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Article08 Nov 2022

Unreal: How Virtual Reality is Transforming Sport

A new report by Citi’s Anuj Gangahar looks at how virtual reality is transforming sport – from watching, to playing, coaching and beyond.

Virtual reality versus the real-life buzz of high-level sport. You might think it’s a no-contest.

Can virtual reality – life through a lens – ever compete with those breath-taking moments of live sports that move and inspire us?  

On an emotional level, the answer is probably not. But importantly, another part of the answer is – that’s not the point.

Because in sport, virtual reality doesn’t need to be about replacing the thrill of being there. Rather, it’s about enhancing the experience for certain fans and for deepening fan engagement and loyalty. It’s about expanding the audience for games and events. It gives those who can’t travel – or afford to travel – to the stadium (virtually) the best seat in the house.

Additionally, VR is about making the athletes or competitors themselves better, through its use in coaching at an elite level.

According to a global report, published by Sheer Analytics and Insights, the total market for VR in sports and entertainment was valued at $2.3bn in 2020 and is expected to reach $56.7bn by 2031 at a CAGR of 32.5% through the forecast period.

Some sports like ice hockey and basketball are particularly well suited to virtual reality enhancements of the fan experience, and incremental revenue generation as a result of VR may be possible. For a full explanation of our thinking on this, see the full report.

VR headset weight is gradually decreasing (bubble size: price)

Source: Citi Global Insights 

 

But, in short, we attempt to aid thinking in this area by exploring possible scenarios for different sports based on a somewhat subjective, but we think methodical, look at their suitability for VR.

The existing TV audience could be used as a base to estimate the potential VR audience, assuming this is the very group of people to whom VR viewing will most appeal. That’s based on VR viewing as an experiential enhancement to TV viewing given it affords multiple perspectives and more interaction opportunities among fans.

In Citi’s Metaverse and Money GPS report (March 2022), we estimated the total addressable market for the Metaverse to be between $8 trillion and $13 trillion by 2030. The report also pointed out that total VR/AR users could reach 900 million to 1 billion by 2030 with AR expected to be more ubiquitous given its less-invasive user experience compared to VR.

VR hardware penetration will probably stay a limiting factor for VR viewing by 2030.

Citi Research’s Global Technology report on the Metaverse, published on June 10, 2022, forecasted global VR devices to reach 66 million units by 2030, a penetration rate of 1% of online users, the vast majority of whom would be in developed markets.  To help dimension the suitability of a sport for VR viewing, we narrowed down a pool of 80 sports from all over the world to 26 sports based on their popularity.

Then four criteria were considered: Duration, Popularity. Technical Feasibility and Audience Engagement

After considering VR suitability for different sports, we put them into three categories, high medium and low, each of which is likely to have different VR penetration rates.

Most sports fans with access to VR headsets will use them sparingly for now because the tech isn’t yet that comfortable. A UK government report estimated 30 minutes as the time limit for a single viewing experience for current VR devices.

However, with continuous improvement on the hardware side, we expect the time limit for a single viewing to extend to at least 90 minutes by 2030, enough to cover the duration of most sporting contests.

To access the full report, if you are a Velocity subscriber, please find it here log in here.

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

 

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