Recent technological development has impacted the gaming industry by expanding the capability of existing platforms, creating exciting new channels and challenging developers to think creatively about alternate forms of consumer experiences. Of these changes, augmented reality (AR) and virtual reality (VR) seem to be the most prominent upcoming frontiers for gaming. Modern examples of commercialized games demonstrate the tremendous potential of these technologies, which have come a long way from their purely theoretical and academic roots. According to statista.com, the global AR and VR market will reach over $200 billion in 2021. The potential for substantial growth is driven by the emergence of new types of experiences; the gaming industry will likely see increasingly immersive and imaginative content in the near future. AR and VR are expanding the limits of what was previously considered possible in games and captivating consumers in new ways.

AR enhances a user’s view of reality by superimposing digital images to create a unique experience. While the technology has existed for decades, primarily for research and digital marketing, its accessibility to the average consumer was only recently made possible by the drastic advancements seen in mobile devices. The ability of smartphones to run AR-enabled software that combines visual, audio and geolocation sensors has created unique experiences that are both engaging and refreshing for gamers. With sufficient technology in place, developers are only beginning to explore the various commercial applications. New categories of the industry may emerge, such as the combination of exercise and gaming. As active lifestyles are becoming more popular in mainstream culture, these types of games aim to gain traction with new cohorts of consumers: those trying to start a daily routine, or those just hoping to make their existing routines a bit more fun. Thus, the total addressable market is well-positioned to expand: statista.com estimates the global AR market will grow to approximately $90 billion by 2020.

Perhaps the best recent application of AR in games has been Pokemon Go, which Niantic launched in summer of 2016. Although wildly successful at first, PoGo’s use of AR is actually rather basic: overlaying mostly-stationary creatures on the phone’s camera preview screen and allowing users to capture them by throwing virtual balls. More recently, it has added an “AR+” mode for iOS that anchors the creature within the environment even when the camera moves around – this feature allows users to see different angles and move closer for more accurate throws. Although its explosive growth in the first few months is arguably the result of hype from riding the coattails of the legendary Pokemon franchise, it also demonstrated that AR holds both a viable and promising future in gaming. The substantial demand is driven by various factors: consumers are fascinated with the immersive playstyle and exercise in a fun way as they continuously move around the real world. As a business, Niantic generates substantial revenue through microtransactions. According to SuperDataResearch.com, Niantic made almost $900 million in revenue over 2017 from the game; as of April 2018, PoGo is the number one grossing Android app per Google Play listings. Overall, this demonstrates the compatibility of AR mobile gaming with existing monetization strategies and undoubtedly encourages the development of similar types of games.

A close relative of AR, VR also uses computer-generated images to create new user experiences. The key difference is that VR seeks to supplant reality rather than supplement it: the idea is to completely simulate an environment and immerse the user in this artificial world, which requires overcoming a much higher technological hurdle. Fortunately, engineering efforts over the last century in optics, computers and software have finally enabled users to experience the magic of what Palmer Luckey (founder of Oculus VR) and others are calling the last great human invention: the “final platform.” A 2017 statista.com survey conducted in the US stated that over 90 percent of participants have heard of the term “virtual reality” already, and the majority mentioned that the most interesting aspect of VR was the feeling of entering another world.

Even within the context of gaming, the spectrum of VR hardware is broad. After all, 3D simulation can be accomplished in many ways. From an accessibility perspective, smartphones are an easy entry point into VR games since most modern ones are powerful enough to run them. There are many headsets on the market today that are simply smartphone head mounts which use optical tricks to create a basic VR experience. Google Cardboard accomplishes this for only $15, but more durable sets like Daydream and Gear VR are still only a fraction of a smartphone’s cost. These headsets are a relatively small purchase for any curious consumer who already owns a smartphone. With more than a third of the global population estimated to be using a smartphone by the end of 2018 according to a recent forecast by eMarketer, the untapped market of VR mobile gaming is substantial.

On the other end of the accessibility spectrum lies more advanced and customized VR equipment. For $400, an Oculus Rift kit will provide a much more sophisticated experience than those like Google Cardboard. These goggles pack in more specialized sensors than a smartphone and rely on the PC they’re connected to for the necessary processing power to generate images. Similarly, consoles like the PlayStation are offering their own VR headsets and supporting accessories such as wands that enable more interaction with their virtual worlds. These purchases are quite substantial for any consumer, especially when they may become outdated in just a year or two.

With the variety of VR hardware described above comes a variety of games. For example, well-known titles such as Skyrim, Fallout and Minecraft have VR-enabled expansions for consoles and PC that offer  players their familiar environments in a more intimate way, helping draw attention from veteran gamers to the growing VR gaming campaign. Generally, demand from consumers seeking a fresh perspective from modern games has led to promising results: International Data Corporation expects sales of over 12 million headsets in 2018 versus 8 million in 2017, attributable to changes in hardware, software and pricing.

The variety of emerging VR games demonstrates the rapidly growing commercial interest, as developers are shifting their focus to meet demand in this promising new space. As with many emerging markets, the first step after broad consumer accessibility is a land grab. Tech giants like Facebook, Apple, Google and Microsoft have made significant investments to capture market share. Google acquired Owlchemy Labs (a VR game studio) in 2017, Apple bought Metaio (an AR software startup) in 2015 and Facebook paid $3 billion for Oculus VR in 2014. Sony made substantial investments to develop Playstation VR, similar to Microsoft’s HoloLens for AR. Now that their hardware is in the hands of consumers, they will seek to hold consumer attention by developing more interesting games. Just like with AR, it seems that VR games today are just the tip of the iceberg. The traditional experience that kept gamers glued to a screen and clutching controllers is shifting towards a more dynamic one, where users wearing headsets continuously look around as they slash their virtual swords and fire their laser rifles.

Both AR and VR are offering users fresh, new experiences that continue to surprise, impress and captivate. Over the next few decades, refinement of VR will likely enable mirroring of reality and beyond, allowing us to explore with all our senses places that have captivated our imaginations ever since childhood, such as space. Traditional video game genres like first-person shooters will become more immersive, while sports games could offer first-person perspectives to any ordinary player. Professional athletes could benefit from AR goggles that show real-time trajectory calculations and monitor vitals. Popular outdoor hobbies like fishing and hunting could be replaced by simulators that offer the exact same sensory experience without any devastating ecological consequences. With all the possibilities, the line between virtual gaming and life begins to blur and traditional gaming companies will evolve to provide solely high-tech entertainment. Even though development still has a long way to go, if the efforts of the industry to date are any indicator, we have plenty to look forward to.