On our study targets
New technologies like extended reality (XR) are changing the landscape for businesses and making products and services more accessible to everyone. It also plays a pivotal role in shaping the future of virtual worlds.
Our recent study ‘Zero Distance XR Applications and Services’ for DG CONNECT – carried out together with Ecorys – looked into how XR is being used across different industries. The study found that XR isn’t just about entertainment—it’s also being used to create virtual worlds that serve public needs, like education or healthcare.
The study looked at how funding, both public and private, is being used to develop XR solutions. In addition, it also examined public initiatives in Europe and beyond that are supporting XR technology. Case studies from all continents highlighted some of the most innovative ways XR is being used, from creating virtual classrooms to developing new XR-based apps.
Furthermore, the study outlines key emerging technologies and assesses their potential impact on XR and virtual worlds (based on mapping of 180 virtual worlds in the EU across all industrial ecosystems). The analysis also uncovers key hardware, software and infrastructure needs, as well as prominent legal, business, technological, social and ethical barriers for the development of the XR industry. The report provides recommendations for EU-level action to address these barriers.
Main findings
Landscape analysis
Our analysis dives deep into the current state of XR technologies, examining both market trends and technological advancements. In our exploration of XR financing, we’ve observed a consistent upward trend in funding since 2016. Notably, 2021 and 2022 marked record-breaking years for European XR companies, with substantial investment pouring into European XR companies.
The analysis also shows that the majority of private investment is captured by one industrial ecosystem, namely cultural and creative industries, with a particular focus on video games. Typically, private sector funding is secured during the early stages of a venture, often through seed or early-stage venture capital.
Geographically, a significant portion of funding—almost 80%—is concentrated in countries such as Germany, France, Finland, Sweden, Denmark, and the Netherlands.
Public funding, on the other hand, tends to prioritise the development of XR technologies and platforms rather than specific use cases. This funding is particularly prominent in more horizontal and enabling sectors, with Western Europe emerging as a focal point for opportunities.
In terms of procurement, educational institutions are at the forefront, driving initiatives primarily for training and educational purposes across both the EU and HEACs.
Deployment of XR technology
The analysis further provides a comprehensive overview of the current state of deployment of XR technology and indicates that the most common areas of XR technology application across industrial ecosystems are:
- training and education;
- data visualisation, simulation and design; and
- marketing and promotional activities.
As regards the main barriers to the adoption of XR across different ecosystems, the analysis identifies technological, business, societal, financial and legal barriers. These barriers are linked to the needs (hardware, software, infrastructure) that should be addressed to facilitate and foster the broader deployment of XR technologies in Europe. The following main barriers are identified in the study:
- The EU XR market is fragmented due to differences in regulation and regional preferences. This poses challenges for upscaling successful XR solutions and establishing cross-national businesses.
- XR industry is facing challenges from uncertainties in the regulatory framework, unexplored ethical implications, and the need for clear behavioural guidelines, as well as legal challenges related to data security.
- EU players have limited importance in the XR market as opposed to the influence exerted by non-EU actors.
- Professionals across different sectors and/or end users lack awareness of XR technologies. There is also resistance from users towards transitioning from a traditional to an XR solution.
- XR solution providers lack staff with the required technical expertise to develop or help businesses install and operate XR technologies.
- EU is behind other regions, such as the US, in access to funding for XR companies.
- Public funding at the EU and national level is often insufficient to meet the specific requirements of individual ecosystems.
- Insufficient standardisation efforts in the EU (and at the global level) often result in issues related to interoperability.
- Existing infrastructure needs to be strengthened to ensure low-latency and smooth running of XR applications (incl. virtual worlds).
- Costs associated with developing and implementing immersive technologies into traditional workflows are still a barrier.
Public initiatives
To give you a broader picture of publicly funded XR initiatives, our study dives into eight case studies from around the globe. These initiatives are typically part of larger policy frameworks aimed at digitalisation, boosting industry innovation, or enhancing public services.
These initiatives come with varying budgets, ranging from around 27,500 EUR to a whopping 1.2 billion GBP. They generally fall into three main categories: the creation of VWs for public services, development of programmes/ institutions to incentivise XR use or adoption, and development of XR-based solutions and/or applications.
Emerging technologies
Further on, the study elaborates on emerging technologies, which play a vital role in enhancing XR. Here’s a glimpse of what we found:
- Next-Generation Connectivity: Technologies like 5G and 6G, along with advancements in Wi-Fi (Wi-Fi 6.6E and Wi-Fi 7), are providing the high-speed bandwidth needed to handle complex computational tasks.
- Cloud and Edge Computing: By reducing latency and improving device performance, cloud and edge computing are making XR experiences smoother and more responsive. This also means lighter and more comfortable devices for users.
- Advanced Materials and Components: Innovations such as metamaterials, graphene, and advanced semiconductor chips are revolutionising XR hardware and wearables, promising lighter devices and more immersive experiences.
- Cutting-Edge Display Technologies: Novel display technologies, optics, and sensing methods are enhancing visual and physical experiences in XR, making them more realistic and engaging.
- Blockchain: By enhancing trust and security, blockchain technology is making interactions within virtual worlds more reliable and secure.
- Artificial Intelligence: AI is powering various aspects of XR, from rendering graphics to managing big data and making real-time decisions. This makes XR integration more accurate, efficient, and seamless.
Overview of virtual worlds
The study follows up with an overview of virtual worlds in the EU, showing that the majority of VWs have industrial or entertainment applications and are mostly targeted to citizens rather than businesses or the public sector.
Out of the mapped virtual worlds, the most common industrial ecosystems using VWs are cultural and creative (65%), digital (37%), retail (22%) and fashion industries (22%).
In addition, two main models of VWs are identified: (1) VWs oriented towards enterprises and companies (usually subscription-based) and (2) VWs focused on common citizens (mostly freely accessible or freemium).
Recommendations
Finally, the study provides a set of recommendations for specific EU-level policy measures and actions to boost the EU XR ecosystem in a zero-distance economy:
- Provide a medium for fostering collaboration and exchange among stakeholders, as well as addressing current and future challenges related to XR and virtual worlds
- Promote a globally-oriented EU XR industry
- Ensure users’ awareness of XR technologies and access to talent for the EU’s XR industry
- Increase funding and financing opportunities for XR entities at different growth stages
- Support XR standardisation efforts
- Monitor the development of virtual worlds
The full study report is available here while the executive summary can be found here.
