SuperData XR Q3 2020 Update
The original Oculus Quest was the top-selling VR headset of Q3 2020, and sales are set to jump with the launch of the Quest 2. The device sold 161K units in Q3, though that number would have been higher if retailers had not run out of stock partway through the quarter as Facebook prepared to launch the Quest 2. Pent up demand, a lower price and holiday season gift-giving are all set to push Quest 2 sales up dramatically over the original at launch. Also, with Facebook now discontinuing the Rift S, many potential buyers of Oculus PC headsets are expected to shift over to the Quest 2. 2021 sales for the device are now expected to reach 3.0M, up from a prior estimate of 2.6M.
PC VR game earnings are now on track to rise 119% year-over-year from $86.1M in 2019 to $189M in 2020 thanks to the release of Half-Life: Alyx and other major titles. Since its March launch, the Valve title has earned more than what all PC VR games combined made in 2019. Another VR entry in a classic first-person shooter franchise, Medal of Honor: Above and Beyond, will also launch in December. Finally, the recent release of Star Wars: Squadrons is contributing to PC VR earnings.
Limited supply, not demand, held back sales of the Valve Index during Q3. The headset continues to appeal to enthusiasts and 56K units were sold during the quarter. However, this total would have been significantly larger if Valve had been able to fulfill orders faster. Buyers must still wait at least eight weeks before receiving the device.
Investments in VR and AR companies are now projected to reach $915M in 2020, still down from 2019’s total of $1.0B, but up from our prior estimate of $830M. Prolonged lockdowns and work-from-home arrangements have shown the potential of XR in both personal and professional settings, and investors are taking note. Major Q3 XR funding developments include a $54M investment round in high-end VR headset maker Varjo and a $40M funding round in mixed reality (MR) company Nreal. (Magic Leap is not included in investment figures due to its outsize impact on the market.)
Widespread consumer adoption of AR/MR headsets is not expected to take off until at least 2023 despite Facebook’s newly announced AR glasses and Apple’s continued investment into the space. Issues that held back firms like Magic Leap and North, such as limited consumer use cases, are set to persist in the near future. As a result, the enterprise sector will generate over 70% of AR/MR hardware revenue through the end of 2022.