The State of VR, AR and XR

The promise of virtual reality has existed for decades, but it’s only in the last 10 years that it has truly become a reality. The technology isn’t close to dreams of the holodeck, as envisioned by Star Trek, but it’s come a long way since Nintendo’s Virtual Boy, launched in 1995 and discontinued shortly after.


The history of VR


Hype around the market really started to grow when start-up Oculus VR, led by creator Palmer Luckey and CEO Brendan Iribe, began a campaign to raise funds for the development of a new headset on the fledgling crowdfunding website Kickstarter. The company aimed to raise $250,000 for its prototype Oculus Rift (the Development Kit 1, or DK 1), and ended up with $2.4 million by the campaign’s end.


A year later, following the release of the DK 1, Oculus raised $75 million in a funding round led by venture capital firm Andreessen Horowitz. Months later, in 2014, Facebook announced it would acquire the VR start-up in a $2 billion deal.


The virtual reality market had started to pick up significant steam during this time. Valve, the company behind PC games marketplace Steam, partnered with consumer electronics firm HTC to launch the HTC Vive. The virtual reality headset differed from Oculus, allowing users to walk around a virtual space, rather than sit or stand still. Dev kits were released in August and September 2015, before the first consumer Vive device launched in April 2016.


Meanwhile Samsung launched its own Gear VR headset powered by smartphones in 2015, in collaboration with Oculus. Sony then released the PlayStation VR in October 2016, and Google launched its Daydream VR headset not long after in November 2016.


The augmented reality headset market also began heating up during this period. Start-up Magic Leap raised $542 million from a Series B funding round in October 2014, with investors including the likes of Google and, as with Oculus, Andreessen Horowitz. The company ended up raising $2.6 billion in total. Its first headset, the Magic Leap One, launched in August 2018. Microsoft announced its augmented reality tech, the HoloLens, in January 2015, with the first Development Edition shipped in 2015.


According to data analytics company SuperData, 6.3 million VR headsets were shipped in 2016. Breaking this down further, it was estimated that 4.5 million sales were attributed just to Gear VR.

As well as the notable tech mentioned above, a host of other manufacturers also developed their own headsets, such was the hype around virtual and augmented reality. AR in particular was popularized not through a headset, but by game development Niantic’s blockbuster mobile game Pokemon GO, which went live in select countries on July 6, 2016, as part of a steady global rollout. That title overlays virtual pokemon into the real world, which players then catch to build up their collections. As of June 22, Sensor Tower estimated the title had surpassed $6 billion in global player spending across the App Store and Google Play.


State of VR in 2023


Analyzing the market in 2023, Pokemon GO remains hugely popular, but Niantic itself has struggled to follow up with a repeat hit, despite attempts with Harry Potter: Wizards Unite and Pikmin Bloom. Other notable titles such as Dragon Quest Walk from Square Enix and Ludia’s Jurassic World Alive have found some success, but not at the same level. And these titles are arguably better known for their location-based features than AR.


The market for VR and AR headsets hasn’t yet generated mass market appeal like some believed it would, with some of the main platform holders abandoning the business. The Daydream and Gear VR headsets are no more, and Magic Leap and HoloLens are largely focused on business endeavours rather than the consumer market. Meanwhile, the Oculus name has been ditched for the Meta branding of its parent company, formerly Facebook before its metaverse pivot.


According to an IDC report, shipments of AR and VR headsets declined by nearly 21% in 2022 year-over-year to 8.8 million. The report notes however that “the market was bolstered by Meta’s Quest 2 and strong spending by consumers stuck at home with disposable income for entertainment”. CCS Insights puts global headset shipments at 9.6 million for 2022, a fall of 12%.


Meta is the clear leader in the market, with IDC putting its share of headset sales as high as 80%. Meta is said to have sold over 20 million Quest units to date. Despite these sales, The Verge reports concerns around engagement with its VR headsets. Rival PlayStation VR, meanwhile, is said to have sold more than 5 million units as of December 2019. The PlayStation VR 2, launched in February 2023, sold just under 600,000 units during its first six weeks. That put it above the PSVR’s launch period, though Bloomberg reports Sony had hoped to sell 2 million headsets during its launch window.


Apple enters the market


In June 2023, Apple announced its own entry into the market, with its mixed reality headset Vision Pro. The device utilizes both augmented and virtual reality features, and is controlled by hand and eye tracking, rather than a controller. The device is set to launch in 2024, priced from $3,499. Its announcement came as Meta revealed its Quest 3 headset will be released during autumn 2023, priced from $499.99.


Apple’s entrance into the space adds another major technology company to the VR and AR fray. The company has a clear history of launching successful mass market products like the iPod and iPhone, and its release will likely help expand the current industry. As noted in this article for, however, while it’s good news for developers and could increase reach, we remain many years from mass market adoption.

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