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The Metaverse is off to an ominous start as VR headset sales slump in 2022

The Metaverse is off to an ominous start as VR headset sales slump in 2022

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Meta CEO Mark Zuckerberg demonstrates an 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

More than a year later change his company name to Meta and committed to spending billions of dollars to develop the metaverse, To Mark Zuckerberg virtual reality betting is no closer to paying off.

Sales of VR headsets in the U.S. this year fell 2 percent from a year earlier to $1.1 billion as of early December, according to data shared with CNBC by research firm NPD Group. Facebook’s advertising business generates this much revenue every three days.

With the advertising business stuck in a slump, Zuckerberg is looking to VR devices and related technologies to bring Meta into the future. But data from analyst firm CCS Insight reveals that global shipments of VR headsets, as well as augmented reality devices, are down more than 12% year-on-year to 9.6 million in 2022.

Taken together, the VR headset sales and supply forecasts paint a troubled picture for Meta, whose share price has lost about two-thirds of its value this year. Zuckerberg said he is playing a long game with the metaverse, expecting it to take up to a decade to become mainstream, and predicts it will eventually house hundreds of billions of dollars in commerce.

It’s not just Meta. A host of venture firms and other tech companies have bet big over the past decade on a futuristic world of virtual work, education, fitness and sports.

of Meta Mission 2 headset released in 2020 is by far the market leader for VR, according to several analysts. Competing devices from companies such as Valve, HP and Sony represent a small part of the market.

Sales of Meta’s flagship Quest device fell in 2022, a decline that can be attributed to the device’s big year in 2021, it said Ben ArnoldNPD Consumer Electronics Analyst.

“VR had an incredible holiday in 2021,” Arnold said, referring to various promotions that helped boost sales of the devices at a time when game consoles like Sony’s PlayStation 5 were in short supply. “It was a great time last year to get my hands on one of these products and VR totally crushed it.”

VR headset revenue in the U.S. is set to double in 2021 from about $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 and, like any consumer electronics device, has lost some appeal as it ages. And while Meta released new VR headset in the fall, the Quest Pro, this 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.

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

Leo Gabyanalyst at CCS Insight, said in an email that Meta’s price increase was a surprise “given that the company was willing to sell the headset at such a low margin to try to drive VR adoption and earn 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.

Gebbie said that “consumer budgets will tighten” and “non-essential purchases like VR headsets will probably fall victim to that.”

Sony’s next generation VR headset it will cost $550 when it debuted in February. Arnold said that while the PlayStation VR2 will “give the market something of a shot in the arm,” it probably won’t impact the overall VR market as much as the Quest 2, since Sony’s device requires owners to have a PlayStation 5 as a way to power it. the handset.

Sony PlayStation VR2 headset

Sony

“PSVR2’s general addressable market will be PlayStation owners,” Arnold said.

A major question for next year remains whether An applewhile rumourswill introduce a VR headset.

Apple could create an immersive VR headset with an accompanying software ecosystem, Arnold said.

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

“If one company has the ability to transform the VR market overnight, it’s Apple,” Gebbi said. “With its fiercely loyal fanbase, many of whom are comfortable spending large sums of money on technology, if Apple were to release headphones, we expect them to perform very well.”

It’s Apple it is reported creating a VR headset with AR features to hit the market as soon as 2023.

Eric Abbruzzese, research director at ABI Research, said Apple could have success with a VR headset aimed at businesses, which would likely help attract developers to the community. But the high cost of enterprise VR headsets, which are likely to retail for several thousand dollars, will still make 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 this is the first major product from a huge technology operator.”

Apple did not respond to a request for comment.

One major thing the VR world is missing is a breakout or killer app.

Some games gained popularity, such as the music rhythm game Beat Sabre and VR versions of popular titles like Resident Evil, Abbruzzese said. And some users are more interested in using VR for fitness activities.

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

Meanwhile on Meta Horizon Worlds the social VR platform is still in an experimental phase.

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

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