Virtual reality is still in its infancy, with headsets like Oculus Rift, Samsung Gear VR and Google Cardboard VR too crude and unappealing for most people.
When the industry does hit the mainstream, Wall Street believes that Facebook (FB), Apple (AAPL), and to some extent, Google (GOOG), will win the virtual reality space.
In a research note, Piper Jaffray analyst Gene Munster stated that virtual reality is likely the next key trend in technology, writing, "We liken the state of virtual and augmented reality today as similar to the state of mobile phones 15 years ago. It likely will take a decade before mainstream adoption as necessary improvements in displays and applications as well as lower pricing are needed to drive demand."
Virtual reality is still in its infancy, with crude games, movies and 3-D based images leading the way for how people will use it. Facebook's Oculus Rift is currently used for gaming, while Samsung's Gear VR has media partners, including Time Warner, among others. While those may be early uses of the headsets, Munster believes it will go much further than that.
"On the virtual side, new immersive worlds will open up, including gaming, live sports, concerts, immersive cinema and social experiences," Munster stated in the note. "Down the road, users will be able to virtually attend an NFL or NBA live game with a 50-yard line seat, listen to a live concert of your favorite band with a front row seat, watch movies optimized for VR, or visit friends in far-away locations. Classrooms in small-town USA will be able to virtually (and relatively inexpensively) tour the Great Wall of China, Egyptian pyramids, Stonehenge, the Coliseum, or the inside of a factory or laboratory. The possibilities are endless."
Even though the market is relatively small for virtual reality hardware currently, it's about to go on a torrid upswing, accord to Munster. Excluding hardware, content for virtual reality is estimated to be around $5.4 billion by 2025. Including hardware, the market explodes higher, estimated to be $62 billion by 2025.
As the space develops, from the rudimentary form it's in now, Munster believes the likely winners are going to be Apple, Facebook and Google among publicly traded companies, while "some of the better positioned private companies [are] Magic Leap, Next VR, Jauant VR, Leap Motion, OTOY, Matterport, Linden Lab and Valve."
As these companies enter the space, Munster believes that "TV manufacturers, PC and mobile phone display manufacturers, the travel industry, and content companies that don’t have a VR strategy" are the likely losers, as virtual reality becomes mainstream.