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Chinese will use 86 million virtual reality headsets within five years

VR content revenue forecast to be worth US$3.6 billion in China by 2021, says PwC.

PUBLISHED : Thursday, 08 June, 2017, 8:00pm
UPDATED : Thursday, 08 June, 2017, 10:54pm

Over 85 million virtual reality (VR) headsets will be in use in China by 2021, as digital entertainment continues to surge, spurring strong growth in industries such as internet video, cinema and video games, a new report from PwC claims.

Its Global Entertainment and Media Outlook 2017-2021 found that China’s demand for virtual reality VR headsets will reach 85.9 million within five years, overtaking the US’s projected 68 million.

“The entire VR market is new, with increasing VR device penetration and continual investment in the industry, its potential is very promising, even if profitability is an issue at present,” said Jane Kong, PwC China entertainment and media partner.

VR content revenue is forecast to hit US$3.6 billion in China by 2021 with over half coming from video, and 46 per cent from gaming.

“No one will get rich from hardware alone. The end game for these firms will be attempting to become the standard platform for VR and start to charge royalties or commission from content sales,” Kong said.

A main driver of China’s entertainment and media industry is also internet video, which reached US$1.8 billion in revenue last year.

Although regulations against so-called over-the-top (OTT) services – audio, video, and other media transmitted via the internet as a stand-alone product – were introduced towards the end of 2015, PwC believes OTT still has “room for growth”, with consumers expected to spend almost US$4.5 billion in 2021 on the internet video industry.

“Over the next five years, China will witness a significant shift of viewing video content from free-to-air to paid video-on-demand services. Offering premium foreign and domestic content is key for OTT providers,” said Cecilia Yau, PwC Hong Kong Entertainment and Media Leader.

Box office revenues have also shown that Chinese consumers still have strong demand for cinema. Last year, China’s box office was worth US$6.2 billion, and this is expected to soar to US$10.7 billion by 2021 as the country continues to build more cinemas.

The total number of cinema screens exceeded the US in 2016, with 41,056 screens compared with 40,928 in the US. By 2021, China will also lead with 575 IMAX 3D screens, more than any other country in the world.

According to PwC, China’s video gaming industry continues to thrive, with the market expected to be worth US$26.2 billion by 2021, making China the second-largest after the US.

Social gaming revenue overtook traditional games in China in 2015, and video games made in China have also found a foothold in markets such as US, Japan and Korea, spurring overseas market growth to increase by close to 150 per cent.

In Hong Kong, social gaming revenue increased by almost 26 per cent to rake in US$373 million, surpassing traditional gaming revenues of US$360 million for the first time in 2016, the report found.

Hong Kong’s total video games revenue for 2016 was US$742 million, which reflects the increasing importance of this segment in the entertainment and media sector, PwC said.

The popularity of gaming as well as the city’s infrastructure, such as high internet speeds, means Hong Kong is well positioned to become an “Asia-Pacific or global hub for e-sports”, said Wilson Chow, PwC China and Hong Kong TMT Leader.

“The Hong Kong government and business tycoons are supportive, and investment has been made in this field,” Chow said.

“We find that in China, Korea and Japan, people are very receptive to e-sports, and these countries have been reporting quite a significant growth [in this area].”