What are the Implications of Meta’s Recent Price Drop for Its Flagship Headsets?
Why is Meta suddenly lowering the prices of its virtual reality headsets?
Meta has dropped the prices for its two flagship headsets; the consumer-focused Meta Quest 2 headset which has been around since 2020 and the Meta Quest Pro headset which was launched in October 2022.
Although Meta’s Quest 2 has sold close to 20 million units, there was a slowdown in sales following a recent $100 price hike. The work-focused and business-focused Quest Pro headset costs $1,500 and is out of reach of many buyers. The price hike should, therefore, be seen in this context, especially given that it is launching a successor to the Quest 3 this year.
Meta has slashed the prices for Meta Quest Pro from $1,499.99 to $999.99 while the price for the $256GB Meta Quest 2’s price has dropped from $499.99 to $429.99.
The price of the work and productivity-focused Meta Quest Pro has been slashed by $500 or a drop of roughly 33%. This is significant for a headset that was launched with much fanfare, together with support from both Accenture and Microsoft.
The slump has affected the larger VR market as well as associated industries such as the gaming world. In 2022, the VR market registered a 2% drop in sales year-over-year, based on research by NDP.
However, Meta not only has a problem with pushing its headsets to the market but it is also facing challenges keeping new headset owners hooked to its products according to a recent presentation by Meta VP of VR Mark Rabkin.
Rabkin reportedly Meta staff during the presentation that the newest buyers are “just not as into it” as the earlier buyers.
IDC Research Director Ramon Llamos said consumers are still able to lay their hands on virtual reality headsets at a much lower cost by buying them second-hand and refurbished headsets in the aftermarket.
Llamos calls Meta’s price drops a “macro move” and that it is still too early in the day to determine if this is part of cleaning out the current Quest 2 inventory as Quest 3 will launch towards the end of the year.
XR is a High Stakes Pursuit for Meta
Meta is pumping billions of dollars in the pursuit of its XR ambitions. In 2022, its XR division Reality Labs lost $13.7 billion, more than the $10.2 billion that the division lost in 2021, based on the company’s latest earnings report.
Although the company is hemorrhaging cash in its XR division, the sheer amount of the investment is cementing the company’s dominant position in the VR device market. Meta’s share of the VR device market increased from 45% to 82% in the past year, according to IDC.
This is still a fledgling market and if Meta is going to maintain their dominance, its current play is the right one, despite the steep costs for the company.
It is therefore sensible for Meta to continue subsidizing its VR hardware at the moment when the market is still in its early stages and get more people onboard which is good for the industry in general.