DFC Intelligence predicts 2016 game software sales to reach $79 billion. This is 8% higher than 2015.

  • Video Game Software Sales will be $98 billion in 2020
  • The market is seeing a CAGR of more than 5 percent
  • The PC Game Market in Asia, North America and Europe will grow to $40 billion by 2020
  • The PC Game Market in Asia, North America and Europe was $30 billion in 2015
  • TrendForce predicts that Virtual Reality (VR) hardware and software will be a $70 billion market in 2020
  • VR hardware will account for $20 billion in 2020
  • VR software will account for $50 billion in 2020
  • TrendForce predicts the VR market in 2016 will be $6.7 billion

IEShepra Opinion: With the recent announcement of the Oculus Rift at $599, it seems like Facebook may be giving Sony an unintended lead in VR (See Microsoft giving the lead to PS4 because of their always-on technology) by not realizing this type of hardware would greatly benefit from a razor blade model. The software is where the real money is and the distribution platform for that software could results in Billions of dollars of annual revenue.

Look at Steam and their $3.5 Billion in retail sales for 2015 and remember their 30% revenue share – that’s $1.05 Billion to Steam for having 15% of the PC game distribution market.

My own assumptions are that at $299, Oculus would dominate the market and increase the adoption speed by an order of magnitude. The revenue potential is in the Billions if they have aspirations of becoming the Steam of VR.

Now, considering that 15% (equivalent to Steam’s percentage of the PC game market) is a reasonable target for Oculus within 5 years, Facebook has a potential distribution platform worth $7.5 Billion in revenue in 2020..

My assessment is that Facebook has bought into something pretty huge. Disclaimer: I do not own FB stock.

A lower price point accelerates the model, but FB should be fine either way, as long as they own the distribution channel.