It’s with special thanks to Dr. Jon Peddie and Jon Peddie Research that they gave us the fundamental sales data needed to make this analysis possible. More than this, even though this article was originally only intended to be published in JPR’s Tech Watch publication, they agreed to allow this article to be public as everyone could discuss, learn, and hopefully benefit from it. We’ve also made the article available in Immersed Access so industry professionals can openly (though privately) discuss it and its ramifications if any to build for the future.

A big stink is being made about HTC delaying the commercial release of their HTC Vive until April next year, and others are worried that Oculus has already missed the mark by delaying until 2016 altogether. It’s unbelievable how so few understand the VR market and the core metrics that make it tick. Oculus and HTC could effectively wait a whole year, and it wouldn’t harm their bottom line or lay a dent in any content or business relationship they are working to build.

How could this be, you ask? What bit of data makes it possible for all the VR HMD makers to sit back and relax and get things right? You’ll see.

When the Oculus Rift first made the scene, they overcame a major hurdle by using dirt cheap smartphone panels as the core of high field of view high resolution VR displays. The technique effectively revalued VR devices that were formerly tens of thousands of dollars to just hundreds of dollars per unit in retail value. As major as this was, it’s a smaller piece of a much bigger challenge that is going to take years to overcome.

Oculus has been shying away from public sales commitments, though I think they are expecting big numbers given the hoopla they’ve received. HTC has been bolder in that they went on record that they expect non-smartphone revenue to account for 10% of their business next year (http://www.taipeitimes.com/News/biz/archives/2015/12/12/2003634579).

I’ve seen all kinds of media study blurbs and claims about VR. Everything from millions to tens of millions of units sold within the first year; most recently a study promoting the industry valued at $70 billion by 2020. With numbers like these, no wonder people think that VR’s future is going to be determined within the next six months.

The good news is everyone can take their time and do things right.

First, we have to rule out the sales figures for SDKs and developer kits; those Ocul-i and Valve-i mind-tricks won’t work here. Unless otherwise stipulated, figure that the first 200,000 in declared sales for all platforms are in fact SDKs sold or sent to hopeful content makers and press. In many cases, they could be purchased in multiples per location so developers have it in their hands. Whether they buy it or not, it’s a valueless part of the equation. We are only interested in actual customers that just want to enjoy VR and immersive tech and are not bound to the technology in any other way. The following numbers are based on this mindset.

To achieve what they consider the best VR experience on their HMDs, Oculus and HTC are each recommending an AMD 290 series or Nvidia GTX970 series graphics card or better. In fact, there are already signs that the Oculus SDK will detect if your graphics card isn’t up to spec and their software won’t work for you. So everything that performs less than these GPUs is out of the VR universe – settled.

According to Jon Peddie Research, 33 to 34 million add-in boards (AIB / GPU cards) will be sold in 2015. Three to five million of these are high-end / enthusiast graphics cards. The Nvidia GTX 970 / 980 was only announced September, 2014 and AMD’s R9 290 series was announced a year earlier, though AMD’s card wasn’t framed as a required-for-VR card until 2015. For arguments sake, let’s aggressively predict that by the end of 2016, 7 million high-end GPUs are sold, and this includes the qualified GPUs sold in 2013 and 2014. Factoring in that many gamer PCs use SLI or Crossfire, I estimate there will be three million gaming PCs powerful enough to play in VR. Whether it’s SLI / Crossfire or single GPU doesn’t matter; three million PCs is the potential universe for modern VR. If an optimistic 10% of these PCs own a dedicated VR device, the industry is looking at 300,000 HMD units sold within 12 months from launch. Not 300K for Oculus and 300K for HTC and 300K for other players coming to market…300K for everyone.

It takes anywhere from three to five years for today’s top grade graphics chips to be affordably mass marketable, and ten years for them to be inexpensive enough to work in a smartphone. This means that year over year, the VR market potential will have sequential growth, but it’s going to take time. I’d estimate that a potential market size would be about 20 million gaming PCs give or take within the next five years or so if the GPU flexibility is there.

The industry will likely have to come up with a recommended resolution limit on VR display hardware. Unless this happens, the GPU and display markets will never meet up at a mass market scale. The only way around this is if the GPU makers can arbitrarily surpass Moore’s Law (that circuitry doubles on a processor every two years), and that’s unlikely because Moore’s Law is struggling to keep pace as it is. This means that there is little to no room for major bumps in resolution from the HMD makers; too many pixels, and they are trapped in that 300K universe all over again.

There are cheats that can help. Combined with eye tracking, foveated rendering makes it possible for the GPU to only render the pixels you physically see, but this won’t be enough to turn the tide. It will also be tempting for content makers to use horrible 2D+Depth techniques instead of true stereoscopic 3D rendering to compensate for missing horsepower. 2D+Depth killed stereoscopic 3D gaming in the past, so the market should run for the hills if this makes an appearance.