Metaverse off to ominous start after VR headset sales shrank in 2022

Over a year after changing his company’s name to Meta and committing to spend billions of dollars developing the metaverse, Mark Zuckerberg’s bet on virtual reality is no closer to paying off.

Sales of VR headsets in the U.S. this year declined 2% from a year earlier to $1.1 billion as of early December, according to data shared with CNBC by research firm NPD Group. Facebook’s advertising business generates that much revenue about every three days.

With the ad business mired in a slump, Zuckerberg has been looking to VR devices and related technology to pull Meta into the future. But data from analyst firm CCS Insight reveals that worldwide shipments of VR headsets as well as augmented reality devices dropped more than 12% year over year to 9.6 million in 2022.

Taken together, the estimates of VR headset sales and shipments create a problematic picture for Meta, whose stock price has lost about two-thirds of its value this year. Zuckerberg has said he’s playing the long game with the metaverse, expecting it take up to a decade to go mainstream and projecting it will eventually host hundreds of billions of dollars in commerce.

It’s not just Meta. Numerous venture firms and other tech companies have wagered big over the past decade on a futuristic world of virtual work, education, fitness and sports.

Meta’s Quest 2 headset, released in 2020, is by far the leader in the VR market, according to several analysts. Competing devices from companies like Valve, HP and Sony represent a small fraction of the market.

Sales of Meta’s flagship Quest device dropped in 2022, a decline that can be attributed to the device’s big year in 2021, said Ben Arnold, NPD’s consumer electronics analyst.

“VR had an amazing holiday in 2021,” Arnold said, referring to various promotions that helped boost sales of the devices at a time when gaming consoles like Sony’s PlayStation 5 were in short supply. “It was a great time last year to get one of these products, and VR totally crushed it.”

VR headset revenue in the U.S. doubled in 2021 from about $530 million in 2020, according to NPD.

A confluence of factors contributed to lower sales and shipments in 2022.

The Quest 2 has been around for a few years and, like any consumer electronics device, has lost some appeal as it’s aged. And while Meta released a new VR headset in fall, the Quest Pro, that device is geared toward businesses and costs $1,100 more than the Quest 2, pushing it even further out of reach for many VR enthusiasts.

Meta decided over the summer to raise the price of the Quest 2 by $100, citing inflationary pressures.

Leo Gebbie, an analyst at CCS Insight, said in an email that Meta’s price increase was a surprise “given that the company has been willing to sell the headset at such a low margin to try and drive uptake of VR and gain a high market share.”

Meta declined to comment about its VR headset sales or third-party estimates.