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Five Insights into China's Virtual Reality Sector

VR-related revenues are expected to hit roughly $11.9 billion by 2021

Chinese media dubbed 2016 as the “birth year” of virtual reality (VR) in the country. Tech companies, including the big three—Alibaba, Tencent and Baidu—all sought to set up their own VR initiatives. China may become the first market to see mass VR adoption by consumers thanks to drivers like government support, a willingness by consumers to adopt new tech and a highly competitive environment that will force prices down and foster innovation.

Here are five takeaways from a 2017 report on the state of VR in China from consultancy iResearch Consulting Group and VR market research firm Greenlight Insights.

No. 1: Revenues generated by the VR market in China will skyrocket between 2016 and 2021

The virtual reality market—which includes revenues from headsets, content, experience centers, peripheral hardware, marketing and VR cameras—is projected to grow from RMB3.46 billion ($520.8 million) in 2016 to RMB79.02 billion ($11.9 billion) in 2021. That’s a more than twentyfold increase during that timeframe.

No. 2: Consumer content will soon generate massive revenues for China’s VR sector

In 2016, sales of VR headsets accounted for 59.2% of total virtual reality revenues in China—by far the largest share—while consumer content made up just 7.7%. However, consumer VR content is set to explode, and is expected to account for 35.3% of all VR revenues in the country by 2021. By then, games will lead the VR content category, generating RMB9.62 billion ($1.45 billion), followed by films and movies at RMB8.79 billion ($1.32 billion) and live streaming at RMB 4.46 billion ($671 million).

Virtual Reality (VR) Revenue Share in China, by Segment, 2016 & 2021 (% of total)

No. 3: Companies will increasingly rely on VR to drive innovation and lower costs

Enterprise solutions will be one of the fastest growing VR segments in China, rising from RMB3.46 million ($521,000) in 2016 to RMB8.77 billion ($1.32 billion) by 2021. VR technology is already being applied in a number of disparate fields in China, including architecture, engineering, real estate, healthcare and retail, just to name a few. “VR will eventually replace all screens in our lives and enhance efficiency in all industries,” Alvin Graylin, head of operations in China for HTC, which makes the Vive VR headset, told eMarketer. “It’s likely going to be the technology that will ultimately enable a full remote workforce model for most businesses in the world, while greatly increasing the available talent pool for any business.”

No. 4: In the short term, VR will remain a niche tool among marketers

Though VR has the potential to help brands drive a more immersive and possibly more memorable marketing experience, the technology will not become a mainstream tool for marketers until it reaches mass adoption among consumers. According to the iResearch/Greenlight study, VR marketing outlays in China will grow from RMB30 million ($4.52 million) in 2016 to RMB1.98 billion ($298.05 million) by 2021. To give some sense of scale, eMarketer predicts digital ad spending in China will reach $96.52 billion in 2021.

No. 5: Budget-conscious consumers are investing in low-cost headsets (for now)

In 2016, the vast majority of the roughly 9.63 million VR devices shipped in China consisted of cardboard-type devices (e.g., Google Cardboard)—understandable given their affordable price in a relatively untested market. However, mobile VR headsets, such as the Samsung Gear, will surpass cardboard headsets by 2021. By then, total VR headset shipments will hit 105.25 million in China, according to the report.

Man-Chung Cheung

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