World's foremost Virtual Reality (VR) entrepreneurs - FacebookFB , AlphabetGOOGL , SonySNE , Samsung, HTC and Acer - recently announced the formation of the Global Virtual Reality Association (GVRA). The non-profit organization will be responsible for promoting "development and adoption of VR globally".
VR along with Augmented Reality (AR) has been touted as the next "happening" computing platform with massive growth potential. Per IDC's Worldwide Semiannual Augmented and Virtual Reality Spending Guide, worldwide revenues will grow at a compound annual growth rate (CAGR) of 181.3% (over the 2015-2020 period) reaching more than $162 billion by 2020.
IDC identifies three major device categories across the AR and VR markets. They are " Screenless viewers that use the screen of specific smartphones to drive an AR/VR experience; Tethered Head Mounted Displays (HMDs) that utilize an existing compute device such as a PC, game console, or even a smartphone to drive a head-worn display; and Standalone HMDs that integrate processing within the head-worn display itself. "
Samsung Gear VR is the prime example of the first category, Facebook's Oculus Rift is of second category and Microsoft 's MSFT HoloLens belongs to the third category.
How VR works?
Before delving further into projections, let's try to understand how VR works. Per Deloitte, " VR hardware offers visual (and sometimes audio) immersion via a wide-angle, head-mounted display that shows a stereo image in 3D. Sensors in the headset track the user's movements and change the user's view accordingly. "
To simplify the technical jargon, by using VR headset, you can visit the Sahara desert in Africa in a matter of seconds, without feeling the heat of the scorching sun or roughness of the desert floor. However, this can be termed as sub-immersive experience, as all the human senses are not satisfied or needed.
Currently, most of the VR developers are aiming to develop headset, applications and games that can give a full-immersive experience to users. GVRA is expected to boost research and information sharing among partners on improving head, motion and eye tracking technology to develop improved devices.
Per IDC, worldwide shipments of VR hardware will grow at a CAGR of 183.8% over 2016-2020. The research firm forecasts unit shipments to jump from an estimated 9.6 million in 2016 to 64.8 million in 2020.
Per Deloitte's projections, VR hardware sales will be almost $700 million, which will push overall VR sales to more than $1 billion in 2016. The research firm estimates VR headset sales of almost 2.5 million and game copy sales of 10 million, which is enticing for both the headset makers and VR-based video game developers.
According to market research firm SuperData, the total market for VR content will reach $40 billion by 2020. Over the next five years, the firm expects " the number of households that owns at least one VR device to increase nine-fold ."
Unified Standards: A Possibility?
Although the VR market is still in its infancy, we believe innovative hardware and content (gaming as well as movie) is key to gaining a strong foothold in the market. The creation of GVRA is a right step in this regard as it will surely improve collaboration among the different stakeholders of the VR market.
The consortium is expected to help in creating unified standards among its partners both in terms of software and hardware. For instance, the presence of standards will ensure that games bought from Oculus Store can be played with HTC Vive, which is not possible presently. This will immensely benefit consumers in terms of accessibility, which will eventually drive up revenues for the whole VR market.
However, absence of leading software provider Valve (developer of the Steam store and SteamVR platform that supports HTC Vive and Oculus Rift) and Microsoft can be a concern for the effective functioning of GVRA, in our view.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.