Fortune Report Looks at VR Porn

Aug 5, 2015 3:10 PM PST

LOS ANGELES — As porn and Virtual Reality continue their collision, mainstream media is taking notice.

Calling porn “Virtual Reality’s dirty little secret,” Fortune author John Gaudiosi recently outlined analysts belief that in addition to mainstream movies and video games, adult entertainment will motivate many early adopters of VR technology — a not too-secret secret that will benefit major stakeholders, including Facebook-owned Oculus, Google, Microsoft and more.

Gaudiosi cited Piper Jaffray research analyst Travis Jakel, and his prediction that adult entertainment will be the number three driver of VR content, growing into a $1 billion industry by 2020.

Jakel’s figures show that three percent of VR users will pay $35 for adult content in 2016. This amount is typical of a monthly membership at a higher-end adult paysite — and accounts for $13 million worth of the projected total VR market in 2016.

Adult industry insiders will note that the three percent figure seems extraordinarily low, while the single shot $35 payment could indicate analysts expectations that early adult VR content offers may not match many consumers’ expectations, and thus not induce repeat purchases.

A further note on the three percent figure is that it is the number of users expected to pay for their porn — not the number of users expected to view VR porn — with the adult entertainment industry likely to continue its headlong rush towards giving away all of its content for free, skewing such VR usage stats.

For comparison, the same research predicts that five percent of VR users will spend an average of $56.66 on games (the top slot, at $35 million of the market), while 15 percent of VR users will spend an average of $8.19 on movies (the second place position with $15 million of the market).

Tractica VR analyst Craig Foster believes that the combined revenue for head-mounted displays (HMDs), VR accessories and content will jump from $108.8 million in 2014 to $21.8 billion by 2020, representing an annual global growth of 142 percent, with content quickly coming to the fore.

“As adoption begins to reach a critical mass, the industry’s revenue mix will quickly shift from hardware sales to content,” Foster says. “Content sales will represent more than one-third of total VR revenue by 2017, and will quickly grow to nearly two-thirds of all VR revenue by 2020.”

Piper Jaffray senior research analyst Gene Munster currently estimates porn to be a $25 billion industry with a primarily male demographic that is keen on new technology, and which provides a reliable test audience for product development, ensuring at least an awkward nod to the genre’s value.

“Whenever there’s a shift in content conception, it’s typically adult entertainment that’s the first monetizable app,” Munster says. “History repeats itself and we’ve seen adult entertainment drive sales of VHS, DVD, Blu-ray, high definition, mobile, and online video over the years.”

Many analysts and VR promoters expect it to become the defining visual technology, especially for the younger generations of consumers, with some forward looking adult producers already embracing this “shift in content conception.”

“I see it through a generational lens,” Todd Glider, CEO of BaDoink, an early adopter of VR porn says. “VR porn will not have a pronounced effect on the demographic born before 1980. However, for the generations born after, the ones that reach adulthood in a world where 24/7 access to adult content is just a mouse-click away, that’s the audience for VR porn, and it will be huge.”

As for the broader business perspective, recent analysis by XBIZ Research reveals that more than half of adult entertainment industry insiders believe that Virtual Reality will revolutionize porn; with the biggest segments of the market predicted to be live cams (41 percent), 3D rendered virtual worlds (30 percent), and recorded video content (29 percent).

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