Meta Raises the Price of Quest 2 VR HMD amid Chaotic Internal, VR Market, and Macroeconomic Environment

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By Eric Abbruzzese | 3Q 2022 | IN-6630

Meta, the company behind the incredibly successful Quest 2 Virtual Reality (VR) Head-Mounted Display (HMD), announced it is raising the price of the headset 2 years after its initial launch. The device will now start at US$399, a US$100 increase. With new devices from Meta and competitors on the near horizon, the price increase appears oddly timed, although wide-reaching variables internally and externally make the situation more complicated than it appears.

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An End-of-Life Price Hike


Normally, when a tech product has been available for a few years and replacements are in the pipeline, a company will lower prices to help shift remaining stock and prepare for the new device sales. Meta has flipped that approach, instead raising the price of its incredibly popular Meta Quest 2 headset by 33%. Without context, this move seems misguided at best, but Meta’s overall Virtual Reality (VR) story and broad market approach in the metaverse is nothing if not complex. Coincidentally—or quite intentionally, depending on your viewpoint—Meta’s recent financial reports and Reality Labs spending calls into question its market approach, competitive position in both hardware and ecosystem, and, ultimately, its potential timeline to fully realize VR and metaverse ambitions.

Subsidizing, but at What Cost?


It’s been understood that the Meta Quest 2 was being sold at a loss—at its initial lowest price of US$299, it undercut every comparable VR headset, and sometimes by a significant margin. Meta was subsidizing the headset with revenue through Meta’s content stores and drumming up interest in its broader VR and metaverse ambitions. This is very similar to the game console market with hardware losses made up with game and ecosystem buy-in.

Purely based on hardware specifications, the Quest 2 was competitive with the likes of the Valve Index (US$1,000), HP Reverb G2 (US$600), and HTC VIVE Pro 2 (US$800)—these are all tethered devices as well, requiring a separate computer. Quest 2 is standalone, with a significant standalone-ready software ecosystem. No other competitor can say the same. There are similarly priced standalone devices, from Pico and DPVR as examples, but these are lacking the software ecosystem and, up to this point, have not been available globally.

All that considered, the Meta Quest 2 is still one of the best headsets to buy even at its new price. This goes to show how significant the subsidizing was with the original price, or at least how little competition Meta has had over the past couple years. No company other than the giants—Apple and Google, mainly—could subsidize at that level. The company has developed both the hardware and software ecosystem, hitting a sweet spot between accessibility and capability. It’s not a perfect solution, with valid concerns around privacy and security, requiring a Facebook account until recently, and some lacking hardware like eye tracking, but it’s the most robust today and has been for 2 years.

Global Variables and Competition


The price increase also comes amid tumultuous economic activities. The price hike could at least partially stem from these broader macroeconomic impacts on the device and the company—the Quest 2 is the only VR headset that is shipping at a scale where that can be noticed. Inflation and hesitance around the financial and job markets do no favors for consumers looking to purchase a VR headset—companies feel the same pressure, meaning both consumer and enterprise sales for Meta are uncertain.

Meta’s broader market positioning should also be considered. Mark Zuckerberg and Meta’s management team have been upfront from the beginning of their Meta rebrand that the metaverse is a long-term play, and financials will look weak thanks to significant investment and ramp-up time. However, it looks like the patience of shareholders, or their alignment with the metaverse transition, was overestimated. A 33% product price increase, with no real competition for customers to move to, can help stem some of the short-term financial bleeding. Ultimately, both shareholders and customers need to be convinced of Meta’s metaverse, of which VR is a necessary component.

Meta will not be an objective VR leader forever, nor will the Quest 2 remain the best overall headset forever. Meta itself will make sure of that will its next-generation headsets coming soon. Mentioned above, Pico and DPVR are companies to watch as they expand globally and release new competitive products.

Apple’s play in VR, while details are not confirmed, will absolutely be interesting. Apple VR hardware is likely coming within the next year, which, barring supply chain delays, will align with new Meta products as well. Details are not confirmed for either company, but estimates point to high-end headsets targeting prosumer and enterprises for both. Apple is also dominating the silicon space for performance and efficiency today, both hugely important for VR. If an Apple VR headset were to be standalone with an M2 chip inside, it could similarly dominate the VR space. Even if the device were not standalone, the M2 chip in a tethered Mac product retains an advantage. Pure outright performance would still be won with dedicated Graphics Processing Units (GPUs), in most cases, but the use cases where that level of local compute is necessary are limited—even the gaming space has demand for an M-level device amid high-end gaming PCs.

With so many variables to account for, it is impossible to simplify and attribute the Quest’s price hike reasoning to one or two factors. As with many stories, it is a combination of many factors now exacerbated by intense Meta rearranging and global political and economic events. While Meta’s go-to-market plans are sound on the surface, the timeline and financial freedom for the company to get there comes into question. The next 12 months will provide some critical insight into the potential future of Meta and its competitors—as the dust settles at the VR hardware and software level, the actual role and value of supporting ecosystems like the metaverse will crystallize.


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