the VR install base is growing faster than ever before, VR is becoming a more sustainable platform for developers, and even more high-quality content is imminent. We will see further developments in VR hardware, software, and use cases (in and outside of gaming) in the coming years. . In turn, . To explore this growth, this report looks at VR’s latest developments in gaming and beyond. When (formerly ) acquired in 2014, it triggered a huge influx in VR interest from investors and companies. Yet, VR did not quite live up to expectations; headsets were based on very early technology, and the hardware required to run software was extremely expensive. A Developers were unwilling to create VR content due to the market’s small audience, while the audience was unlikely to grow because of a lack of content—a true chicken-and-egg problem. However, the tide is turning. The VR market enjoyed a resurgence in 2020. in general, as consumers craved escapism and social features. Gaming acts as the major touchpoint between consumers and VR, so the platform attracted many (new) users via immersive experiences and social activities in virtual environments. VR also saw its first AAA killer app with the highly anticipated release of . Meanwhile, Meta's affordable and untethered headset made VR more accessible to the masses. Gaming has been and will continue to be the key driver of VR’s growth CAGR 2019-2024 of the global active VR HW install base. 2 – VR Market Analyst – Game Dev. & Publishing Consultant – Metaverse Market Analyst – Market Lead Telecom & Mobile Services – Market Analyst & Writer – Editor in Chief – Lead Visual Designer

Ecosystem Infographics 7 Active VR Install Base & VR Game Revenues 8 Top 100 VR Game Analysis 16 VR Headsets Overview & Case Studies on VR Games 19 VR Game Development 26 VR Hardware & Peripheral, VR Technologies 27 VR Gaming 32 The Metaverse 35

© Newzoo 2022 z XR is a term that encompasses any technology that alters reality by adding digital elements into a physical or real-world environment to any extent. It refers to any technology that blurs the lines between the physical and the digital worlds. Currently, the term XR encompasses all of VR, MR, and AR technologies. The computer-generated simulation of a three-dimensional image or environment that users can interact with in a seemingly real or physical way via special electronic equipment, such as a headset with an internal screen or controllers/gloves fitted with sensors. MR connects physical and digital worlds, using sensory and imaging technologies. The blended world allows users to interact with physical items, digital items, and environments using their own hands. All of this happens while wearing a headset. The number of directions of users' positional tracking in VR. The positional tracking relies on built-in or external sensors to capture movement. While 3DoF tracking only measures three types of directional rotation (rolling, pitching, and yawing), 6DoF adds three further directional movements (elevating, strafing, and surging), allowing players to physically move around in a virtual space rather than simply standing in one spot. VR-only games refer to VR games/apps that can only be played through VR (e.g., Half- Life: Alyx, Beat Saber). VR-Integrated games refer to VR games/apps that can be played outside and inside VR devices (e.g., Resident Evil 7, Star Wars: Squadrons). 4 (P7) • Manufacturers of consumer VR headsets, that are capable of 6DoF positional tracking and are required for consumers to engage with VR games. • Content distribution platforms that offer players easy access to VR games. Platforms include the Meta Quest Store, Steam, and the PlayStation Store. • Manufacturers of peripherals that provide haptics and/or enhance user immersion in the consumer VR gaming experience (excl. location-based VR). These peripherals include, for example, controllers, haptic gloves, full-body tracking suits, and treadmills. • Gamified virtual spaces whose core focus is meaningful player interaction and socializing, rather than on traditional gaming experiences. • Studios that are responsible for planning, developing, and releasing VR games and apps to consumers. • Tools and services that enable and support the development of VR games and apps. They range from game engines like Unreal Engine or Unity, which support the development of VR games/apps, to computer graphics software applications like Blender, which are used to model and simplify the planning and development processes of VR game/app development. • Cloud services and infrastructure that aim to increase access via cloud to high-end VR titles without requiring users to purchase the latest and most expensive VR devices. These technologies should theoretically enable players to stream high-fidelity PC VR-level games onto their standalone VR headsets through their internet connection. • Providers and manufacturers of the key hardware components that allow a VR headset to function by properly processing and executing commands. These include Qualcomm's Snapdragon CPU chipset (found in every Meta Quest headset), Intel’s processing cores, and NVIDIA’s GPUs for PC VR. A definition of the key terms used in the VR market

© Newzoo 2022 The methodology behind Newzoo’s active VR hardware install base & VR games revenues First, Newzoo’s VR market-sizing scope covers and . Therefore, we that can also be also used to play VR games. Degrees of Freedom (DoF) refers to the number of directions of users' positional tracking in VR. The positional tracking relies on built-in or external sensors to capture movement. While 3DoF tracking only measures three types of directional rotation (rolling, pitching, and yawing), 6DoF adds three further directional movements (elevating, strafing, and surging), allowing players to physically move around in a virtual space rather than simply standing in one spot. We believe that 6DoF is essential for immersive VR gaming experiences. Therefore, we ; for example, all smartphone-based VR headsets (Samsung Gear VR, Google Daydream, and Cardboard) and entry-level standalone headsets such as Oculus Go. Our definition of at the end of each year. This means that we . For example, if an Oculus Rift owner purchased a Meta Quest 2 in 2020, the Oculus Rift would not be counted as an active install base if the owner did not play the Oculus Rift in 2021. Furthermore, in order to count headsets as part of the active install base, headsets need to be produced by manufacturers, shipped by the manufacturers to retailers, sold by the retailers to consumers, and activated/played by the consumers. This that some research firms use for reporting. We categorize consumer VR headsets into the following : , , and . PC VR includes consumer VR headsets that require a VR-ready PC to run software, such as the and . Examples of standalone VR include the and , which do not necessarily require a PC or connecting the headset to a PC to play games. Lastly, our forecasts only include potential successors of existing brands and works confirmed or hinted at by new brands or suppliers. Both the new entry of game- changing headsets (brands) and introductions of high specs with aggressive prices could easily affect the market situation. To that end, Newzoo will continue monitoring the market closely and reflect the latest developments into our forecasts at the best possible time. 5

© Newzoo 2022 Ecosystem and market sizing