For an industry that hardly has any big news now, it was a huge week for virtual reality. Unsurprisingly, the all-important data points pertain to the industry’s sole beneficiary these days, Meta, which managed to raise the cost of entry into its VR ecosystem, finds itself in a new battle with the US government over VR, and announces that it spent too much money on its Reality Lab efforts, again, this quarter.
The strangest news was certainly the unprecedented move for Meta to raise Quest 2 prices by $100. This, again, is a year-old headset that Meta is reportedly selling at a loss to lure more consumers into the market. This massive increase moves the entry price from $299 to $399 and indicates the company has its own limit to subsidize the headset in relevance.
This price increase is accompanied by record inflation levels and a hostile stock market that has taken a particularly strong hatch for Meta’s share price. The company’s stock is now trading below where it was 5 years ago and spending at Realty Labs has become a more relevant concern for investors as the company’s revenue growth begins to fade.
VR and the metaverse are becoming very expensive endeavors for the meta. The company announced Wednesday that they spent $2.8 billion on Reality Labs in Q2 alone, a number indicating that the company’s metaverse dreams are more than just hokey marketing speak and in an area with little near-term substantial financials. The stakes remain where many of the big tech giants have pulled back their R&D spending in recent years.
The thing to remember is why Meta initially adopted the strategy of selling headsets. This was not the company’s initial plan, with the Rift headset and its controllers retailed for around $800 upon launch and only after years of slashing prices was the company able to ramp up sales of the device. It was, of course, a piece of hardware that a gaming PC needed and was in line with close competitors at similar price points.
Fast forward 5 years and there may still be a handful of headsets out there, but the cornerstone of recent headset number growth has been pinned specifically for the Quest 2 which is the lowest-cost point of entry in the market. Raising the prices of a technical hardware product in the middle of its lifecycle certainly suggests a fundamentally wrong calculation and a company is less likely to repeat.
As the company barrels toward the release of its “Project Cambria” headset, which Bloomberg reports will be called the Quest Pro and is pegged at a rumored $1500 price point, the VR industry seems to be taking it on relative merits. being forced to compete. of its ecosystem and to justify something close to the true cost of its hardware to consumers. It would be a big, abrupt change to make it meta and I question how big the audience of users is for a $1,500 headset in 2022, even one with a “professional” focus.
META’s efforts are not being completely isolated. Sony this week announced new details on its second-generation headset, and Apple is investing heavily in the long-delayed Mixed Reality headset release, a device that could cost more than $3,000 when it’s finally released. and will undoubtedly serve as an outlier. Its own suite of “pro” products.
However, Apple seems to have an advantage when it comes to acquiring new startups and products in the VR space. Meta’s efforts to win big in the Metaverse faced a fairly daunting challenge Wednesday when the FTC announced they were suing the studio behind VR fitness app Supernatural to block Meta’s purchase of a VR developer. Were. A block of the deal, which was reportedly for more than $400 million, would be a pretty surprising rebuke of one of the VR industry’s only exit opportunities, during a phase of the industry where revenue is hard to come by and VR. Startups are failing to earn too much investor interest.
After the better part of a decade since Facebook’s Oculus acquisition, the VR industry is still as fully dependent on meta’s checkbook as ever. A public market downturn is forcing the company’s infinite spending adjustments on the subcategory and plenty of second-order effects are evident along the way.