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Microsoft recently announced that Minecraft Earth will shut down in June. It stated that it wants to “reallocate” limited resources due to the pandemic in order to serve the Minecraft community better.
And that’s happening, even after the popular augmented reality game made an impressive debut. It fetched over 1 million users in the U.S. alone within a week of its November 2019 launch.
The bigger question
This unexpected event has given rise to an important question: Will other augmented reality games see the same fate in the post-COVID era?
Even with Microsoft’s backing, Minecraft Earth could not survive the impact of the pandemic. Is there some hope for small AR game development studios to survive? How soon will the AR industry recover from this?
Three top investment pros open up about what it takes to get your video game funded.
To answer these questions, let us first dig into this market’s growth rate before and during the pandemic.
Minecraft Earth touched 1 million users in the U.S. within a week, while Harry Potter: Wizards Unite clocked $12 million in revenue in its first month of release. And Pokémon Go crossed the 1 billion downloads in July 2019.
The global AR gaming market hit $2.82 billion in 2019 with an expected CAGR of over 48%. Such a growth rate essentially meant that the industry was booming and could have crossed the $5 billion mark very easily in 2020.
But recent research published in February confirmed the 2020 market valuation for AR gaming remained at $4.7 billion, which is almost $300 million lower than the expectations.
Expected bounce back till 2026
The good news is that the same research also forecasts an expected bounce-back. It suggests that the global AR gaming market could hit $28.6 billion by 2026, with a CAGR of 34.80% during 2021-2026.
Although the CAGR of 34.8% is about 8%-10% lower than what it could have been normally, this data suggests that AR gaming is already set into the recovery mode and we can expect a bounce-back by 2026.
Let us have a look at what are the main factors that will positively affect the AR market in the coming years.
Factors that will benefit AR
- Economic recovery from the pandemic: The game industry is all set for economic recovery starting from 2021. According to Moodys Outlook for the U.S. gaming industry, the industry’s EBITDA that plunged 39% in 2020 is expected to improve by 45% in 2021.With an overall recovery in the game industry, the AR market will definitely get a push. More studios are expected to bring AR-based apps and games that will eventually increase the size of consumers.
- Improved technologies: Apple and Google are continuously improving AR technologies that most AR developers use. Apple’s latest ARkit 4.0 now includes location anchors, improved depth API, and better face-tracking. This allows Apple’s ARKit developers to tap into the power of the latest iPhones’ LiDAR hardware. Apple is also set to enter the smart glasses market by 2022, which will be a game-changer for the industry. Google’s ARCore, with its fairly good improvements, is making the technology available to a vast segment of the audience, as Android has more user base than iOS worldwide. With increased availability and enhanced technology, AR numbers should spike in the coming years.
- More funding raised by AR/VR companies: For any industry to flourish, it needs funds. While the AR/VR investments saw a drop in Q1 2020, later in the year, investors continued to show their belief in AR startups despite the pandemicMagic Leap raised a $350 million lifeline in May 2020 right at the peak of the pandemic. MAD Gaze, Nreal, Mira, and North are among other companies that received funding last year. According to a report from ABI Research, the total funding and M&A value in the AR/VR ecosystem surpassed $2 billion in 2020.
As more funds are pumped into the AR/VR ecosystem, it will grow at a faster pace and recover from the pandemic slow down very soon.
- Gaming experience: AR games provide a completely different gaming experience to which users will eventually adapt. It frees them from the stationery PC keyboard-and-mouse setup and turns their surroundings (and even outdoors) into their playground.AR games also do not have any hardware limitations of clicking speed, spacebar counter, game controllers, and so on. These games seamlessly blend into your space. After being in a lockdown for a long, players will choose AR games as an outdoor entertainment and socializing medium. Also, games like Super Mario AR for Hololens and the recently announced Space Invaders AR by Square Enix are tapping into ’80s nostalgia to enhance the AR gaming experience even more.
- Leap into 5G Connectivity: One common problem with the most popular AR games like Ingress, Knightfall AR, Zombies Run, and Walking Dead: Our World is the loading times and latency. No matter how much high-end device you’re having, you are bound to experience lags even with fastest 4G connections.5G technology uses network slicing, distributed cloud, and edge computing technologies to guarantee stable performance and ultra-low latency. With powerful 5G mobile devices being released, AR games will be much more immersive and natural experience from what they are now.
- AR in shopping and retail: Augmented reality is also opening avenues in the retail industry. With people less likely to visit stores in person, brands such as Ikea, Nike, American Apparel, and Lacoste are adding AR-enabled shopping experiences for customers at home. They enable customers to try the products virtually, such as seeing furniture in your room using AR or trying out the dress on your virtual self. As per the 2020 IBM U.S Retail Index report, 41% of participants showed interest in trying the virtual fitting room technology, and 18% confirmed that they had already done so. More brands are likely to catch up on this trend, which will lead to growth in this section.
Key takeaways and challenges
The future of many stakeholders of this industry, including tech giants as well as smaller ones, depends on these factors for their growth. Apart from these, here are some important takeaways for AR developers as well as consumers.
- Although the statistics suggest high speed growth, there are some challenges that the AR game studios must prepare to fight. In my opinion, the major challenge will be making AR more affordable, so you can target more consumers with it.If AR companies succeed in doing so, nothing can stop the AR market from growing at an even better rate than the current forecasts.
- Also, Facebook, Apple, and Microsoft need to focus more on making AR headsets with larger field-of-view to match that of human eyes if they want to seamlessly merge the real world with AR.
- With AI and machine learning getting more and more advanced, AI and AR together will make the dream of “mirror worlds” come true in the coming future.
- In all scenarios, one thing is certain: AR is going to be more and more inclusive in our daily lives, be it in entertainment, health, home, retail, or sports. So be ready to embrace it in the near future.
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