The news: The global VR headset market saw growth by 241.6% in Q1 this year, with Meta owning 90% of the market with its Quest headsets, per IDC.
Meta dominates headsets, but for how long? Meta’s Quest 2 device is only available in the US and Canada, per IDC’s Worldwide Quarterly Augmented and Virtual Reality Headset Tracker. Other VR headsets are gaining ground.
- Following Meta, with a 4.5% market share, was ByteDance’s Pico headset, which is mostly limited to China’s borders but has slowly entered global markets for use in commercial applications.
- Other VR headset players include HTC and iQIYI with less than 4% share combined.
IDC notes there’s a high expectation for Apple’s VR or AR headsets, rumored to be coming to market this year.
- "All eyes will be on Apple as it launches its first headset. Keep in mind that this is its first headset that will appeal primarily to a small audience of early adopters and Apple fans," noted Ramon Llamas, research director with IDC's Augmented and Virtual Reality team.
- Apple’s entry into the market will likely upend pricing models, pushing headset costs into the premium market. The company is reportedly busy building content to support its VR play.
Subsidizing VR hardware is not sustainable: Meta owes a lot of its success to its pricing model for Meta Quest 2 headsets, which start at $299, about the cost of entry-level smartphones or gaming consoles. Meta has been subsidizing the cost of the hardware to entice user adoption.
- “Meta continues to pour dollars into developing the metaverse, but the strategy of promoting low-cost hardware at the expense of profitability isn’t sustainable in the long run,” said Jitesh Ubrani, research manager for IDC Mobility and Consumer Device Trackers.
- Meta is currently reeling from the ongoing financial crisis, with CEO Mark Zuckerberg warning employees he’s anticipating “one of the worst downturns that we’ve seen in recent history.”
- The company has frozen hiring, is “turning up the heat” on performance management to cull headcount, and is cutting back on metaverse investments to stay afloat.
- Hardware like VR headsets is the key to metaverse adoption—software is the key to retention. This makes it challenging for any one company to create affordable headsets while developing new and compelling use cases for VR and AR.
What’s next? Big Tech companies are in the best position to develop VR hardware while building immersive virtual-reality worlds and experiences. Meta’s forced financial austerity could put it at a disadvantage while companies with deeper pockets barrel into the metaverse hardware space.