Virtual reality headsets are set to take off. Here's how the market will grow.

There has been a lot of buzz recently around virtual reality (VR) and its potential as a new hardware device and software platform. The technology, which immerses the user in a computer-generated simulation of an environment, projects highly visual imagery in full 3D.

While the technology has been associated mostly with gaming, the platform offers new opportunities for video, e-commerce, and more.

In a new report from BI Intelligence, we provide proprietary forecasts for VR headset shipments and revenue and estimate average selling price over the next five years. We also take a look at the different types of VR headset technology now on the market, discuss which categories will win out, and look at several use cases for VR headsets, including gaming and other.

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Here are some key points from the report:

• Virtual Reality (VR) headsets are debuting on the consumer market and set to launch an advanced and immersive content platform. We estimate shipments of VR headsets will grow at a swift 99% compound annual growth rate between 2015 and 2020.
• VR shipments will create a $2.8 billion hardware market by 2020, up from an estimated $37 million market this year.
• VR headsets are a fairly low-cost consumer electronics category, and this will help drive adoption. The devices will be priced similarly to smartwatches and also need to pair with another standalone computing device.
• Demand for VR headsets will be fueled by gaming on both mobile and console devices. There are 1.2 billion gamers worldwide, including nearly 1 billion mobile gamers alone. This creates a direct, addressable market for VR headsets.
• Beyond gaming, VR will be an important platform for streaming content and even shopping. Oculus has already experimented with Story Studio, a platform for VR movie creation. In addition, many consumers claim the VR experience will drive them to shop more online rather than in stores.

In full, the report:

• Forecasts annual shipments of VR headsets between 2015 and 2020.
• Sizes the market for VR headset shipments by revenue and anticipates how the VR headset average selling price will trend.
• Breaks down VR headset shipments by category, including traditional VR headsets, smartphone-mounted VR headsets, and gaming-console headsets.
• Pinpoints the gaming console market as a key driver of demand for VR headsets.
• Discusses the opportunity for VR content creation in gaming, streaming video, and shopping.

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