VR revenue from software and services will increase by almost $1B this year.

After a mixed year for VR hardware sales in 2016, two new separate reports are painting a more optimistic outlook for the VR market going forward.

In a new consumer VR report just released by SuperData Research, the findings show that global VR hardware revenue is expected to hit $3.6 billion in 2017, up 142% year-over-year. The report examines the market size and revenue of consumer VR hardware and software from 2016 and forecasts growth through to 2020.

The report suggests that premium headset shipments like Google Daydream will see more growth over light mobile headsets. It is expected that 21 million premium headsets will ship this year, more than tripling since 2016, while 59 million light mobile headsets (Google Cardboard) will ship this year, down from 2016 that saw 84 million headsets ship. Google Daydream will sell the most premium headsets in 2017, getting 6.8M devices into the hands of users. And as China’s growing production of affordable premium mobile headsets picks up steam, standalone devices and VR-compatible phones will continue to increase accessibility of higher-end tech.

As headset manufacturers face fewer supply constraints than last year, hardware sales will continue to earn more than VR software, at least until 2020. When it comes to sales from software and services, revenue is expected to increase by almost $1B this year, with high-quality entertainment content fueling much of the growth. North America will be the fastest growing market as it reach $403M this year.

The report also states that location-based VR is an area ripe for improvement. Although retail demos were the most popular way American consumers became interested in VR before buying, poorly managed demos and associates with little knowledge of how the technology works created friction for consumers, decreasing adoption and interest. But with the latest opening of the IMAX VR Center in Los Angeles, premium VR destinations like this may just be what the industry needs.

Also touched on was the outlook of augmented and mixed reality, stating combined earnings of $30.4B in 2020. However, the report did lump together Pokémon GO, which earned 96% of all AR software revenue in 2016, and MR devices like the Microsoft HoloLens proving not yet ready for consumers.

CCS Insight expects global sales of smartphone VR headsets to grow fivefold from 2017 to 70 million by 2021

In a separate report released by CCS Insight, the VR market is estimated to be worth over $9 billion by the year 2021. The Global Forecast for VR and AR Devices report states that the VR market will continue to grow exponentially with both dedicated VR platforms and smartphone VR platforms taking the lead.

The report predicts that around 14 million smartphone VR headsets will sell in 2017, rising to 25 million in 2018 and reaching 70 million by 2021.

Dedicated VR headsets such as the HTC Vive, Oculus Rift and Sony’s PlayStation VR deliver significantly more premium experiences compared with their mobile VR device counterparts, but sales have been shy of expectations according CCS Insight. The company adjusted its forecast to reflect the slower start. Previously it expected 2 million units to be sold in 2016 — it now estimates 1.2 million were sold. By 2021 expected sales of dedicated VR headsets will grow to 22 million units — an 800 percent increase over 2017. Estimates reported show that the total VR device market (smartphone VR and dedicated VR) will be worth $1.5 billion in 2017, rising to $9.1 billion by 2021.

The report also paints a conservative picture on augmented reality devices, where the market is off to a relatively slow start. CCS Insight’s latest forecast indicates the first significant unit sales won’t occur until 2019, when it expects 1.5 million units to be sold. It predicts this to rise to 5 million units in 2021, with a total market value of $2.5 billion.