SuperData trims virtual reality revenue outlook for 2016 by 30%

Virtual reality is not going to have quite as big of a 2016 as one research firm was originally predicting.

SuperData is trimming its prediction for virtual reality sales in 2016 by 30 percent. In January, the analysts at SuperData forecast that VR would make $5.1 billion in revenues throughout this year. Now, the company is cutting that number down to $3.6 billion. SuperData notes explains that it overestimated the market for PC and mobile VR, which includes devices like the Oculus Rift, HTC Vive, and Samsung Gear VR. This slower start doesn’t dampen SuperData’s prediction that VR will generate $40 billion in spending by 2020.

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Before the end of 2016, SuperData is expecting consumers to purchase 16.8 million mobile VR devices. These include the flimsy and inexpensive Cardboard phone holsters from Google in addition to the $100 Gear VR peripheral for Samsung’s Galaxy phones. When it comes to the high end, SuperData analyst Stephanie Llamas says that the market only has a limited number of VR-capable graphics cards. This means that the PC will only have around 2 million high-end devices sold between Oculus Rift, HTC Vive, and tertiary devices and PlayStation VR will sell around 2.6 million.

Llamas points to the limited PC audience for holding back VR as a key reason why SuperData revised its forecast. But she also points out that the 36 million PlayStation 4 owners could make up a little bit of that ground when PSVR eventually launches later this year.

“After conversations with key hardware and software companies, we are confident that our forecasts have been adjusted to more accurately reflect the VR market’s potential,” Llamas said in a statement.

She points out that her thinking now reflects a recent talk from Unity chief executive officer John Riccitiello, who points out that adoption of new technologies grows exponentially. VR may start out slow in 2016, but it’s going to see bigger and bigger returns over the next few years as technology gets more affordable and ubiquitous. So while mobile will make $861 million this year compared to consoles $1.2 billion and PC’s $1.6 billion, SuperData expects mobile VR to generate $15.6 billion by 2020 compared to console’s $8.5 billion and PC’s $16.3 billion.

“There is a lack of content in the beginning of a new media cycle, which is something that VR is facing now,” said Llamas. “Software revenue will begin with just a half a billion dollars in revenue, growing slowly year-over-year until acceleration begins with (an estimated) $24B in 2020. Now that developers see VR’s potential they are clamoring for first-mover advantage leading software revenue to outpace hardware by 2019.”