What if Apple unveiled the most important new product in years and the world wowed?
Apple’s Mixed Reality headset, expected to be released next week — a product that combines virtual reality with augmented reality, superimposing the digital world on top of the real one — feels out of date.
Generative artificial intelligence has taken the tech industry by storm this year. It may represent the most important new way to interact with a computer in a long time, with the same impact that the iPhone’s multi-touch screen had 16 years ago.
It’s unclear how this new type of artificial intelligence will affect the smartphone space dominated by Apple. ChatGPT’s text-heavy interactions are not suitable for small screens, and voice- and image-based mobile phone technology applications are still in development. But for now, this has become the tech industry’s most important experimental focus, rather than the immersive world of VR.
Even without this burst of interest in another corner of the tech world, headphones that Apple’s been working on perfecting for years will still feel odd to most consumers. It costs around $3,000, a high price that will limit sales to a small number of hobbyists and developers who want to create software for it. And the world isn’t asking for cheaper VR gear (Meta’s Quest 2 will soon be on sale for as low as $299). Most people who try virtual reality are overwhelmed by its novelty, but are reluctant to put on a headset while working, gaming or entertaining.
However, Apple’s ventures into virtual and augmented reality need to be judged against its broader goals. It’s best thought of as a hedge against future technological disruption, a relatively modest but still useful expansion of Apple’s existing universe of services and gadgets, and a placeholder for a technological revolution that may take many years to complete.
The hedge is against the threat of Apple’s iPhone empire. It’s unclear if or when smartphones will lose their centrality in people’s digital lives, but Apple clearly needs to bet more on the future.
The former Facebook company was the first to try to move beyond the smartphone, buying VR company Oculus nine years ago. It clearly failed: Only 8.5 million VR headsets were sold last year, according to estimates from Interactive Data Corporation. That still leaves a lot of room for Apple.
Even if sales are negligible for a long time, the headphones should be a modestly profitable addition to Apple’s lineup and another way to bring users more closely into its ever-expanding digital world. With its own suite of digital services, such as music, video content and game subscriptions, Apple will be well-positioned to develop the VR experiences it needs to fuel demand for its headsets.
The 34 million software developers registered to work on Apple devices represent an even stronger asset. It’s unclear what the “killer app” for VR is, but the combined effort of these guys makes it likely that they’ll use Apple’s headsets first.
This has most Wall Street analysts optimistic about the expected expansion of Apple’s hardware range. For example, Goldman Sachs predicts that its headphone sales will reach $18 billion in five years. That would effectively boost Apple’s segment that sells wearables, home devices and accessories, which generated $41 billion in sales last year. One wild card is the high-margin service sold alongside the headset: If consumers are willing to pay for the deeply immersive experience VR brings, software sales could eventually exceed the amount they spend on hardware each year, just as they do on consoles The game market does that.
In the end, as the herald of an important new technology category, Apple headphones will be a statement of intent, not an end in itself. No matter how impressive the technology behind the device is, it still suffers from a problem common to all VR and AR headsets: Most people don’t want to wear a bulky headset or cut off from the world to enter a different digital realm.
Until the same experience can be applied to lightweight glasses — or even contact lenses, one day, could make the technology completely invisible — VR and AR are unlikely to permeate everyday life the way smartphones have. But if Apple finally unveils its headphones next week, it’s taking the most important first step.
richard.waters@ft.com