Report: VR And AR Developers Aren’t Making Enough Money To Justify Investments

by VentureBeat • May 13th, 2017

Virtual reality and augmented reality are still in their infancy. But with hundreds of companies, tens of thousands of employees, and over $4 billion in investments to date, the industry is taking a big swing at the future success of VR and AR.

Despite this forward movement, there are signs that not all is well in the world of make-believe.

Today, the Brabant Development Agency (BOM) has released a survey that reveals a wide discrepancy between developers’ revenue ambitions and their financing needs.

According to the 34-page survey, 50 percent of VR and AR developers indicated that they will require more financing in the future, stating they will need additional rounds of more than $1 million. In order to raise this level of investment, companies typically need to have the ambition to achieve at least $10 million in revenue within five years. However, the average developer in the survey expects their firm to generate “only” $1.3 million.

“When the financials are not compelling enough, developers will have to show other reasons why investors should invest in them,” Coen Sanderink, business developer at BOM, told VentureBeat. “Investors will be looking for potential market leaders with focus and strong client relationships because it allows them to create additional revenue models and value.”

That wide gap between the needs of each business and their revenue-generating opportunity is a warning sign.

“That’s why developers should outline realistic strategies to build a significant position or become a leader in a specific market segment, such as training for offshore oil workers or active eSports,” Sanderink said.

The survey is a refresh of a study by BOM in 2016 that looked at whether VR and AR are “exaggerated hype” or have real potential. In this second edition of “Hype or Serious Business?” BOM surveyed 613 developers and users of VR/AR technology in the Netherlands, Belgium, and Germany on a range of issues, including budgets, revenue forecasts, and financing needs. The survey shows that developers, as well as users, define “unfamiliarity with the possibilities” and an “insufficient business case” as the main barriers to mass adoption.

“It’s always hard to predict how a new technology will be applied in your industry, which holds particularly true in this case,” Sanderink said. “VR/AR involves a virtual world. You need to experience it before you can understand its potential.”

There is hope, however, that the industry will become as important as many analysts and forecasts suggest.

“VR/AR is here to stay and we see strong signs in our research that it will be serious business in 5 to 10 years,” Sanderink said. “A key conclusion is that now is the time for potential users to start experimenting and explore their role in this rapidly evolving space.”

In addition to the funding gap, the study details the current sales of VR and AR displays, forecasts future sales, profiles the industry and its employees, and provides insight into how developers will spend their budgets. And while the survey focuses on the Netherlands, Belgium, and Germany, the data is relevant to most markets. The Netherlands, for example, is a popular mobile app “soft launch” location, due to its consumers having a similar profile to those in the U.S.

BOM has created a compact e-zine that shares the report’s most important observations and conclusions, and it includes a link to the full 34-page report, which is available from today.

This post by Stewart Rogers originally appeared on VentureBeat.

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  • The hardware sales will eventually catch up with where these developers needs them to be in order to make their millions back. Until then I think the smaller indie devs (who don’t need millions to make a game, like all the thousands of games/experiences that were on Oculus Rift before it went CV1), and a handful of bigger publishers (who can afford to either take a loss or not make too much profit) will be making the games that keep VR afloat for the most part.

  • We all know that… that’s why big AAA studios aren’t in the market yet

  • Ted Joseph

    It will take off when the games turn from “tech demos” to AAA games from financially backed developers. Games like Fallout, Ever Quest, Skyrim will eventually make it to VR, and it will take off. I also believe the FOV must be increased to 180 degrees, and the headset must be more of a “welders” mask ala PSVR and Acers mixed reality headset instead of the snorkel mask like the Rift and the VIVE.

    • towblerone

      The problem is that people assume VR exists only as a platform to play video games and use gaming terminology to determine what VR needs. “AAA games” isn’t what VR needs. Hell, for the most part, AAA games isn’t what gaming needs.

      What you’re suggesting is that VR just be a gimmick to push the sales of flat games. Recipe for failure.

    • 1droidfan

      I must be one of the only people that does not mind the reduced FOV. I dont even notice it unless I look for it to be honest, maybe I suffer from tunnel vision in real life or something.

  • Eelke Folmer

    Classic chicken and the egg problem: mobile VR has hundreds of millions of VR capable devices, but limited interaction options where PC VR offers rich immersive experiences but doesn’t have have enough installed units for AAA developers to make a profit.

    I agree with Palmer Lucky that Mobile VR will take off before PC VR but it really needs more richer forms of interaction (my startup VRmersive is working on that).

  • superg05

    Or they could make a regular game with VR support so they hit bother markets?

    • Mane Vr

      This is what is needed people need to wake up to that fact vr will sell when u can play thru COD, BF, and all the big games. And we can play allow side non-vr gamers once people c the vr icon next to ur name in mp that will do more to promote vr than all the these attend with boring ass games

    • 1droidfan

      Exactly. You look at a game like Prey, that runs at 100fps on a 970 – makes perfect sense to make a VR version while developing the game. Sure it will cost a few 100k more, but I will not buy that game in 2D, but would totally fork out full price to play it in VR.

      • Denny Unger

        VR design vs PC/Flat design are COMPLETELY different skillsets. I would even go as far as saying it is impossible to make COD, BF, PREY for both systems without radical redesign for the VR “version”. The knee-jerk is of course to assume that this is the obvious suggestion but in practice, it just doesn’t work that way.

        • 1droidfan

          I suggested a co-development in my post similar to RE7, not a port as it seems you have mis-interpreted.

          • Denny Unger

            Oh for sure. If there’s a competent team co-developing a VR component to the experience it can work.

        • NooYawker

          Doom 3 VR is a mod done on people’s free time. It’s not impossible.

          • Denny Unger

            It also makes a gross majority puke on their shoes.

          • NooYawker

            If you actually played it you’d know the mod has teleport and full locomotion.

    • Aragon

      You are right, but It is unfortunately not that easy. The biggest issue is Motion Sickness. If you transfer the gameplay of a Call of Duty game directly to VR most people will get sick in seconds.

      It is quite difficult to avoid such situations. Developing for VR is also more complicated because programmers have to take on and off the VR headset all the time. If they do things wrong with the camera setup they may get sick.

      The biggest issue is that Publishers like EA etc. only allow to invest Millions for VR Development if they could get enough money out of it. But with Farpoint and the new Controller there is now a much higher chance that games support VR.

  • dr. Professor

    Here’s an idea.
    VR will get a huge boost when you can appeal to women. If you could have Johnny Depp (20 years younger version of him) to do some cooking show (with close ups of his face, so that women could experience an innocent intimate moment with him) – voilá. VR would experience an unbelievable boost. It would have a lift off to a neighboring galaxy. Trust me. When women gets engaged in this tech, then it will succeed.

    – Get Johnny Depp
    – Take digitally 20 years out of him.
    – create just some silly idea what he would do in the VR show
    – add innocent close ups of him
    – PROFIT

    • Dotcommer

      lol, what an incredibly tone-deaf comment. What other brilliant ideas do you have? Pink ribbons and shoe-shopping experiences?
      While I agree, getting women involved in VR is important, you don’t get them involved by trying to appeal to them from a male perspective of a stereotypical woman. This is 2017 FFS.

      • dr. Professor

        I fail to see what is exactly “a male perspective” in close ups of Johnny Depp? You mean all men are gay? We are not that far yet in the overall increase of general gayness in the world, despite all the efforts of every university and MSM.
        Or do you mean that women wouldn’t care at all about such an innocent experience?
        I bet you have never met a woman other than your mom.

        Since I can smell the famous odor of SJW in your tone (I am not tone def) maybe it’s just that Johnny Depp is too white? Well, let’s have Denzel Washington instead? What ever that makes modern women/girls scream, like back in the days in the Beatles concerts.

        • Kyle Pittman

          I think what he means is Johnny Depp hasn’t been a relevant sex symbol in about 10 years.

  • towblerone

    VR devs need to start looking for ways to engage non-gamers. Long-term, that’s where the real money is.

    • NooYawker

      I think AR will be a bigger draw to non-gamers. When it finally comes out that is.

      • towblerone

        It’ll all be combined eventually. You’ll wear a headset and will jump between VR/AR/mixed reality.

  • Mane Vr

    Is this surprising it the dumbass idea that vr games NEEDS to be built from the gound up. What it needs is ports of the all the aaa games coming out. Vr gaming is going to die focusing on perfect when it need to focus on good enough.

    • J.C.

      Yet, if the games are just the same game as non-VR, it’s going to be seen as an unnecessary addition. With motion controls, you can’t have people play in games like COD alongside flatscreen players. One side or the other will cry cry cry about being at a disadvantage. If VR is determined to be at a disadvantage, then it’ll die right then and there. If VR is considered the advantage, non-VR owners will bitch that VR owners are “paying to win”. There is no good way for competitive multiplayer to allow VR players along with flatscreeners.

      If you think that seems ridiculous, remember Battlefield 2 players complained about widescreen owners having an advantage so it was nerfed by lowering the FOV for widescreen. Pc-PS4 gameplay is possible, but not allowed in FPS games due to the PC players’ massive advantage in keyboard/mouse. Even owners of Gears of War 4 can’t play pc versus Xbox…but they CAN play co-operatively.

      • Mane Vr

        the choice should be left to the gamer i’m sure there will be vr only servers and non-vr only servers what are we like 5 here that we don’t do somethingjust can some people will bitch.. smh this mindset is y most vr games suck cause it’s focus on one set of people instead of giving everyone their option to play as they want. Serious Sam vr has mp with non-vr and vr players together I don’t see any out cry on that and I do think vr has the advantage I was in a mp with non vr player and I was crushing them and I don’t normally play pvp in fact I was excepting to lose badly just like I normally would in pvp I didn’t hear any of the guys in the chat say how unfair it was not once

        • J.C.

          Ok, if you want to be taken seriously, write like an adult. Currently you write like an adderall-starved 11 year old.

          Serious Sam isn’t a billion dollar franchise like CoD or Battlefield. It’s a goofy shooter series that very few mainstream gamers have played. It can get away with lopsided or unfair hardware advantages. Big name titles are used in tournaments, and no one’s going to let someone use a machine where the hardware offers a tangible benefit.
          That tournament mindset has seeped into the game’s basic player pool, and clearly you didn’t read the prior examples of where “unfair hardware” was intentionally kept out of play. If a game is co-op, one player’s advantage is good for everyone, so no one’s gonna bitch.

          So how about you stop thinking like someone putting $60 into a game, and think like the people who put $100 million into it. They have a reputation to protect to keep their game series going. IF Battlefield or CoD get VR, it’ll be shuffled off to its own servers or map, for now.

          • Mane Vr

            Clearly u didn’t read the fact i said theu can have vr only servers along with non-vr only servers it a little word called choice. The fact that they are so big is the reason we should hope they add a vr mode to the game one of those game in vr would do more to help vr than all these crappy indie games we have now. U guys are dreaming if u think going to 4k screen and wireless and the same indie games is going to get more people into vr. It going to take big games getting vr port u k ow like fallout 4 for starters. People need to see the games they love can be played in vr to make it worth buying if it wasn’t for my addiction to tech i would never have bought vr the games r NOT worth the buy in price.. don’t get me wrong i love the tech but none of the games i own now in vr i would have bought if i had another choice know halo vr, mass effect vr, etc.

    • Chris Courtois

      Yup, motion controls and the “built from ground up for VR” and “VR headset required” will kill the tech on the long run if nothing changes. Worse we also have to put up with “gamepad required” (seriously… on PC?? Fucking kidding me??) and “motion controllers required” or “2m x 2m required”… criss cross all the confusing requirements each game proposes, and some of us end up only able to enjoy 30% of the library given studios clearly have no clue to to make a game accessible.

      They pile on six different random unusual requirements (ie: the stupiest one is requiring an XInput gamepad with an OpenVR game, a cancer leftover from Oculus-to-VIVE ports.. most VIVE owners don’t own any gamepad and select “refund” 5 seconds into trying the game; BattleZone is a perfect example of such incompetence) and then they wonder… “Hey why didn’t we make the quadrillion trillion that we projected? Was that not realistic?”. Toss over that the ridiculous exclusivity which Facebook should have known would be immensely toxic not only to the dawn of commercial VR, but also to the devs that create content for them… a ghastly, tragic and shocking decision.

    • Tyler Soward

      OMG my sentiments exactly. Completely right on with this.

    • NooYawker

      If Doom 3 VR mod can be made by devs in their free time, large studios can easlity convert their AAA games easily on the cheap.

      • Mane Vr

        Yea when a see an aaa developer say how hard it is to port their game into vr i load up doom vr or Ss:vr and think what total bs

  • cyberpunguy

    Of course not, with VR headsets so expensive only a small part of the possible buyers are actually buying.

    • J.C.

      They’ll come down in price. Do you honestly think the first automobiles were prices affordably? Nope. How about the first computers? Cell phones? It’ll get better.

      Right now the headset cost isn’t the only barrier, there’s also the cost of the machine to RUN it. For most consumers, the final total will be around $1700 or so for a decently powerful machine…the minimum spec rigs are just disappointment. There’s a long road to mass consumer acceptance.

  • Armand LePrince

    I think the reasons why VR can be a failure are the same reasons why 3D is a failure :
    – unpleasant to wear
    – no killer app.
    I don’t think the reason is the price. Just see how many millions of S8 Samsug is going to sell. And how much is this new smartphone ? 700 USD ? Even more ? Yes, as much as a complete set of Oculus or HTC.

    Just look at what can be a relative success : the PSVR – perfect for gamers. But only for gamers, always in search of better immersion.
    But even with 5-10 millions, it will not reach a market similar to the smartphone.

    For me the VR under its current form will never be a success, or at least comparable to mass media such as smartphones or TV.
    The AR glasses have a chance maybe.

    And the killer app should not be a game but an app for every day.
    Why not an AR glasses which allows you to call a person and litterally see him/her and his/her surroundings ?
    There is a long way before that :
    – better helmet / AR glasses with good definition
    – 360° camera on each side to capture the surroundings
    – cameras to show expression/faces/eyes
    – good algorithm to stitch all the cameras to rebuild a face
    – and a good network to carry all these data
    – and investors to support this of course
    Oh, yes and we would need a zuckerberg or a gates who can make investors dream.

    • NooYawker

      Anyone who makes the comparison between VR and 3D has no idea what they’re taking about.

      • Armand LePrince

        well, on both sides :
        – there are tons of big companies investing on it (sony, microsoft, apple, etc. as there were all the TV companies, including cinema studios) with the same enthusiasm, not counting strong early adopters
        – we’re talking about glasses, uncomfortable for most normal people (I don’t include “geek” in it)
        – there are currently plenty of abuse of the “3D” / “VR” brand – converted 3D / fake VR or not worthy experience
        – all studies predicted massive success on VR just as they did for 3D

        Seriously, what are your arguments on saying they will not share the same destiny ?

        • NooYawker

          I’m not here to educate you, if you know nothing about VR go learn about it before making this asinine comparison.

          • Armand LePrince

            very constructive discussion “you bad, me good, you stupid, won’t tell why”.
            So you are a troll. So sad.

            Now if you have a minimum of honesty you may understand why there are no further “big” announcements in VR.
            And big game studio are here to make money. You may understand why they don’t want to invest in VR for now.
            Also look at VR sales (including gear vr) and laugh with me.

            NB: I am a long time 3D and VR adopter. And a long time observer too.

          • NooYawker

            Oh you have an oculus or vive? Or do you observe with a gear vr or google carboard?
            Or not even those?

          • Armand LePrince

            the vive. Better experience, don’t you think ?
            Tried the cardboard, missing the interaction. Satisfied ?
            Now your turn !

          • NooYawker

            Why would you buy a product you think will fail? Why throw away $800?
            You know what… I just realized you wrote why VR “can” be a failure, not “will” be a failure. Big difference. I think I overreacted.
            I apologize.

          • Armand LePrince

            I bought because each time I believe in the product !
            I regret that greediness of some (just look at so many poor 3D conversion or abuse of “3D” label on a movie that cleary didn’t need it), or immaturity of others (most of VR games/programs are only demos or on “early access” stage and unfortunately would remain “early access” for the lack of interest or finance) would lead those product to a failure.
            On this last point oculus has far better programs than the vive. Fortunately the Revive stuff exist …

  • Greg Decker

    I think the exclusives are hurting vr for gaming most of all. Such as re7 and its year of vr for psn. And oculus home vs rift… i know its about the store fronts but VR needs to have its feet planted deeper before companies divide the vr communities. I almost bought oculus then i learned about not compatable with some rift games and vise versa with out 3rd party addons and whatnot. Now i do not know what to buy and i never ended up with either yet. Still wanting but i feel i should wait now.

    • J.C.

      Yeah, the Oculus Store is a huge issue, but it’ll sort itself out in the end. When the cheaper headsets come out and Steam will undoubtedly support them, and Rift still only supports ONE…guess where users will go? Having exclusives is fine and dandy, but who would buy the Oculus version of a game if it can’t play versus the Steam one? Battlezone is a very recent example of that. Cloudlands Minigolf, which is so much better than it has any reason to be, loses its best feature (user created levels) on Oculus Store.

      Oculus will need to open up to all headsets, or it will die. It’s trying to pull an Apple Store maneuver, but they don’t have the cult following. Plus they canned their one person who MIGHT have inspired the brand loyalty they’re chasing.

      • daveinpublic

        Steam isn’t an open platform. It’s basically like an Apple App Store. The reason Facebook has exclusives is because the VR industry isn’t profitable, yet. Facebook is preparing to move our technology into the future by like 10 years by funding the solution to this chicken and egg problem single handedly. Why would they try to bring other companies along with them just so those companies can turn around do battle. They’ll actually have an advantage at that point, having spent zero dollars to fund development and after FB dropped hundreds of millions of dollars.

        • J.C.

          You…don’t see the advantage to Oculus if they allowed all headset owners to purchase games from them?

          You know, since right now they only have a bit under half of the PCVR headset audience, and they could have 100%. The hardware isn’t where the money is.

        • Nicholas

          It’s open to PC users. And the VR component is open to PC users with different VR headsets and controllers. This means if I buy a VR game on Steam today, it’ll work on tomorrow’s HMDs (including whatever Facebook bring out in the future…if they bring out anything in the future). If you buy the same game on Oculus Store and a better non-FB headset comes out…well, you’re s..t out of luck.

          Currently most games are now arriving on both Steam and Oculus Home. You’d be a fool to buy it from the Oculus store, especially if it’s a multiplayer game.

  • Coen Sanderink

    Interesting to see most discussion is about VR and Gaming. Although it is for sure that Gaming will be a big market for VR. Healthcare and Engineering are predicted as second and third (see the research below). A lot of that are non-gamers will know VR and AR by applications within those sectors. I am curious what you guys think those sectors can learn from the gaming sector. Any thoughts?

  • Santiago Rivera

    What people are not understanding is that perhaps the VR has more projection in the business world. I have invested about € 10,000 in only hardware not expecting to see the return of investment quickly. Not rush. What I show my clients in VR is surprising them without first understanding the use they can give them, although when they see examples of their sector their eyes are illuminated and they already see the enormous amount of possibilities. I see VR more successful in business than in video games. It’s the same for BIM or 3DPrinting. But when they have seen my BIM to VR pipeline… wowing!! Can we do this?… ha, ha.

    • Coen Sanderink

      In reports from Goldman and PiperJaffray the gaming market is the biggest market for VR in 2025 followed by the Healthcare and Industry. In the long run VR might be bigger. AR will be much bigger in business than in gaming. We already see the rise of AR within our research now. Also in construction (where BIM is often used) AR will eventually be bigger.

      • chris miller

        This makes sense as more companies more for a Digital (P2P) economy (something I’m working on leading a transformative change with my large company for now) AR is going to be way bigger than VR for regular business. Retail business and customers will start using it for product info, without needing to Google andcompanies and clothing stores are starting to use it in sales as well. VR will fair much better in the educational/gaming industries.