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AR to Thrive in 2021, Says ABI, but VR Stunted by Lack of Content, Users

It could be a breakout year for augmented reality hardware, said an ABI Research 2021 trends report, as Nreal and Mad Gaze expand their AR efforts, and Facebook is expected to debut its AR smart glasses from the Reality Labs initiative. Google could take another stab at smart glasses after buying North and facing pressure from Facebook and others, said analyst Eric Abbruzzese. Apple, a “wild card,” is expected to have a dedicated AR product launch in 2022.

Overall, the AR market, including content and usage on mobile devices, will be “strong,” said Abbruzzese, with media driving adoption rates in home-based entertainment. Innovations in online shopping will propel the market, too, as retailers compete with their AR innovations in product previews and visualizations. Apparel makers will increasingly use virtual try-on apps to spiff up online shopping experiences and buoy interest in clothes shopping during the COVID-19 pandemic, said the analyst.

Increased time spent on social media and the democratization of AR content creation tools, including Spark AR Snap’s Lens Studio, will unlock opportunities for new AR content and boost spending on AR-branded content and advertising, said Abbruzzese. Social distancing rules could drive more AR-based remote assistance for customer service departments.

AR’s advances are largely seen happening indoors near term due to the pandemic, said Abbruzzese. Promising AR applications based on 5G -- outdoor navigation and location-based content experiences -- will have slow progress despite strong potential, he said.

In virtual reality, though growth will be strong this year, the user base will fall short of levels once envisioned, said analyst Eleftheria Kouri. The technology competes for eyeballs with TVs, smartphones and traditional displays, said Kouri, noting price and availability are key barriers. The Oculus Quest 2, “the best positioned VR device” to hit the market, doesn’t require a tether to a smartphone or PC, she noted. Its $300 starting price is likely to be a “sweet spot” for stand-alone VR headsets, she said, but it can "still be seen as expensive for a limited use item that will be outdated by next year.”

The VR headset category would benefit from smartphone-like upgrade cycles, which would spur overall growth, said Kouri, but VR is held in check by its positioning as a nonessential device. Gaming dominates use cases for VR headsets, though there have been few “must-have” games to date, “with few AAA game developers and publishers getting involved,” said the analyst. Early efforts in video content, especially for sports, have shown promise, “but never to the point of disruption,” she said.

Apple’s NextVR acquisition isn’t expected to bear fruit in the VR market for another one or two years, when a library of content has been built, potential users are shown the value of VR content and users have “bought in” to the technology, Kouri said. Social and environmental dynamics of VR content consumption are also a challenge: A lot of users don’t have space at home to fully experience the six degrees of freedom required for a satisfying VR game, and in-person content sharing is limited because of headsets’ form factors, Kouri said.

Though the consumer segment has the largest potential for VR, content creators are waiting for a “more approachable” user base, while the user base waits for content, which isn't expected to happen this year, said Kouri. That leaves the enterprise sector as the fastest VR growth opportunity now for training and simulation. During the pandemic -- and after -- remote training and worker enablement through VR will “allow workers to re­main engaged with limited workflow disruption for most,” she said.