VR Industry Is Caught Up in South Korea's Political Turmoil - eMarketer

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VR Industry Is Caught Up in South Korea's Political Turmoil

Government reduces planned VR investment

December 13, 2016 | Media

The virtual reality industry became an unlikely casualty in South Korea’s unfolding political turmoil as the government cut back on a VR investment program.

Virtual Reality Revenues in South Korea, 2014-2020 (billions of South Korean won)

Last week, the government cut its planned spending to develop the VR industry by roughly 42%, reducing the amount to 11 billion won ($9.8 million).

The cut came amidst a rapidly escalating scandal involving President Park Geun-hye. South Korea’s parliament voted to impeach Park last week. She is accused of giving an unofficial adviser wide latitude in government affairs that led to preferential treatment, including kickbacks. Park has rejected the charges.

There has been no direct link of the scandal with the reduced VR investment. A government oversight agency said the reduced investment reflects concerns about transparency in the formation of the project and lack of understanding about the project’s goal.

VR in South Korea has been less focused on game and entertainment applications, and more on industrial use cases, such as architecture and engineering. The government investment was part of a joint public/private effort to encourage the development of gaming, entertainment and education platforms.

Hardware companies such as Samsung Electronics and LG Electronics offer a variety of VR devices including headsets and 360 degree cameras, but software and content for VR has been less of a focus. The government investment is meant to address that.

Not all areas of VR were affected equally by the government cuts: Investment in game content was not reduced. “Games are the area that will drive the most growth,” said Baek Hyun-jung of Innocean Worldwide, a global marketing and communications company.

With South Korea’s government stepping back, China may step in as an investor. “China’s VR market is growing at a very fast pace, yet their content is not diversified,” said Baek.

—Jeane Y. Han

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