In the first quarter of this year, global sales of augmented reality (AR) and virtual reality (VR) headsets saw a dramatic decline of 67.4 percent compared to the previous year, according to the latest IDC report. This drop was anticipated due to the rise of new types of headsets for mixed reality (MR) and extended reality (ER). Despite this decline, Meta remains the market leader, followed by Apple, ByteDance, Xreal, and HTC.
The evolution of VR headsets: from Quest 2 to Quest 3S
Meta, a pioneer in the VR market, seems to be preparing for a significant shift. The Meta Quest 2, once a top-selling VR headset, is nearly sold out globally. This suggests that Meta is preparing to phase out the Quest 2 in anticipation of the launch of a new model: the Meta Quest 3S.
The Quest 2 is now only available in a few countries, and major retailers like Amazon and Best Buy have removed it from their inventory. The significant price cuts for the Quest 2, coupled with the cessation of new production, indicate that Meta is clearing out old stock to make way for the next generation of headsets.
The rise of Mixed Reality and Augmented Reality
The decline in VR headset sales can be partly attributed to the shift from ‘simple’ VR to the emergence of mixed reality (MR) and augmented reality (AR). While the Quest 2 offered a basic VR experience, consumers are now increasingly interested in headsets that combine both VR and AR capabilities. These new MR and AR headsets promise a richer and more versatile user experience.
With the upcoming Quest 3S, a more affordable variant of the Quest 3, Meta appears to be addressing this trend. The Quest 3S is expected to be a budget-friendly version of the Quest 3, featuring similar components but with some reduced specifications, such as a less advanced display and lenses. This allows Meta to reach a broader audience with an affordable option that still provides access to the latest technologies.
Rising sales prices and market predictions
Despite the drop in the number of headsets sold, the average selling price (ASP) has risen above USD 1,000. This increase is due to the introduction of premium headsets like Apple’s Vision Pro and the Meta Quest 3. These high-end devices have spurred developers to create mixed reality content, which has contributed to the higher prices. However, more affordable devices from Meta and HTC have prevented the average price from rising significantly, with many VR and ER devices priced under USD 500.
IDC predicts that headset sales will rebound later this year, with a projected volume growth of 7.5 percent compared to 2023. This growth is expected to be driven by the launch of new headsets and price reductions. Looking ahead, IDC forecasts that headset volumes will show a compound annual growth rate (CAGR) of 43.9 percent from 2024 to 2028, indicating rapid market expansion.
Conclusion
The VR and AR market is undergoing a significant transformation, moving from the nearly sold-out Meta Quest 2 to the emerging Meta Quest 3S and other mixed reality headsets. Despite a temporary decline in sales, the outlook is promising. With lower prices and more advanced technologies on the horizon, the market is expected to grow and evolve further. This presents new opportunities for both consumers and businesses in the realm of virtual and augmented reality.
