Report: Virtual reality rules now, but augmented reality will soon take over

Virtual Reality is already on the way out, according to a digital media expert, and it hasn't even gotten going yet.

Virtual reality market augmented reality
BagoGames (CC BY 2.0)

Immersive tech virtual reality (VR) and augmented reality (AR) revenue is expected to reach $150 billion by 2020, according to consulting firm Digi-Capital.

But it's AR that's set to grab the biggest share. VR won't be as big.

Hardware and games to be biggest

VR is a "closed-off experience" USA Today explains, whereas AR eyewear will allow viewers to see the real-world, while visually overlapping relevant information in the user's field of view.

That's one reason the experts think AR will do better.

A recent report form Manatt Digital Media says that, of the $150 billion in revenue, AR will account for $120 billion and VR only $30 billion. The firm used numbers from Digi-Capital.

Hardware will be the biggest revenue generator for AR, while games will top that chart in the VR market, the report says.

Other revenue shares for the tech include film, television, theme parks, data, and commerce, among others.

What's the difference?

AR augmentation means that sensory input like sound, video and graphics, and GPS data modifies the direct view of the physical, real-world environment. It enhances the view of reality with the extra data.

Virtual reality merely simulates a world. The simulation can mimic the real world, though.

AR is usually in real-time and creates overlaid context of often artificial elements, with actual events and views in the real world.

VR, on the other hand, isn't necessarily real-time, and it imitates physical presence rather than incorporating the actual world.

Sensory experiences, particularly sight, are simulated in VR, usually. Touch is also often reproduced in VR with haptic feedback.

Where will we see them?

Big investments have been made in some of the players. Magic Leap leads the pack with $593 million, according to the report. I've written about Magic Leap before in "How Microsoft sees the connected car."

Magic Leap and Microsoft are developing a goggles-based platform that creates AR experiences floating around automobile passengers, for example.

Another big player is Facebook. It bought VR headset maker Oculus in 2014 for $2 billion. That as yet unreleased headset will be used for immersive games.


"Several million premium headsets will be sold in 2016," Peter Csathy, CEO of Mannet Digital Media, the Manatt report's author wrote in a blog post recently. The context of his blogging was the consensus of opinion on a Siemer Summit technology conference panel about AR and VR. Manatt is a sponsor of the Siemer Summit.

"That means that VR becomes a mass market opportunity in the very near-term, i.e., next year," he writes.

Though "the ultimate market potential for AR will dwarf the VR market, because AR's semi-immersive, rather than fully-immersive nature means that AR applications are much broader in scope," he says in the blog.

However, that's not what's happening right now. VR is likely to be more popular in the near term partly because of momentum and that total immersion for gaming has captured the public's imagination. It's also probably technically easier to do it well with existing conceptual ideas, processor power, and bandwidth available. Google Glass, one AR technology, has had mixed reviews.

"Interestingly, all agreed that VR is far ahead of AR in terms of obvious mass consumer and business applications right now," Csathy writes of the panel consensus.

But if Digi-Capital's numbers are right, that won't be the case in a few years.

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