Meta’s Quest 2 Price Increase Due to Competition by Rec Room & VRChat, Contributes to Slow Install Base Growth

Meta’s Q4 2022 earnings report was earlier this week, with revenue from Reality Labs, its XR/metaverse division, bringing in $727 million — down from $877 million in Q4 2021.

So now it’s time to play everyone’s favorite guesstimating game: How many Quest 2’s were sold, and what’s the total install base?

Assuming that $727M is mostly from Quest 2 sales (now at $399), that comes out to about 1,800,000 units. That’s the high end. Factoring in revenue from app sales etc., let’s call that 1.5 to 1.8 million Quest 2 units sold during the Q4 2022 holiday season. 

That’s quite a dip in sales! When it sold at $299 over the 2021 holidays, it sold around 2.9 million units (give or take). I’m not surprised, though; increasing the MSRP on an appliance even though it hasn’t fundamentally improved is, well, bonkers.

Now let’s look at the total Quest 2 install base:

Last October, the New York Times estimated Quest 2’s install base was 15 million. (That’s in line with my own estimates earlier in 2022.)

So that brings us to Quest 2 install base of 16.5 million-17.8 million.

Definitely below 18 million, we can safely say. 

The deep irony: Meta raised the price of Quest 2 because (as Carmack openly stated last year), too many Quest 2 users were mostly spending their time in free-to-play metaverse platforms VRChat and Rec Room:

Now of course, price points leads to the point about the Quest 2 price increase, which is obviously super unpopular and there’s no question that it’s weird to have a headset or have a consumer device go up in price later. But… the dynamics of subsidizing hardware is super common on all the consoles, and it’s just kind of the way a lot of these closed ecosystems tend to work… you sell the device at a loss and you make it up on the software that you wind up selling.

But that winds up having a bunch of perverse incentives for general user value. When you have some of the most popular apps on Quest are free apps, VRChat and Rec Room, that we get no revenue from at all, and while they are sitting there at the top of our ranking list in many cases, there’s there’s not a lot of internal push for that.

In other words, because of heavy competition by metaverse platforms, consumer growth of Meta’s VR hardware line is slowing.

Image via Meta.