Apple’s mixed-reality headset is coming. Here’s why initial sales might disappoint

Apple CEO Tim Cook
Justin Sullivan—Getty Images

Sixteen years ago today, Steve Jobs stood before a Macworld Expo crowd in San Francisco and declared that “Apple is going to reinvent the phone.”

Apple and Jobs did just that with the iPhone, unveiled on Jan. 9, 2007. But in hindsight, it’s easy to forget that the iPhone wasn’t quite a smash hit from the start.

Apple’s iPhone sales totaled a relatively paltry $123 million in the product’s first three months on the market. The following year, iPhone sales rose to $1.8 billion, or roughly 5% of Apple’s total revenue. (For context, iPhone sales hit $205 billion in fiscal 2022, accounting for slightly more than half of Apple’s revenue.)

It’s a data point worth keeping in mind as news emerges of Apple’s imminent plans to unveil its most ambitious piece of hardware since the iPhone: a mixed-reality headset.

Parallel reports from TF International analyst Ming-Chi Kuo and Bloomberg reporter Mark Gurman—two of the world’s leading authorities on Apple—suggest Tim Cook is on track to debut the still-unnamed headset sometime this spring and send it to market this fall. The headset, which might be called Reality Pro, has been under development for several years and hit multiple production snags, but Kuo and Gurman suggested Apple engineers are finally in the home stretch.

Given Apple’s track record, the headset figures to herald another major leap in the nascent augmented and virtual reality spaces. Gurman has previously reported that Apple’s device will feature enhanced versions of its primary functions, apps produced by third-party developers, and possibly a metaverse-type environment for collaboration.

Yet, for all the excitement over Apple’s arrival to the AR/VR game, a confluence of consumer and economic trends likely will hamper the device’s immediate popularity.

In theory, VR headset adoption should be on a steady rise, powered by the buzz over an exciting new technology and a marketing blitz from the sector’s far-and-away current leader, Meta. But CNBC, citing data shared by market research firm NPD Group, reported in late December that VR headset sales actually declined 2% year over year in 2022. What’s more, analysts at research firm CCS Insight said shipments for the broader category of augmented and virtual reality headset fell 12% year over year.

CCS Insight officials attributed some of the AR/VR headset slump to weak global economic conditions, which have depressed consumer electronics sales. Meta’s Quest 2 headset runs $400, while its newly released Quest Pro starts at a hefty $1,500.

“High inflation has hit consumer budgets in many major markets this year, and some people, who in better circumstances would have treated themselves to a virtual reality headset [in 2022], have postponed their purchase,” said CCS Insight’s vice president of forecasting, Marina Koytcheva.

Apple’s headset, in turn, seems even worse-positioned to weather the current economic downturn and a possible recession in 2023. 

While the company hasn’t announced the cost of its upcoming headset, Gurman has reported that it’s expected to reach $2,000 to 3,000. That price tag would put the product out of reach for many everyday consumers.

Of course, Apple executives are acutely aware of the economics at play. And for a road map to long-term success, the crew in Cupertino can look to its history.

When the first-generation iPhone arrived in 2007, critics also grumbled about its starting cost ($500 for a 4-gigabyte device; $600 for an 8-gigabyte upgrade). Wired writer Scott Gilbertson concluded that you’re “better off with something else for half the price,” while RealNetworks CEO Rob Glaser declared “those are not high-volume prices.” 

Early iPhone detractors might have been right about the initial value proposition. But Apple’s ultimate success came from iteratively building on its revolutionary—if commercially underwhelming—first-generation platform.

“After today, I don’t think anyone is going to look at these phones in the same way,” Jobs told the Macworld Expo crowd.

When Cook ultimately reveals Apple’s first mixed-reality headset, he’ll have to hope a similar pattern plays out in 2023 and beyond.

Want to send thoughts or suggestions to Data Sheet? Drop me a line here.

Jacob Carpenter


Echoes of Jan. 6. Rioters in Brazil used several leading social media platforms to organize their attacks on government buildings in support of former right-wing President Jair Bolsonaro, the Washington Post reported Monday. Researchers found the violent protesters used Telegram, Facebook, TikTok, and other sites to coordinate their daylong blitz on Brasília, which resulted in hundreds of arrests and a breach of the nation’s presidential palace. The online organizing efforts renewed debates over how social media companies police content ahead of potentially destabilizing political events.

Not wasting any time. A new Republican-led House panel is expected to probe communications between the White House and several prominent tech companies, Axios reported Monday. The investigation stems from GOP complaints that Democratic President Joe Biden’s administration colluded with tech giants to censor and harass conservatives on digital platforms. House Judiciary chairman Jim Jordan, one of the chamber’s harshest critics of tech companies, will lead the inquiry.

Still a small percentage. New Crunchbase data shows Black startup founders in the U.S. raised about 1% of all venture capital allocated in 2022, a fractional drop from their 1.3% share in the prior year, TechCrunch reported. Black founders secured an estimated $2.3 billion out of the $215.9 billion raised from venture capital last year. Some investors and founders feared that Black entrepreneurs would struggle to boost their share of venture capital dollars amid an inflation-driven downturn in fundraising.

Getting real on fakes. China will begin enforcing new rules this week designed to curb the spread of “deepfakes,” becoming the first nation to widely police the spread of misleading content generated with artificial intelligence technology, the Wall Street Journal reported Sunday. The Cyberspace Administration of China will punish deepfake creators who spread false information that harms the republic’s economy or national security, and it will require developers to label some A.I.-generated content as manipulated. Policymakers in the U.S. and Europe have voiced concern about the proliferation of deepfakes, though they’ve resisted enacting legislation largely owing to free speech concerns.


Newer kids on the block. OpenAI and Alphabet aren’t the only generative artificial intelligence players in Silicon Valley. The Information took a look Monday at six startups dedicated to building on the kind of large language models powering OpenAI’s popular ChatGPT chatbot and text-to-image generator DALL-E 2. None of the six companies is believed to generate much revenue from their various A.I. ventures. Yet, in a show of excitement surrounding the enterprise-facing potential for A.I., the sextet has combined to raise more than $1 billion in equity funding to date.

From the article:

These companies, listed below, are focused on creating their own language-understanding models, which train on a huge amount of text to learn the nuances of writing and speech. The process of training a model on so much data can cost millions of dollars in computing expenses, but it yields systems that can converse naturally with people or even help them generate computer code using simple prompts. 

The startups, which collectively have raised more than $1 billion in equity funding, plan to license the models to other companies, as OpenAI has done, or use them to develop their own chatbot-related applications.


The ‘everything bubble’ has popped and the experts on Wall Street and in Silicon Valley were spectacularly wrong about a ton of things, by Will Daniel

Salesforce wants to cut $3 billion to $5 billion in costs, and real estate is a big target. Some offices have less than 10% occupancy, exec says, by Kylie Robison

Tesla price cut sees customers storm stores to demand compensation—and a rival BYD employee may have led the charge, by Christiaan Hetzner

Twitter cuts workers addressing hate speech and trust and safety as Elon Musk’s chaotic revamp continues, by Kurt Wagner and Bloomberg

Twitter employees laid off after Elon Musk’s takeover received severance payments today that fall short of expectations, by Kylie Robison

Why ChatGPT may be the most human form of A.I. yet: It produces informed BS, by Alan Murray and Nicholas Gordon

Why IBM is no longer interested in breaking patent records—and how it plans to measure innovation in the age of open source and quantum computing, by Darío Gil


What happened in Vegas. As the tech ecosystem has shifted more toward software, A.I., and other non-hardware products, the annual CES extravaganza has lost a little bit of its luster. Even still, some buzzworthy products and trends emerged from the 2023 event that wrapped up this weekend, the Associated Press reported. Immersive virtual reality took center stage in Las Vegas, with HTC unveiling a headset aimed at rivaling Meta, and a Vermont-based startup showcasing a device capable of delivering smells to users. Cosmetics company L’Oréal also impressed with an augmented reality app that scans users’ faces and makes personalized recommendations, while two startups touted at-home machines for generating the drink of your choice. Sony took home Engadget’s “Best in Show” award for Project Leonardo, a new, accessibility-focused PlayStation 5 controller that doesn’t have to be held.

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