A week ahead of the Electronic Entertainment Expo 2015 (E3 2015), Facebook Inc (NASDAQ:FB) and Microsoft Corporation (NASDAQ:MSFT) have announced a partnership for the virtual gaming market. Facebook’s Oculus virtual reality headset, Rift that is set to be launched in the beginning of 2016, will now come with the Xbox game controller from Microsoft.

Facebook acquired Oculus VR, a virtual reality technology company, which developed the Oculus Rift gaming headset in 2014, for approximately $2 billion.

The initial version of the Oculus Rift will come with an Xbox One controller and Xbox adapter. This will enable users to play their Xbox One games via the VR headset by streaming on a Windows 10 PC. Furthermore, following the launch of Oculus Rift, every Xbox One wireless controller and associated PC adapter shipment will include the VR headset.

This collaboration comes even when Microsoft is developing its own virtual reality headset, Hololens that is expected to be released this year itself. While Hololens may be a competitor to Oculus Rift some time in the future, at present the two companies are likely to benefit from this strategic collaboration.

This deal brings together Oculus’ virtual reality technology and Xbox’s game controller. The timing of this collaboration is also important for both the companies as they are likely to face stiff competition from Sony Corporation when it presents its own virtual reality device ‘Project Morpheus’ (that supports PlayStation 4) in the upcoming E3 conference.

Meanwhile, a couple of handheld motion controllers- the Oculus Touch -are already in the pipeline for the virtual reality gaming device.

Oculus Touch

Oculus Touch is a set of tracked controllers developed that make the virtual reality experience even more real. The company claims that users get the feeling that the virtual hands are their own. The device is designed for Oculus Rift and will be available in the first-half of 2016, while pre-orders will start at the same time as the Rift.

Yesterday, the company released a prototype of Oculus Touch- Half Moon, which has an identical controller for each hand. Each controller has an analog thumbstick, a couple of buttons and an analog trigger. This apart, the wireless controllers also have hand triggers, an input mechanism to make the interaction more seamless and natural.

Most importantly, the device has similar a configuration as the Rift, including the IR LED constellation tracking system that ensures precise, low-latency, 6-DOF tracking. Additionally, this prototype has haptics, which allows developers to get feedback from the virtual world. Oculus has also used advanced sensors in Half Moon that allows the device to distinguish few communicative hand gestures including pointing, waving and thumbs-up to enhance the user experience.

Virtual Reality Market

The scope for growth in this nascent market is immense as even tech giants like Apple Inc. are rumored to enter the market soon. According to a 2014-2018 report from KZero, a U.K.-based consulting and research firm that focuses on virtual reality, the market will grow exponentially going ahead and could be worth $5.2 billion by 2018. The company also expects the active user base to grow from 0.2 million in 2014 to 42.8 million in 2016 and cross the 170 million mark by 2018.

In fact, Mark Zuckerberg was probably not exaggerating when he earlier stated that virtual reality is the next big thing after mobile growth. As such, the company remains focused on developing more leaner and efficient versions of the device over time. Facebook will be spending as much as $10 million on the development of games. It has already unveiled the first list of Rift games, which includes Chronos (a role playing game)and Eve Valkyrie (a sci-fi flight simulator).

Facebook has a Zacks Rank #3 (Hold).