Virtual reality is in a "chicken and egg" situation where consumers are waiting for more content before buying, and content makers are waiting for more customers.

Virtual and augmented reality might be the buzz technologies of 2017, but consumer hesitation and shortage of products could mean they won't go mainstream until next decade, new research shows.

The 102-page Australian VR & AR Market Study 2017, released Tuesday by the Australian research company Telsyte, concludes that the technology has found itself in a chicken-and-egg predicament, with consumers unwilling to buy into it until there is enough content, and content producers unwilling to buy into it until there are enough consumers.

Virtual reality technology uses headsets, often just a mobile phone with lens attached to it, that are strapped to the face so users can play video games or watch movies, completely surrounded by the device's video feed.

Augmented reality can use headsets or handheld devices, that mix computer-generated video with live images of the real world.

Neither technology has gained widespread adoption in Australia, with household penetration estimated at only 2.3 per cent at the end of 2016, according to the study.

That figure has been kept low in part because few Australians have been able to try VR or AR to see if they like it nervousness about trying on headsets has meant that only 11 per cent of Australians aged 16 years or older have actually tried a headset, Telsyte found and in part because the manufacturers been nervous about shipping too many products ahead of demand, making them hard to buy even for consumers who have tested it.

"Manufacturers are taking a measured approach to this new category of products," said Foad Fadaghi, managing director of Telsyte and author of the report.

"They still have memories of other technologies that have come and gone, like 3D TV."

With such constraints still in force for much of 2017, it could be 2018 before we know whether VR and AR will gain a proper foothold or go the way of 3D TVs, Mr Fadaghi said.

While a number of VR manufacturers have said that education will be the first sector to properly adopt the technology, Telsyte's research found that it will be video gaming and movie watching that will draw more people in.

"We do see some uses in education," said Mr Fadaghi. "A lot of educators look at VR as a big opportunity, given its ability to capture the imagination of young people with immersive experiences.

"But when we ask consumers what they want to use VR for, it's primarily for games and movies," he said. The same is true of smartphones: half of all smartphone app revenues go to the gaming industry.

Of the two complementary technologies, it will be virtual reality that has the fastest adoption, thanks to games, but it will be augmented reality that has the broadest application, because it can be used for gaming and business apps.

"It will all eventually take off," predicts said Mr Fadaghi. "It will just take a little longer before it becomes mainstream. It could be 10 years, just like smartphones."

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Virtual reality to take a decade as users chicken out, study shows - The Australian Financial Review