More than a year after renaming the company “Meta” and promising to invest billions of dollars in a “metaverse,” Mark Zuckerberg’s bet on the world of virtual reality (VR) is reportedly far from paying off.
The latest data from research firm NPD Group shows that sales of VR headset devices in the U.S. this year were $1.1 billion as of early December, down 2 percent year-over-year. By comparison, Facebook’s advertising business generates the same amount of revenue about every three days.
It’s because the advertising business is in the doldrums that Mark Zuckerberg decided to bet on the “meta-universe” of VR devices and related technology. But data from analyst firm CCS Insight shows that global shipments of VR and AR (augmented reality) devices are only 9.6 million units so far in 2022, down more than 12 percent year-over-year.
There is no doubt that these figures cast a shadow over Meta’s future prospects. In fact, Mark Zuckerberg has previously said that the “metaverse” is a long-term bet that is expected to take up to a decade to become mainstream and could eventually bring in hundreds of billions of dollars in business.
Of course, in addition to Meta, there are many other companies making big bets on virtual worlds related to work, education, fitness and sports. But so far, say several analysts, Meta’s “Quest 2” in 2020 is leading the VR market, with competing products from companies like Valve, HP and Sony accounting for only a fraction of the market.
This year, sales of the Meta Quest headset have declined, NPD Group consumer electronics analyst Ben Arnold said, mainly because Quest sales were too hot during the Christmas season in 2021 when demand for consoles such as Sony’s PS5 exceeded supply.
NPD Group data shows that U.S. sales of VR headsets will be about $530 million in 2020, and double that in 2021. A number of factors have come together to cause a decline in VR headset sales and shipments in 2022.
First, Quest 2 has been out for a few years now and, like any other consumer electronics device, has lost some of its appeals as it ages. Although Meta released a new VR headset, the Quest Pro, this fall, the device is aimed at businesses and costs $1,100 more than the Quest 2, which is a turnoff for many VR enthusiasts.
This summer, Meta raised the price of the Quest 2 by another $100, citing inflationary pressures. In response, CCS Insight analyst Leo Gebbie said, “This price increase is surprising because Meta has previously been willing to sell this product at a lower margin in an attempt to drive VR adoption and gain higher market share.”
Apple in the spotlight
In its latest report, CCS Insight said it expects 2023 to be another “down year” for the VR market due to the weak economy and inflation, with CCS Insight analyst Gebbie saying, “Consumer budgets will tighten and non-essential items like VR headsets will likely fall victim. “
Sony’s next-generation VR headset, the PlayStation VR2, will debut next February for $550, and while the PlayStation VR2 will give the market a shot in the arm, it probably won’t have as big an impact on the overall VR market as the Quest 2, according to NPD Group analyst Arnold. That’s because Sony’s device requires users to have a PS5 to power their computing, while the Quest 2 is independent of other devices.
Arnold said, “The potential users of the PlayStation VR2 are PlayStation console owners.” In addition to Sony, one concern is whether Apple will release a VR headset, as rumors suggest.
Arnold believes that Apple could create a compelling VR headset that comes with a software ecosystem. In addition, Apple, as a leader in consumer technology, could bring some spark to the bleak VR market and make the technology more appealing to the general public.
If there’s one company that has the ability to change the VR market overnight, it’s Apple,” said CCS Insight analyst Gerby. Apple has a large and loyal fan base, many of whom are happy to invest large sums of money in the technology. If Apple were to launch a VR headset, we expect it to do very well.”
Apple is reportedly building an AR-enabled VR headset that will be released as early as 2023.
Eric Abbruzzese, research director at research firm ABI Research, thinks Apple could launch an enterprise-oriented VR headset that would help attract developers to the community. But Abbruzzese also pointed out that enterprise-grade VR headsets are expensive, possibly reaching thousands of dollars, making it difficult to push the technology into the mainstream.
In the first year, Apple’s VR headset will probably ship even less than 5 million units,” Abruzzese said. But it’s worth noting that this will be the first compelling product to be launched by a major tech giant.”
What the VR world is lacking, in fact, is killer apps.
Abruzzese said some games have already gained traction, such as the music rhythm game Beat Saber and VR versions of some popular games, such as Resident Evil. In addition, some users are showing more interest in using VR for fitness activities.
But that still pales in comparison to the console market, where heavy hitters like FIFA and Call of Duty are selling hundreds of millions of copies. Meanwhile, Meta’s Horizon Worlds social VR platform is still in the experimental stage. Abruzzese said, “The only real meta-universe product is Horizon, but it’s not doing well at the moment.”
