Metaverse Gets Off to an Ominous Start After VR Headset Sales Drop in 2022

Meta CEO Mark Zuckerberg shows off the Oculus Rift virtual reality (VR) headset and Oculus Touch controllers during the Oculus Connect 3 event in San Jose, California, U.S., Thursday, Oct. 6, 2016.

David Paul Morris |: Bloomberg |: Getty Images:

A year after changing his company name Meta: Mark Zuckerberg’s bet on virtual reality, and committed to spending billions of dollars developing the metaverse, may not pay off.

Sales of VR headsets in the U.S. are down 2% this year from last year, to $1.1 billion as of early December, according to data provided to CNBC by research firm NPD Group. Facebook’s advertising business generates that much revenue roughly every three days.

With the advertising business in decline, Zuckerberg is looking to VR devices and related technology to take Meta into the future. But data from analytics firm CCS Insight shows that global shipments of VR headsets, as well as augmented reality devices, are down more than 12% year-over-year to 9.6 million in 2022.

Together, the VR headset sales and shipment estimates paint a troubled picture for Meta, whose stock price has lost about two-thirds of its value this year. Zuckerberg has said he’s playing the long game with the metaverse, expecting it to take up to a decade to go mainstream and predicting it will eventually see hundreds of billions of dollars in commerce.

It’s not just Meta. Many venture firms and other technology companies have been betting big on the futuristic world of virtual work, education, fitness and sports over the past decade.

Released in 2020, Meta’s Quest 2 headset is the clear leader in the VR market, according to a number of analysts. Competing devices from companies such as Valve, HP: and: Sony: represents a small portion of the market.

Sales of Meta’s flagship Quest device are down in 2022, a decline that can be attributed to the device’s big year in 2021, said NPD consumer electronics analyst Ben Arnold.

“VR had a great holiday in 2021,” Arnold said, referring to various promotions that helped boost device sales at a time when game consoles like Sony’s PlayStation 5 were in short supply. “Last year was a great time to get one of these products, and VR completely crushed it.”

VR headset revenue in the U.S. is set to double in 2021 from an estimated $530 million in 2020, according to NPD.

A combination of factors contributed to lower sales and shipments in 2022.

The Quest 2 has been around for a few years now, and like any consumer electronics device, it’s lost some appeal as it’s aged. And while Meta released a new VR headset in the fall, the Quest Pro, that device is aimed at businesses and costs $1,100 more than the Quest 2, putting it further afield for many VR enthusiasts.

Meta decided to raise the price of the Quest 2 by $100 over the summer, citing inflationary pressures.

CCS Insight analyst Leo Gebbi said in an email that Meta’s price hike was a surprise “given that the company has been willing to sell the headset at such a low margin in an effort to capture VR and gain a high market share.” “.

Meta declined to comment on sales of its VR headsets or third-party ratings.

All eyes are on Apple

Next year is expected to be another “slow year” for the VR market, CCS Insight said in its latest report, citing a weak economy and inflation.

Gabby said “consumer budgets will tighten” and “non-essential purchases like VR headsets will likely fall victim.”

Sony’s next-generation VR headset will cost $550 when it launches in February. Arnold said that while the PlayStation VR2 will “kind of impact the market, it likely won’t impact the overall VR market as much as the Quest 2 because Sony’s device requires owners to have a PlayStation 5 as a energy medium. the headset.

Sony PlayStation VR2 headset


“The general target market for PSVR2 is going to be PlayStation owners,” Arnold said.

The main question for next year remains Apple:as long rumored to feature a VR headset.

Apple could build a compelling VR headset with an accompanying software ecosystem, Arnold said.

In addition, Apple’s reputation as a leader in consumer technology could add a spark to the murky VR market, making the technology more appealing to the general public.

“If one company can transform the VR market overnight, it’s Apple,” Gebbi said. “Thanks to its extremely loyal fan base, many of whom are comfortable spending a lot of money on technology, if Apple were to release a headset, we expect it to do very well.”

Apple is reportedly building a VR headset with AR features to launch in 2023.

Eric Abruzzese, director of research at ABI Research, said that Apple could successfully launch a VR headset designed for businesses, which would likely help developers attract a community. But the high price of enterprise VR headsets, which are likely to sell for several thousand dollars, still makes it difficult for Apple to move the needle, Abbruzzese said.

“It probably won’t even ship 5 million units in its first year,” Abbruzzese said of Apple’s enterprise VR headset. “But it’s the first major product from a huge tech incumbent.”

Apple did not respond to a request for comment.

One important thing that the VR world lacks is a breakout hit or killer app.

Some games have gained traction, such as the music rhythm game Beat Saber and VR versions of popular titles such as Resident Evil, Abbruzzese said. And some users are showing more interest in using VR for fitness activities.

But in the console market, blockbuster games like FIFA and Call of Duty “ship hundreds of millions of units,” he said.

Meanwhile, Meta’s social VR platform Horizon Worlds is still in the pilot phase.

“The only metaverse product is really Horizon, and it’s not good right now,” Abbruzzese said.

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