The Australian VR (Virtual Reality) headset market grew 40 per cent in 2017 to reach 302,000 devices sold, according to new research from emerging technology analyst firm Telsyte.

The Telsyte Australian VR & AR Market Study 2018 found that despite the growth in sales, adoption remains constrained by high device costs, the rapid pace of innovation and lack of clear market winners.

“Australian consumers and developers are taking a wait and see approach to virtual reality,” Telsyte Managing Director, Foad Fadaghi said.

Telsyte forecasts that 2.2 million households will have a VR headset in use by 2021, with the main applications being in entertainment. VR headset annual revenue is expected to grow to more than $200 million by 2020, up from $79 million in 2017.

The market leader in VR headsets was Sony PlayStation, which benefited from selling VR as an accessory for the PlayStation 4, and its ability to attract leading games publishers. Sony PlayStation has announced over 50 new VR games titles for 2018.

As awareness has advanced, health concerns surrounding VR has plummeted, with only 5 per cent of survey respondents concerned about negative health implications of VR, down from 36 per cent in 2016.

Telsyte believes with more use cases and higher levels of accessibility, augmented realty (AR) – or the overlaying of computer-generated digital images over a camera feed of the real world on devices such as smartphones, tablets, and headsets – is expected to gain broader adoption than VR.

The popular AR apps such as Pokémon GO and Snapchat photo filers have helped rocket AR into the mainstream, with 1 in 3 of Australians saying they have tried AR applications.

Telsyte research shows that 67 per cent of iPhones used in Australia are ARKit compatible (Apple’s AR development platform), and 23 per cent of Android phones are AR core compatible (Google’s AR development platform).

While most AR applications are currently being developed for smartphones and tablets, Telsyte forecasts that consumer AR headsets and smart glasses will be commercially available towards the end of 2020, some combining AR and VR functionality.

Around one third of organisations interviewed by Telsyte indicated they are either investigating or implementing VR applications. Driving this intention was applications in education & training (40 per cent) and product design & engineering (38 per cent).

Interest in VR applications for education and training is most prevalent in the professional, scientific and technical services organisations.

Lack of knowledge in VR and lack of skills in app development are key barriers to enterprise adoption, which is further complicated by the numerous VR platforms currently battling for dominance.

Enterprise interest in AR is higher than VR with 46 percent of organisations currently investigating or implementing AR applications. Customer facing applications (40 per cent), location-based services (38 per cent) and project management (37 per cent) are the main applications being developed.

Most organisations building AR apps are developing for the iPhone (74 per cent), followed by iPad (64 per cent) and Android smartphones (64 per cent).

Like VR, lack of skills and technology maturity are the key barriers for AR with almost 1 in 3 organisations identifying both as barriers.

“With a large established installed base of augmented reality capable smartphones and tablets, AR is becoming the go to option for businesses that are experimenting with immersive technologies” Fadaghi said.

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