Virtual Reality is used to describe a multi-sensory computer-generated experience that allows users to explore and interact with a virtual world. It’s a digital immersive user experience gaining immense popularity worldwide. In recent years, Virtual Reality Gaming Market has seen massive growth.

Currently, American and European countries have the largest market share in the virtual reality industry and are constantly adapting to consumer preferences and releasing new technologies. 

Here is our in-depth report on the VR industry.

  1. VR Gaming Market in the US and Europe
  2. Market Trends
  3. Top Companies
  4. Venture Capital & Private Equity Investments
  5. Current Industry Challenges
  6. The Effect of COVID-19 on the VR Industry
  7. Growth Prospects Beyond 2020
  8. Conclusion

Virtual Reality Gaming Market in the US and Europe

The virtual reality gaming market is one of the fastest-growing markets and has gained widespread recognition and adoption over the past few years. In 2019, the VR gaming market had a $7.7 billion valuation. According to Globalnewswire, the industry will reach a $42.5 valuation by 2025 and accumulate a  world user base of 216 million users. 

VR Gaming Demand and Target Addressable Market Trends

A regional analysis of the gaming market can highlight the gaming demand and market trends. It primarily operates in 5 regions: North America, Asia Pacific, Europe, Middle East & Africa, and Latin America. Among all regions, North America had the largest market share in 2019, with a revenue of $2.28 billion, followed by Europe, with a revenue of 25.5 billion Euros

Leading companies such as Google, Microsoft, Oculus, etc. drive market growth in the West. In America, the increased use and adoption of VR technology by the media industry has especially boosted demand. For example, in 2018, Oculus VR launched Oculus Quest, an all-in-one gaming device.  Whereas, in Europe, the early adoption of technology and a shift from VR to AR has boosted the demand for both services. Germany, Italy, and Spain have hosted multiple VR gaming tournaments, some of the famous ones are E3 2019, GDC 2019, GamesCom 2019, and London Games. In Europe, Germany is a popular gaming hub. 

We can attribute the rise of VR gaming to the following factors: 

  1. Internet penetration rate

We can attribute the growth in VR to increasing internet penetration rates. Currently, the overall penetration and adoption of VR is 16% in the US. A study conducted by AR Insider shows that 71 million people will be using VR technology by 2022 i.e. 24% of the internet users. 

  1. VR hardware and accessories 

VR accessories used for gaming include devices equipped with artificial intelligence that helps users see, move, and interact with their virtual surroundings. For example, motion sensing devices, wireless gloves, bodysuits with motion sensors. According to Globalnewswire, the VR headset market will rise in revenue to$19.8 billion in 2026 from $6.8 billion in 2020. North America and Europe have shown the highest level of adoption of VR devices in the retail and manufacturing sectors. 

Many companies have also invested in expanding their hardware and accessories base. For example, Oculus VR launched Oculus Rift S-a VR head-mounted display device, on which all virtual reality games work. 

  1. Start-ups 

More start-ups are now offering VR gaming software compatible with other devices, such as TVs, projectors, remotes, and smartphones.  

North America is home to Apple and Google and is serving as a platform to help startups grow. In 2018 alone, North America had a market size of $3 billion and will continue to dominate the market in the upcoming years. 

  1. Cloud Gaming 

Cloud gaming will enable users to have a personalized virtual experience, as it will allow them to customize their library and store games for instant access. It will enable unlimited storage and live streaming. Consequently, cloud gaming partnerships between companies will further boost the market size. For example, Microsoft partnered with Sony in 2019 to develop an advanced cloud gaming platform. 

  1. Gaming Consoles 

The increase in demand for gaming consoles will act as a catalyst for the adoption of VR in gaming. There is a huge market demand for gaming consoles compatible with AR/VR, cloud streaming, Bluetooth, and WI-FI. To cater to this demand, Sony has announced the launch of PlayStation 5.

Top overall game developers and their shift to Virtual Reality games

Top VR Game Developers and Associated Revenues

At the start of 2020, more than 100 VR games have exceeded $1 million in revenue. The overall revenue for 2020 so far has been $4.45 billion for the USA. By the end of 2017, 40 titles exceeded the $1 million revenue mark, with the highest revenue collected being $10 million. In 2018, 60 titles contributed to the one million milestone and the highest revenue collected was $20 million. In 2019, over 100 titles exceeded the $1 million mark and at least one top title grossing over $40 million in annual revenue.

Some of the companies with the highest revenues are:

Owlchemy Labs$4.8 million in revenue $5 million in funding 
PlayStation VR, Sony $110 million 
Beat Games $20 million 
Companies with the highest revenues

Venture Capital/Private Equity Investments in Virtual reality

With the increasing popularity of VR technology, the total investment in VR companies has increased from $89 million in 2012 to $2.4 billion in 2019. According to Pitchbook, over the last 6 years, 645 VC investors have invested in the 453 VR deals. The topmost active VCs in the industry are: 

Company Investments 
Presence Capital19 investments 
Rothenberg Ventures24 investments 
The Venture Reality Fund16 investments
Qualcomm Ventures- 12 investments
Intel Capital18 investments 
Colopl11 investments 
Lux Capital13 investments 
Andreessen Horowitz 9 investments 
500 startups9 investments
Comsat ventures11 investments  
Samsung9 investments 
Topmost active VCs in the industry

VC backed VR Companies

  1. Next VR: 

Next VR has partnered with NBA, FOX Sports, and Live Nation to develop a VR platform for delivering and enhancing live sports and entertainment. Through funding, the company raised $116 million.

  1. Leap Motion 

Leap Motion specializes in VR technology that tracks the movements of hand gestures to interact with computers. It also offers hardware and software compatible with the untethered headsets. Through funding, Leap motion has managed to raise $30 million. 

Virtual Reality Venture Capital Alliance (VRVCA) 

Founded in 2016, the VRVCA is an alliance between the top 36 VR investors worldwide. They aim to ensure that VR start-ups are provided with the technology and resources to grow. Some of the companies include Bluerun Ventures, Cathay Innovation, COLOPL, CRCM Venture Capital, and 500 start-ups. 

Challenges faced by the VR Industry 

The virtual reality industry has faced the following challenges: 

The Effect of COVID-19 on the VR Industry

The Covid-19 pandemic has re-written the script for immersive technologies. Users have become more reliant on VR devices to work and shop. Due to the work from home system, companies have started using virtual spaces, such as Zoom and the Virtual Worlds Forum for online face-to-face collaboration. Even after the lockdown, most companies have adopted the use of online platforms to engage on. This helps in drawing attention to the fact that there needs to be more investment in VR technologies so that the barrier of entry is increased, reducing market prices and hence making VR devices available to the general public at affordable prices.

The use of VR in corporations such as Microsoft has also reduced the division of labor- now employees can provide each other with tech support from different locations. According to Booz Allen’s Senior Vice President, Manjeet Singh, the demand for Digital Twins has increased, as it allows organisations to visualize and map out physical movements and changes before finalising them. This is very useful for helping hospitals measure the number of people they can hold. 

The frequency of virtual events and conferences has also increased since the start of the pandemic.  For example, Microsoft’s Build developer conference was held virtually.  This rise in virtual events is due to the behavioral change brought about due to the pandemic- it has allowed companies to explore virtual spaces further and research on consumer preferences. 

VR technology has also given online shopping a new shape. With VR technology, users can now shop for products and see how they will look in their homes, without actually leaving them. Some retailers, such as Storefront and Obsess also offer a 360-degree store experience, that is viewable on your phone/ tablet. 

Outlook on growth

Statistics from 2019 show that 42.9 million people in the USA were using VR technology and 68.7 million people were using AR technology. Different market studies also predict that VR will grow exponentially in the next 5 years- according to IDC, the VR and AR market will reach 15.5 billion euros by 2022. This is mainly because AR and VR have been the center of digital transformation and companies have increased their spending on this technology by 80% due to the increased demand. 

The use of smartphones and mobile gaming by users has boosted the VR industry. Valuates predicts that the VR and AR market will grow at a CAGR of 63.3% between 2018 and 2025, reaching $571 billion CAGR by 2025. Since VR and AR are now available on almost all smartphones and tablets, users are highly responsive towards VR/AR apps, especially AR-based simulation games, and consequently, the market will see a 48.8% CAGR growth, reaching 161.1 billion in terms of revenue by 2025. Some of the main beneficiaries are Alphabet Inc., Oculus VR, LLC, Microsoft Corporation, Qualcomm Technologies Inc., Intel Corporation, Samsung, and Sony. 

Adoption of VR/AR technology

More and more users are opting for VR headsets produced by Google, HTC, and Oculus, leading to an increased demand for 360-degree content and hence an increased demand for content creators in the market.  This will lead to VR seeping into other market sectors, including the training sector. For example, Walmart has started using VR technology to train their staff. 

With the adoption of VR technology in one’s day to day life, the demand for VR chips is also bound to increase. Alliedmarketresearch predicts that the demand for VR chips will increase by 23% between 2019 and 2026. This is mainly due to the increased usage of smartphones, laptops, and digital recorders. 

VR and AR technology has also made it possible to host live virtual events, video entertainment, and video games. In the next 9 years, the video game sector will reach $11.6 billion in revenue, as stated by Goldman Sachs Global Investment Research. 

Very soon, 5G internet services will enable users to experience AR/VR without downloading apps and on the internet as well. 5G will enable the rapid transmission of data for virtual image formation, allowing users to enjoy better-augmented experiences on cheaper headsets and devices. Currently, WebVR is substituting 5G, as it allows users to watch VR/AR content without having to download the app- it uses Google Chrome, Mozilla Firefox, e.t.c instead. 


Virtual Reality is seen as the future for the tech industry and is expected to grow rapidly in the next 10 to 15 years. The advancements in the VR industry will be influenced by the overall changes in technology, especially by phones and the internet. The benefits of VR have proved its potential in the future, given that the developers overcome the challenges put forth by the products.