Oculus Quest Outsold PlayStation VR In Q2 This Year

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Oculus Quest Outsold PlayStation VR In Q2 This Year

XR hardware and consumer software revenue is now projected to reach $6.9B in 2020, up from a prior estimate of $6.3B. Popular VR headsets were hard to come by in Q2 as COVID-19 disrupted supply chains just as consumer demand for in-home entertainment rose. Continued strong demand, combined with new headsets launching in the second half of the year like the HP Reverb G2, mean VR hardware earnings are expected to generate $2.5B in 2020 and rise slightly year-over-year. 

The Oculus Quest outsold the PlayStation VR in Q2 (177K vs. 155K) despite supply constraints. The PlayStation VR was the top-selling VR headset from Q4 2017 to Q3 2019, but this is the second quarter (after Q4 2019) that the Quest has topped the charts. The Quest (including future hardware updates) is expected to be the top-selling VR hardware through at least the end of 2021 now that Oculus has discontinued the Go headset to focus more fully on its higher-end standalone device.

 

Our outlook for location-based entertainment has been revised downward further due to the ongoing impact of COVID-19. 2020 spending is estimated to be roughly one-quarter of 2019 spending ($146M vs. $597M), but the long-term impact of COVID-19 on the economy and entertainment venues means we now expect 2023 spending ($422M) will still be 29% lower than the total in 2019.

 

The growth outlook for augmented and mixed reality (AR/MR) headsets has been revised downward due to Q2 setbacks for consumer AR/MR. We now estimate that AR/MR headsets will only account for 23% of XR revenue by 2023, down from a prior projection of 36%. Magic Leap experienced mass layoffs after it failed to appeal to consumers or developers of consumer software. The company has now pivoted to focus on enterprise customers. Similarly, smartglasses maker North was acquired by Google, reportedly for less than the firm had raised in venture funding. There are reports Apple is testing AR devices, and a product from the company will certainly grow the consumer AR market overnight. However, we believe a consumer AR headset from Apple will not arrive until 2022 at the earliest and will take some time to reach true mainstream adoption. 

 

Pokémon GO continues to be a bright spot for mobile AR, with earnings in Q2 2020 up 12% year-over-year. COVID-19 lockdowns did not hurt the game even though it is designed to be played while physically moving around. Developer Niantic began selling remote raid passes at the end of April, which allowed players to join in-game battles without the need to travel to certain physical locations.

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