For an industry that rarely gets big news anymore, this has been a great week for virtual reality. Not surprisingly, all of the key data points relate to today’s industry’s only philanthropist, Meta, which has managed to increase the cost of joining its VR ecosystem, seeing I’m in a new war with the US government over VR and announced that it’s, once again, burned a lot of money on Reality Labs efforts this quarter.
The strangest news is undoubtedly Meta’s seemingly unprecedented move to raise the price of Quest 2 to $100. Again, this is a year old headset that Meta deliberately sold at a loss to attract more consumers into the market. This huge increase takes the entry price from $299 to $399 and signals that the company’s willingness to subsidize headphones to match has its limits.
This surge, coupled with record inflation and a hostile stock market, has hit Meta’s share price particularly hard. The company’s stock is currently trading below where it was five years ago, and Reality Labs spending has become a more relevant concern for investors as the company’s revenue growth begins to taper off. .
VR and metaverse are becoming very expensive endeavors for Meta. The company announced Wednesday that it spent $2.8 billion on Reality Labs in Q2 alone, a number that shows the company’s super-reverse dream is more than just hokey marketing. remains a substantial financial bet with little short-term growth in an arena where many of the big tech giants appear to have reduced their R&D spending in recent years.
It’s worth repeating why Meta pursued the strategy of selling headphones at original price in the first place. This wasn’t the company’s original plan, the Rift headset and its controllers retailed for close to $800 when they launched, and it was only after years of price cuts that the company was able to expand the range. equipment sales. It’s a must-have piece of hardware for a gaming PC, of course, and one that has competitors at a similar price point.
After 5 years have passed and there may still be a handful of headphones coming out, but the cornerstone of the recent growth in headset numbers seems to be pinned only to Quest 2, which has the lowest input costs on the market. school. The increase in the price of a technology hardware product mid-life certainly shows a fundamental miscalculation and the company is less likely to repeat it.
As the company tries to release a “Project Cambria” headset that Bloomberg has reported will be called the Quest Pro and rumored to have pegged at $1500, the virtual reality industry looks like it will be forced to compete. based on the relative value of its ecosystem and justifies something closer to the true cost of hardware to consumers. This will be a big, abrupt shift for Meta, and I question the $1,500 headset audience in 2022, even a “professional” focused audience.
Meta’s efforts do not take place entirely in solitude. Sony announced new details about its second-generation headset this week, and Apple has invested heavily in the long-delayed release of its mixed reality headset, a device that could potentially cost a fortune. up to $3,000 when it’s finally released, and will no doubt serve as an extravaganza in the “Pro” kit.
However, Apple seems poised to gain an edge when it comes to acquiring startups and new products in the VR space. Meta’s efforts to spend big to win big in the metaverse met with a rather unsettling challenge Wednesday when the FTC announced that it was suing to block Meta from buying developer VR Within, the studio behind the VR fitness app Supernatural. A block of the deal, believed to be more than $400 million, would be a pretty cool rebuke to one of the VR industry’s only exit opportunities, during a period of hard revenue and companies VR startups are not earning many interested investors.
After a better decade since Facebook acquired Oculus, the virtual reality industry is still more dependent on Meta’s checkbook than ever before. The public market downturn is forcing an adjustment to infinite corporate spending for the sub-category, and there will obviously be many quadratic effects along the way.