It has already been discussed how VR can be used, but how can it be a source of income? Digi-Capital suggested a business model for AR/VR by 2020 that can be seen in the figure below. Not so surprising, hardware is the biggest source of income when it comes to VR, and what is also what we have been focusing on so far. Hardware is essential, and it is not an option to ignore hardware when discussing the business model. Hardware could stand for more than 40% of the incomes by 2020 - this includes the headsets, but also the additional equipment that follows, like controllers and sensors.
Business Model
Another big market is eCommerce sales. This includes goods and services, but not applications, and could stand for up to 20% of the income by 2020. eCommerce businesses like Alibaba, eBay and Amazon could be able to sell products to people in completely new ways in the future. People could be able to view products in a suitable environment - if you want to buy a tent, you could be able to see and experience it in the mountains through VR before you buy it. VR could grow eCommerce’s share of all sales.
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Furthermore, advertising sales could stand for about 10% of the income. VR advertising has the potential to be more immersive than any rich media. It is highly possible that VR advertising will follow the successful path of web and mobile advertisement. VR can also be a huge opportunity for telecommunication operators. Telecom operators and can possibly take around $0.5 of every $10 spent on VR. VR can be a reason for mobile networks to increase their annual revenue growth significantly. Tim Merel, founder and CEO of Eyetouch Reality and Digi-Capital, explains it as this:
”YouTube estimates that each frame of 360 video re- quires 4-5 times the bandwidth of traditional video. High-resolution, high-frame rate, stereo images and data could drive some applications even higher in terms of bandwidth requirements; someone has to pay for all that data” [17]
The last ∼25% of the revenue is likely to come from in-app purchases, subscriptions and other. In-app sales is based on the concept where you get an application for free, but you need to pay to get extra features or upgrades within the application - This can be a great potential for VR. Subscriptions are based on paying for a commercial-free product in the same way as with Netflix or Spotify work. [16]
Business model for AR/VR by 2002 [16]
[16] goo.gl/GFL5eD, accessed 27.11.2016