Meta unveiled the Quest 3 mixed reality headset ahead of Apple’s virtual reality debut

NEW YORK (Reuters) – Meta Platforms (META.O) CEO Mark Zuckerberg on Thursday unveiled the company’s next-generation mixed reality headset, Quest 3, as the company prepares for Apple to reshape the emerging market once dominated by Meta. Until now.

Starting at $499, Zuckerberg said in an Instagram post ahead of the Meta’s annual gaming conference, the device will be 40% thinner than the company’s previous headset and feature color-mixed reality, which combines elements of augmented and virtual reality (AR/VR).

Meta also said it will lower the prices of its existing Quest 2 headsets, while adding performance upgrades to those hardware with the goal of offering a smoother user experience.

Zuckerberg said the Quest 3 will feature a new Qualcomm chipset with twice the graphics performance as the Quest 2. He said the device will launch in the fall and promised more details at the company’s annual AR/VR conference on Sept. 27.

Zuckerberg’s announcement came less than a week before technology rival Apple (AAPL.O) is to unveil its first mixed reality device, a high-end product priced around $3,000, according to a Bloomberg report.

Meta Quest 2 and Quest Pro hardware accounted for nearly 80% of the 8.8 million virtual reality headsets sold in 2022, according to an estimate by market research firm IDC.

The Pico was second with 10% share by Chinese-owned ByteDance, which also owns social media rival TikTok.

However, despite its dominance, the Meta has struggled to sell its immersive “metaverse” vision of interconnected virtual worlds and expand its hardware market beyond the niche of the gaming community.

The company has ranked eight of the 10 most popular apps in its Quest store as being in the Games category, according to a Reuters tally.

After increased interest during the pandemic, headset sales slumped in the first quarter of this year, with the total AR/VR headset market down 54.4% year-on-year.

Revenue from Meta Reality Labs’ segments, which include headset sales, fell 50% in the most recent quarter compared to a year earlier.

This puts the Meta well behind in the path it previously envisioned for Unity. One dead executive in 2018 that the company’s metaverse would reach 100 million units within a decade, half of which would be Meta devices.

“Between now and the end of the year, there will be a slowdown,” said Jitesh Ubrani, research director who tracks the virtual reality market at IDC. “Virtual reality has so far been largely built around gaming. And I think gaming will continue to be the dominant use case even into the future.”

Even in the gaming market, Meta is under threat from Sony, which is dominating the gaming hardware market with the PS5. Sony released its second-generation gaming headset, the PS VR2, in February and has great developer support.

Meta seems to be leaning on that market at the moment by pairing the Quest 3 announcement with its annual Games Show, where the company teased new ways users can kill vampires and outwit evil bots in upcoming releases.

In March, Meta slashed the prices of most of its existing Quest headphones in hopes of sparking demand, after raising the price of its entry-level Quest 2,128GB version in July 2022.

Its high-end Meta Quest Pro now sells for around $1,000, down from its $1,500 launch price, and the 256GB version of the Quest 2 now starts at around $430, down from $500.

The company said Thursday that it will cut prices for the Quest 2 again starting June 4, with the entry-level device dropping to its original $300 price and the 256GB version to $350.

To attract more audience, Zuckerberg has in recent years made overtures to the fitness world, posting videos of himself using Meta devices while fencing with Olympic medalists and trading punches with mixed martial arts fighters.

He won a battle with US antitrust regulators to acquire the app developer behind VR fitness app Supernatural. During the trial, government attorneys showed evidence that Meta executives had identified fitness as a way to expand the use of virtual reality beyond its existing fan base of mostly young gamers.

Zuckerberg has also built productivity tools to market the Quest headsets as virtual offices, including a partnership with Microsoft to bring apps like Teams and Outlook to the devices.

(Reporting by Katie Paul). Additional reporting by Yuvraj Malik and Stephen Nelis. Editing by Lisa Shumaker

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