The virtual production market industry is projected to reach USD 5.1 billion by 2027 from USD 3.1 billion in 2023 growing at a CAGR of 14.5% during the forecast period.

The virtual production industry is experiencing rapid growth, fueled by the establishment of new virtual production studios and a rising demand for advanced visual effects (VFX) in movies and television. This innovative approach to filmmaking combines real-time computer graphics, game engine technology, and physical production to create immersive environments and dynamic visual content.

Here’s an in-depth look at the factors driving the expansion of the virtual production industry:

1. Surge in Virtual Production Studios

The increasing number of virtual production studios worldwide is a major contributor to the growth of the virtual production industry. These studios utilize cutting-edge technology, such as LED walls, motion capture systems, and real-time rendering engines, to create virtual environments and realistic visual effects. This setup allows filmmakers to visualize scenes as they are being shot, providing greater flexibility and creative freedom compared to traditional production methods.

Major entertainment hubs like Los Angeles, London, and Vancouver have seen a rise in new virtual production facilities, often in collaboration with tech companies and gaming studios. This expansion is making virtual production more accessible to filmmakers of all levels, from major Hollywood studios to independent producers, accelerating the adoption of this technology across the industry.

2. Rising Demand for Visual Effects in Film and TV

The demand for sophisticated visual effects in movies and television has been steadily increasing, driven by audience expectations for more immersive and visually stunning content. High-profile franchises, such as the Marvel Cinematic Universe, “Star Wars,” and “Game of Thrones,” have set a high bar for visual effects, pushing the boundaries of what can be achieved on screen. This has led to a surge in demand for advanced VFX technologies, including virtual production, which can create realistic and visually engaging environments without the need for extensive physical sets or location shooting.

Virtual production allows for the seamless integration of CGI elements with live-action footage, enabling filmmakers to create complex visual effects in real time. This capability is particularly valuable in action-packed scenes, fantasy worlds, and sci-fi settings, where traditional filming techniques may be impractical or prohibitively expensive.

3. Cost Efficiency and Production Flexibility

Virtual production offers significant cost efficiencies and flexibility in the filmmaking process, which is another key factor driving its growth. By using virtual sets and real-time rendering, filmmakers can reduce the need for on-location shoots, minimize travel expenses, and decrease the time spent on post-production. This can result in substantial savings, particularly for projects with large-scale visual effects or those requiring multiple location changes.

Additionally, virtual production allows for greater flexibility in scheduling and creative decision-making. Directors and cinematographers can see how scenes will look in real time, making it easier to adjust lighting, camera angles, and visual effects on the fly. This can lead to more dynamic and visually compelling storytelling while also reducing the risk of costly reshoots.

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4. Technological Advancements and Real-Time Rendering

Technological advancements in real-time rendering engines, such as Unreal Engine and Unity, have been instrumental in the rise of virtual production. These engines can render high-quality visuals at high frame rates, allowing for realistic virtual environments and characters to be created on set. The integration of game engine technology into the film production process has enabled filmmakers to achieve a level of realism and detail previously only possible in post-production.

Moreover, the development of advanced motion capture and LED wall technology has enhanced the capabilities of virtual production. LED walls can display dynamic virtual backgrounds that interact with live-action elements, creating a seamless blend of real and virtual worlds. This technology has been used in productions like “The Mandalorian,” where virtual production techniques were essential in creating the show’s immersive environments.

Increasing demand for VFX and CGI in movies stimulates market growth

In 2021, the software segment accounted for the largest share of the virtual production market. The dominance of the segment is attributed to the increasing demand for VFX and CGI in movies. Continuous organic and inorganic growth strategies adopted by virtual production ecosystem players have enhanced the growth of the market. For instance, in May 2022, Mo-Sys Engineering Ltd. formed a partnership with GMS International to make augmented reality and virtual production solutions available to South Korean cinematographers and broadcasters.

Movies segment to capture the lion’s share in the virtual production market

In 2021, the movies segment accounted for the largest share of the virtual production market. The rising trend in moving movies from theaters and multiplexes to over-the-top (OTT) platforms enables producers to access broader audiences. The substantial budgets of movies and increasing demand for VFX-based movies have led to the growth of the movies segment. As stated in the Theme Report 2021 published by the Motion Picture Association, the production of new movies continued to skyrocket during the pandemic. In 2024, approximately 940 films were initiated for production in the US. However, in 2024, 2030, and 2024 only 808, 814, and 443 films were produced during the respective years.