More than a year after changing the company’s name to Meta and pledging to spend billions to develop the Metaverse, Mark Zuckerberg’s VR bet is nowhere near paying off.
Sales of virtual reality headsets in the US this year fell 2% year-over-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 this kind of revenue about every three days.
With the advertising business in decline, Zuckerberg looked to virtual reality hardware and related technology to take Meta into the future. But global shipments of VR headsets and augmented reality devices will decline more than 12% year-on-year to 9.6 million units in 2022, according to analytics firm CCS Insight.
Taken together, VR sales and shipment estimates paint a troubled picture for Meta, whose shares have lost about two-thirds of their value this year. Zuckerberg said he was in a protracted battle with the Metaverse, predicting that it would take about a decade for it to become popular and that it would eventually have hundreds of billions of dollars in commercial value.
Not only Meta. Over the past decade, many venture capital firms and other technology companies have invested heavily in the future world of virtual work, education, fitness and sports.
Released in 2020, the Meta Quest 2 headset is the leader in the virtual reality market today, according to several analysts. Competing devices from Valve, HP and Sony make up only a small part of the market.
Ben Arnold, a consumer electronics analyst at NPD, said sales of the flagship Meta Quest device will decline in 2022, and this decline may be due to strong sales of the device in 2021.
“VR has had a fantastic holiday year in 2021,” Arnold said, referring to various promotions that have helped boost device sales at a time when consoles like Sony’s PlayStation 5 are in short supply. “Last year was a great time to get one of these products, and VR completely smashed it.”
The Quest 2 has been around for several years and, like any consumer electronics device, has lost some of its appeal with age. While Meta released a new Quest Pro VR headset in the fall, the device is aimed at businesses and costs $1,100 more than the Quest 2, making it even more out of reach for many VR enthusiasts.
During the summer, due to inflationary pressures, Meta decided to increase the price of Quest 2 by $100.
Leo Gebbi, an analyst at CCS Insight, said in an email that Meta’s price increase came as a surprise “because the company was willing to sell the headset at such a low margin in an attempt to drive VR adoption and gain more market share.”
Another “downturn” in the VR market is expected next year, according to the latest CCS Insight report, citing a weak economy and inflation.
“Consumer budgets will shrink,” Gebby said, “and it will be possible to donate discretionary items like virtual reality headsets.”
Sony’s next-generation VR headset will debut in February for $550. Arnold said that while PlayStation VR2 would “give a boost” to the market, it probably wouldn’t have as much of an impact on the overall VR market as Quest 2 did, as Sony’s device requires owners to have a PlayStation. 5 as a means of powering the headset.
In addition, Apple’s reputation as a leader in consumer technology could spark a spark in the bleak virtual reality market, making the technology more appealing to the public.
“If there’s one company that can change the VR market overnight, it’s Apple,” Gebby said. “Given a huge and dedicated fan base, many of whom are willing to spend a lot of money on technology, we expect that if Apple releases a headset, it will be a success.”
Eric Abbruzzese, director of research at ABI Research, said Apple could be successful in releasing an enterprise VR headset, which would help bring developers into the community. But Abbruzzese said the high price of corporate VR headsets, which can retail for thousands of dollars, will still prevent Apple from making a move.
“Probably no more than 5 million units shipped in the first year,” Abbruzzese said of Apple’s enterprise-grade VR headset. “But it’s the first notable product from a major tech company.”
Abbruzzese said some games have already caught on, such as the musical rhythm game Beat Saber and VR versions of popular games like Resident Evil. Some users have shown more interest in using VR for fitness.
But in the console market, blockbusters like FIFA and Call of Duty “ship in hundreds of millions of units,” he said.
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Post time: Dec-30-2022