Aggressive promotional activity from smartphone vendors and the launch of premium smartphone VR solutions, including Google’s Daydream View, will help drive the installed base of VR headsets from 4 million in 2015 to 81 million in 2020, according to IHS Market (www.ihs.com). That same year, consumer spending on VR headsets will reach $7.9 billion and spending on VR entertainment will hit $3.3 billion, adds the research group.

“While the VR headset installed base will escalate significantly to 81 million by 2020, we predict that expensive, higher-end headsets will dominate content monetisation,” said Piers Harding-Rolls, director of games analysis at IHS Technology. “There will be a polarization of the VR market between lower volume premium VR headsets, which will have strong paid content conversion rates, and higher-volume cheaper smartphone VR headsets, which will monetise content at a lower rate.”

Smartphone VR headsets will represent the largest addressable market for VR content because of cheaper pricing. The smartphone VR base will be a major opportunity for VR content experimentation, said Ian Fogg, senior director at IHS Technology. Smartphone VR headsets’ share of the VR installed base are predicted to be 87%t at the end of 2016.

Consumer spending on VR headsets will be $1.6 billion in 2016, bolstered heavily by the launch of high-end headsets from Oculus, HTC and Sony. This will drive average sales price of all headsets to close to $85 from $26 in 2015. The average selling price is expected to climb sharply once again in 2017 to $191 as high-end headsets sell more, the IHS Technology report said.

Meanwhile, consumer spending on VR entertainment is forecast to hit $310 million in 2016, growing to $3.3 billion in 2020, as the high-end headsets gain more traction.

“A $3.3 billion VR entertainment market by 2020 will represent less than 1 percent of overall entertainment spending worldwide,” Harding-Rolls said. “There is certainly more to be done in terms of premium content for VR platforms and it will take time to deliver on the potential of the technology.”