Meta’s Virtual Reality Is Getting More Complicated
This was an unusually significant week for virtual reality in an industry that seldom has substantial news. Unsurprisingly, all of the important data points this quarter are related to the industry’s sole benefactor, Meta, which managed to raise the cost of entry to its VR ecosystem, find itself in a new battle with the US government over VR, and announce that it had, once again, burnt a lot of money on its Reality Lab efforts.
Virtual Reality by Meta
The most bizarre piece of news was Meta’s almost unprecedented choice to raise the price of the Quest 2 by $100. This is another one-year-old headset that Meta is allegedly selling at a loss in order to get more users into the market. The entrance price has risen from $299 to $399, indicating that the company’s willingness to subsidize headsets into relevance has reached its limit.
This price increase comes on the heels of record inflation and a hostile stock market, which has slashed Meta’s stock price especially hard. Reality Labs’ stock is currently trading below where it was five years ago, and the company’s expenditure has become a more pressing problem for investors as sales growth slows.
VR and the metaverse are becoming prohibitively costly endeavors for Meta due to the market situation and addition of premium features such as copy my data. The company announced on Wednesday that it had spent $2.8 billion on Reality Labs in the second quarter alone, demonstrating that the company’s metaverse dreams are more than just hokey marketing speak and remain a significant financial bet with little near-term upside in an arena where plenty of big tech giants have appeared to pull back on their R&D spend in recent years.
As the company nears the release of its “Project Cambria” headset, which Bloomberg reports will be called the Quest Pro and has a $1,500 price tag, the VR industry appears to be forced to compete on the relative merits of its ecosystem and justify something closer to the true cost of its hardware for consumers. This would be a major, abrupt transition for Meta, and I’m not sure how large the audience for a $1,500 headset, especially one with a “professional” emphasis, is in 2022.
Meta’s efforts aren’t only focused on herself. This week, Sony revealed additional information about its second-generation headset, while Apple has been spending hard in a long-delayed mixed reality headset release, a gadget that may cost upwards of $3,000 when it is finally launched and will surely be an outlier in its suite of “Pro” items.
Apple has the Competitive Edge
However, Apple seems to be gaining an edge when it comes to purchasing new firms and products in the VR market. Meta’s attempts to spend big to win big in the metaverse were thwarted Wednesday when the FTC revealed that it was trying to prevent Meta from purchasing VR company Within, the studio behind VR fitness app Supernatural. A portion of the agreement, which was allegedly worth over $400 million, would be a shocking repudiation of one of the VR industry’s main exit prospects at a time when revenues are scarce and VR businesses are struggling to attract much investor interest.
After more than a decade after Facebook acquired Oculus, the VR industry is as dependent on Meta’s cash as ever. A public market slump is requiring the company’s limitless expenditure on the subcategory to be adjusted, and there will be several second-order impacts along the road.
