It’s been a bumpy road for the metaverse over the past few months. First Meta, the ambitious project’s most prominent champion, slashed more than 10 percent of its workforce in November — only for the news to break just today that they’re planning additional cuts. (The company also reduced its Quest Pro headset’s price by $400 a few weeks ago.) Then Microsoft cut its VR staff to the bone. Pico, TikTok parent company ByteDance’s VR arm, laid off more than 200 people in the past week. Chinese giant Tencent abandoned its plans for a VR headset entirely. Developing the metaverse is a capital-intensive project, covering everything from the devilishly tricky business of hardware development to beefing up the computing and networking infrastructure that would support it. That means even some of the tech’s most fervent evangelists and architects are adjusting their expectations amid the tough economic headwinds facing the tech industry. “The metaverse is a long-term play,” said Zvika Krieger, a consultant and former director of responsible innovation at Meta. “Unless you have a lot of money to burn, like Meta, you're not going to stick with it during a market downturn. When things are flush everyone likes shiny new ideas, but when you have to prioritize it's going to be the first thing on the chopping block.” Case in point: The aforementioned layoffs — and the recent conquest of the tech and media discourse by an even shinier, newer idea in generative AI models. But companies like Meta that have money to burn can throw their weight around in other ways that matter, like building institutions meant to ensure said “long-term play” remains in motion. The XR Association, an industry group featuring board members from Meta and Microsoft, published this week a remarkably sanguine “State of the Industry Report” that touts its growing membership and clout, including successfully lobbying for the inclusion of “immersive technology” as a research focus area in this year’s CHIPS and Science Act. “This recession is considered to be a short-term thing, not a structural change or a real recession in any kind of big way,” Edwina Fitzmaurice, Global Chief Customer Success Officer and head of metaverse efforts for the consulting firm Ernst & Young, told me. “People are sticking the course on [metaverse] strategy, while looking for short-term opportunities or adjustments.” Most of those adjustments have to do with cutting back on hardware development. When the news broke last month that Apple, as much a product design firm as a technology company, was scrapping plans for lightweight augmented reality glasses in favor of a lower-cost mixed-reality headset, it set off serious alarm bells: If Apple can’t get this right, what hope does the rest of the industry have as economic growth slows? “My guess is Apple just realizes that VR is a technology whose time hasn’t arrived yet,” Krieger said. “[Meta’s] Quest headset is good, but I don't think Apple would feel comfortable releasing something like the first Quest, probably not even the Quest Two; it's just not a seamless user experience, which I think from the Apple perspective would degrade the brand.” The refrain that hardware is, well, hard, comes up constantly in conversations about the state of the metaverse and pace of its development. (See metaverse evangelist Matthew Ball’s lengthy essay on the topic published last month.) That’s led to some surprising moves from the companies jockeying for position in it: After the aforementioned shutdown of Tencent’s VR headset project, the Wall Street Journal reported yesterday that the company is in talks with Meta to sell the Quest in China. It would be Meta’s most significant consumer-facing business in China since the nation banned Facebook in 2009, no small feat given the currently hostile tech and industry climate between the country and the United States. “There are choices that companies have to make about going with one or the other [between the U.S. and China],” Fitzmaurice said. Of course Meta, as the prime mover in this nascent industry, can afford to at least attempt to have it both ways. But smaller fish won’t likely be able to resist the pressures of geopolitics any more than they can spend freely on hardware R&D during a minor downturn — meaning Meta will likely remain at the head of the pack as long as Mark Zuckerberg continues pursuing his metaverse vision.
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