Virtual Reality

The Metaverse is off to an ominous start after VR headset sales drop in 2022

Meta CEO Mark Zuckerberg shows off an Oculus Rift virtual reality (VR) headset and Oculus Touch controllers at the Oculus Connect 3 event in San Jose, California, United States, Thursday, October 6, 2016.

David Paul Morris | Bloomberg | Getty Images

More than a year later changing the name of his company Meta and pledging to spend billions of dollars to grow the metaverse, by Mark Zuckerberg betting on virtual reality is not about to pay off.

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

With advertising activity mired in a crisis, Zuckerberg turned to VR devices and related technologies to pull Meta into the future. But data from analyst firm CCS Insight reveals that global shipments of VR headsets as well as augmented reality devices fell more than 12% year-over-year to 9.6 million in 2022.

Taken together, the VR headset sales and shipment estimates paint a problematic picture for Meta, whose stock price has lost about two-thirds of its value this year. Zuckerberg said he was playing the long game with the metaverse, expecting it to take up to a decade to go mainstream and projecting that it will eventually host hundreds of billions of dollars in commerce.

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

Meta Quest 2 headset, released in 2020, is by far the market leader in VR, according to several analysts. Competing devices from companies like Valve, resume and sony represent a small fraction of the market.

Sales of Meta’s flagship Quest device fell in 2022, a drop that can be attributed to the device’s big year in 2021, said Ben Arnoldconsumer electronics analyst at NPD.

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

Revenue from VR headsets in the United States doubled in 2021, from around $530 million in 2020, according to NPD.

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

A Brief History of the Metaverse

The Quest 2 has been around for a few years and, like any consumer electronic device, has lost its appeal as it ages. And while Meta released a 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 over the summer to to augment the price of the Quest 2 by $100, citing inflationary pressures.

Leo Gebbiean analyst 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 and drive adoption of the virtual reality and gain a high market share”.

Meta declined to comment on its VR headset sales or third-party estimates.

All eyes 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 “consumer budgets will tighten” and “non-essential purchases like VR headsets will likely take the brunt.”

Sony’s next-generation VR headset will cost $550 when it debuted in February. Arnold said that while the PlayStation VR2 “will give the market a bit of a boost”, it probably won’t influence the overall VR market as much as the Quest 2, as Sony’s device requires owners to have a PlayStation 5 as a means of supply. helmet.

Sony PlayStation VR2 Headset


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

A major question for next year remains whether Appleas long rumoredwill unveil a VR headset.

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

Additionally, Apple’s reputation as a leader in consumer technology could give the VR market a spark, making the technology more appealing to the general public.

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

Apple is would have building a VR headset with AR functionality for release as early as 2023.

Eric Abbruzzese, director of research at ABI Research, said Apple could successfully launch a VR headset aimed at enterprises, which would likely help attract developers to the community. But the high price of an enterprise VR headset, which would likely cost several thousand dollars, would 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 an Apple corporate VR headset. “But it’s the first notable product from a huge, historic tech player.”

Apple did not respond to a request for comment.

One major thing the VR world lacks is a smash hit or a killer app.

Some games have gained traction, such as the musical rhythm game beat the saber and VR versions of popular titles like resident Evil, said Abbruzzese. And some users are showing more interest in using virtual reality to aptitude Activities.

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

Meanwhile Meta Horizon Worlds The social virtual reality platform is still in its experimental phase.

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

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