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Inflated Metaverse

Why is Meta raising the price of its Quest 2 headset now?

SERGIO FLORES / AFP
A user wearing the Meta Quest 2 virtual reality headset. 
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The biggest bargain in the virtual reality devices, Meta’s Quest 2, just got a bit more expensive. The company is hiking the price of its entry-level device by $100, from $300 to $400 for the 128 GB model. Meta is also raising the price of its 256 GB Quest 2 to $500.

The shift comes ahead of Meta’s quarterly earnings report tomorrow, which could indicate that the company is finally buckling to shareholder pressure to make its VR unit profitable. In the first quarter of 2022, Meta reported (pdf) that it lost about $2.9 billion on Reality Labs, the arm of the company that includes its VR and augmented reality projects.

“VR’s momentum is undeniable…People have spent over $1 billion on Meta Quest apps,” the company stated today in a blog post announcing the price changes. “At the same time, the costs to make and ship our products have been on the rise. By adjusting the price of Quest 2, we can continue to grow our investment in groundbreaking research and new product development that pushes the VR industry to new heights.”

Meta is finally feeling the pressure after supporting its VR business at a loss

Since the pandemic started in 2020, most of the technology sector has experienced supply chain difficulties. But Meta has managed to keep its hardware available while competing gaming platforms like the Sony PlayStation 5 have been largely unavailable to consumers.

Nevertheless, as recession concerns mount, Google, Microsoft, Meta, and other large companies have initiated hiring freezes. The downstream effect has resulted in a pricier ticket to the metaverse. Meta also recently reduced its hiring targets for engineers, further indicating that the company is bracing for possible economic tumult ahead. Of course, Apple’s recent privacy changes to iOS, its mobile platform, also impacted Facebook’s advertising revenue by billions, which may be another reason why Meta is scaling back.

The Quest 2 is about to get some major metaverse competition

Also influencing Meta’s Quest 2 price move is the impending entry of new competitors. TikTok parent company Bytedance appears to be prepping the launch of its Pico Neo 3 VR headset in the US. The device, which, like the Quest 2, requires no PC, can be used anywhere and is optimized for gaming apps, currently sells for about 450 euros ($455) in Germany, France, the Netherlands, and Spain. That makes the Pico Neo 3, which has 256 gigabytes of storage, one of the most compelling alternatives to the Quest 2 in that price range.

Pico Interactive/Bytedance
A user wearing the Pico Neo 3 virtual reality headset.

When Pico’s VR product finally hits US stores, Meta’s Quest 2 will finally have its first real competition in the standalone VR space. Up until now, Meta has been able to subsidize the low cost of the Quest 2 in order to extend its lead in consumer VR. Still, the Quest 2's higher prices won’t completely change that dynamic. For comparison, HTC’s Vive Focus 3, which is geared toward business users, is a well-designed all-in-one VR headset but sells for $1,300, a more cost-effective price for the company, but not a price point that will cause widespread consumer VR adoption as quickly as Meta hopes.

Current economic conditions and a possibly less than stellar earnings report may be offering some cover for Meta’s new pricing move, but it’s just as likely that the company is girding itself for stiffer VR competition. Sony has begun to tease the next version of its VR headset, the PS VR, and rumors persist that Apple will start selling a headset in 2023.

 

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