The virtual reality (VR) market has been heating up, with dozens of major players and startups rolling out their versions of the original Oculus.
The clear winner is currently Meta Platforms Inc. (NASDAQ: META) with a reported 90% market share in the VR industry. This is in line with the company’s massive spending in the sector. Meta has spent over $100 billion on building out its VR and metaverse goals, which has yet to pay off, resulting in a roughly 70% decline in its stock price this year.
Despite Meta’s massive market share and willingness to spend absurd sums of money in the space, this hasn’t deterred others from trying to cut out a slice of the market. The runner-up is likely ByteDance Inc. — parent company of TikTok — with its Pico headset series, but Apple Inc. (NASDAQ: AAPL) is set to release a VR headset in 2023.
While many have failed to compete on the hardware side, others have found success on the gaming, marketplace and infrastructure side of things. Dozens of popular VR games like Beat Saber and Contractors have made millions with their fun takes on the VR genre.
VR is a brand new platform, which means startups have the ability to carve out viral popularity and become the next VR for Call of Duty. Further, startups like Gameflip have sold over $140 million of in-game and digital content and building out the next generation of gaming marketplaces. Gameflip is raising funds on StartEngine, which means anyone can invest!
While many are expecting Apple’s headset to be a massive player in the VR headset realm, it might end up dead on arrival. Not only will dethroning Meta be difficult for anyone — even Apple — there are also a number of other factors going into this. Mainly, while the VR market is expected to grow even if Apple manages to take a substantial portion of the current market, it wouldn’t be taking much.
Meta’s Quest Store has only sold about $1.5 billion in games and apps since 2019, resulting in under $500 million in revenue. For its VR headsets, that number is slightly better at 15 million headsets sold. At an average of about $500 per headset, that translates into roughly $7.5 billion in revenue. While these aren’t small numbers in the grand scheme of things, it took over $100 billion to get there. Given Meta’s market dominance and the relatively small size of the potential market share that Apple could take, it could spell disaster.
Apple’s VR headset is set to be priced between $2,000 and $2,500. This is over four times as much as Meta’s popular Quest 2 and double the price of its premium headset, the Quest Pro. While the headset is likely to have more features, the real problem will be the lack of infrastructure. There are PC VR options, but Meta has spent billions of dollars building out its VR apps, games, story and other infrastructure over the last several years. With Apple’s massive market share, it will be hard to attract developers to come to its platform to make games and apps. This ultimately creates a chicken-or-the-egg problem by which Apple needs developers to gain traction, but developers need Apple to gain traction before they will develop on the platform.
This isn’t the first time this has happened to a major player either. Most famously is the Microsoft Corp. (NASDAQ: MSFT) flop with the initial release of its Windows phone. This exact problem happened, and it cost them billions and took years to recover.
It’s anyone’s guess what will happen, but there might be a better and different play entirely. With new markets like this, it’s often easier for startups to take advantage of the lack of key players in certain niche areas of the market. With changes in recent law, anyone can invest in startups. Startups like Gameflip offer high-risk, high-reward startup investing options that, if successful, can carve out profitable niches in these emerging markets that scale to become bigger players as the market grows. Several other VR startups are raising funds on StartEngine, and StartEngine itself is also open for investment.