Apple needs to sell its vision again. This time with its Vision Pro.

Apple stock is having a rough 2024. Will Apple Vision Pro be the next iPhone moment for Apple to revolutionize consumer electronics? It's complicated.

«The 2-minute version»

Apple started 2024 with a hangover as the stock lost close to $180B in market cap on the first trading week itself, severely underperforming the S&P 500. As pessimism over its slowing iPhone sales grows on Wall Street, Apple needs to sell its vision once again.

This time with its Vision Pro: which will be available to pre-order online and in stores starting February 2nd.

Enter the dawn of mixed-reality devices: While many people would often refer to Apple’s Vision Pro as an AR/VR device, it is technically a mixed-reality device, or as Apple likes to call it “spatial computing device." Unlike AR or VR, Mixed-Reality creates immersive experiences for users independent of the device screen, such as smartphones, tablets, and TV, by producing high-fidelity simulated representations of real-world objects.

The target market is still nascent: While the most popular activities on mixed-reality headsets were gaming and watching movies, as per a KPMG study, with participants indicating that they were using their devices more than they had originally intended, 78% of participants in a different study showed no interest in purchasing an Apple Vision Pro even if it goes on sale. There are other hypotheses that Vision Pro will become more relevant to enterprises, large businesses, and creators than mainstream users.

Plus, $3500 a piece is a little steep: That’s right. If you are planning to buy an Apple Vision Pro this year, prepare to spend at least three and a half grand on it. Meanwhile, there are cheaper alternatives, such as Meta’s Quest 3 at $500, Sony’s PSVR at $549, and more.

What does success look like? Wall Street expects Apple to generate $1.75B in sales from its Vision Pro in 2024. Though this is miniscule compared to its overall revenue, overachieving Wall Street’s estimates would be the first sign of victory for Apple in its quest to build the next iPhone-type product.

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Last week, the markets gave us a glimpse of how easily it can dump its relationship with Apple AAPL 0.00%↑, the most loved company stock in the world. While the S&P 500 index, a closely followed barometer of US stock markets, fell 1.5% in its first week of trading this year, Apple’s stock lost 6%, four times more than the S&P 500, wiping out close to $180B of its market capitalization. At best, Apple’s performance on the stock market in the first week of 2024 can be summed up as a really bad hangover from the party that was 2023.

The real reason for all the bashing the stock endured during the last week can be traced to research released by a couple of investment firms that suggests that people may not purchase nearly as many iPhones in 2024. Some analysts went further by expressing concern about waning demand not just for Apple’s iPhones but also for its broader hardware device category, such as Macs, iPads, and wearables.

But, on Monday morning this week, before markets opened, Apple surprised investors by announcing that its Apple Vision Pro will be available to pre-order online and in stores starting February 2nd.

The timing of the press release was quite interesting in a way that it suggested that Apple’s response to all those questions about its future vision will be met with Apple Vision Pro.

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What is Apple Vision Pro really?

Well, let me start by saying that my mom thought it was just some ultra-fancy-looking ski goggles, reminiscent of the “peculiar things young people buy these days.”

But if someone were to ask people on the street what Apple Vision Pro really is, the most common response would be that it is an AR/VR headset (Augmented Reality/Virtual Reality). Then, there are some tech publications that skipped the acronyms by calling Apple Vision Pro a Mixed Reality headset. However, when Apple showcased their headset to the world last year for the first time, they described the device as “a spatial computing device," far from what other technologists were describing their mixed reality headsets. Typical Apple.

When showcasing the headset last year, Apple’s CEO, Tim Cook, said it could spark the dawn of "spatial computing," where digital content blends with the physical world, just like how the iPhone changed the world of mobile phones.

But there is still immense uncertainty around who the headsets are actually made for, how exactly users will be using them, how they will differentiate from their competition, and the most important question of all: is this Tim Cook’s answer to all who question his legacy as an entrepreneur?

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Apple Vision Pro is not the first mixed reality headset. There were others.

Before we move ahead, it's important to understand the distinction between Virtual Reality (VR) and Augmented Reality (AR). While both are designed to bring a simulated environment to the user, the difference lies in the real-time experience that VR and AR aim to offer.

In VR, the user is almost always required to wear some kind of headset with headphones and/or joysticks to completely replace the real world with a virtual environment that was simulated beforehand. Video games and other related applications, such as Microsoft Flight Simulator, are great examples that illustrate the applications of VR. 

On the other hand, AR integrates the simulated world by superimposing it on top of your real world, as seen in digital devices such as iPhones and tablets. Ikea’s Place app and Snapchat’s Local Lenses are examples of apps that fit into the realm of all the applications of AR.

Now, Mixed Reality, as the name suggests, is where it all comes together with the aim of creating full, immersive experiences for users independent of device screens (such as smartphones, tablets, and TV) by creating high-fidelity simulated representations of real-world objects.

Apple has always been a proponent of AR while being equally skeptical of VR. In 2015, when Tim Cook was asked about his opinion on VR, he argued that the technology was intrusive—it focused more on the technology than on the user’s immersive experience. At that time, he had said, “We always thought it would flop, and, you know, so far it has.”

In some ways, Cook might have been right because many VR applications that started in the 2010s seem to have bombed. Google’s Cardboard and Samsung’s Galaxy VR products were all shut down. MagicLeap, once known as the world’s most secretive startup, also had huge promises for its MagicLeap glasses but bowed down with a whimper.

Only the Oculus devices seemed to have survived after being bought out by Meta Platforms in 2014. The vision for Oculus devices changed over time from VR to AR and now Mixed Reality, with the device being renamed Quest.

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It doesn’t look like Apple Vision Pro is for everyone.

In 2022, consulting firm KPMG surveyed participants as part of their survey about the Metaverse to understand the kinds of activities that existing owners of VR headsets were using the devices for. Participants indicated they were using the headsets for more than one activity, and the most popular activities VR headsets were being used for were gaming and movies, which is not surprising.

Participants also indicated that they were using the VR devices more than they had originally intended. For example, while 28% of surveyed participants purchased their headset for video entertainment, 47% of participants are currently using it for that purpose, according to a survey by consulting firm Activate, as can be seen on the right chart above.

But if there is one thing that everybody already knows about the Apple Vision Pro, it is its sweet, sweet price tag. At $3500 per device, it is the most expensive mixed-reality device out there. (If you didn’t know this already, now would be a good time to do a double-take.🙄)

So, naturally, when participants in another study were asked to pinpoint the exact reasons why they would not be interested in purchasing the Vision Pro, 67% pointed to its astronomical price tag. The study then probed participants in a different way by asking them possible reasons that would interest them in purchasing the Vision Pro when it goes on sale.

Still, 78% of participants showed no interest in Apple’s headset. However, among the few consumers who did express early interest in buying the Vision Pro, entertainment or immersive content experiences seemed to be the biggest reasons to buy Apple’s pretty headset. The responses by this small subset of participants almost corroborate one of Apple’s intended purposes for building the Vision Pro, with Cook describing the headset as a “personal movie theater.”.

On the other hand, some technologists closely watching this space have an entirely different opinion about Apple’s mixed reality headset, predicting the Vision Pro will become more relevant to enterprises, large businesses, and creators instead of mainstream adoption.

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There are cheaper alternatives out there.

Until this year, Meta’s Quest 3 was probably the most popular and well-known mixed reality headset. At Meta Platform’s Connect developer conference last year, Meta’s Chief Technology Officer, Andrew Bosworth, introduced the new Quest 3 as “the best-value spatial computing headset on the market for a long time to come," in an apparent dig at Apple’s Vision Pro.

With this year’s launch of the Vision Pro, Apple has emerged as Meta’s most serious competitor in the mixed reality space. Nonetheless, at $500, Meta’s Quest 3 is seven times cheaper than Apple’s Vision Pro. Following closely in terms of price is Sony’s PSVR, which retails at $549. Meanwhile, HTC’s Vive XR Elite is another mixed reality headset that is expected to set users back by about twice the price of Meta’s Quest 3, at $1100. With these price tags, many consumers may find themselves priced out of the mixed-reality device space.

Finally, there is Zappar, an AR startup that has released its own $80 mixed reality headset. I found this startup’s vision for affordable mixed-reality headsets interesting. They were one of the first mixed-reality devices that were able to play back Apple’s spatial video format. Apple’s spatial video format and support were launched late last year.

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What Wall Street Thinks

It's no secret that Apple’s iPhone has long been the workhorse for the technology device giant’s revenue streams. It was also no secret that secular demand for the iPhone was seen to be flattening. But 2023 showed just how much iPhone sales slowed.

In addition to the waning demand in the U.S. and other large markets, China’s slowing economy in 2023 and its uncertain outlook for 2024 have gotten many market analysts worried about Apple’s growth this year. Hence, the focus is now on Vision Pro, which is an entire new product category by itself. The last known product category Apple launched was the "Wearables" product category, with the company announcing the Apple Watch in 2015. The success of this new product category has some Apple observers excited about the prospects of the Vision Pro.

Ming-Chi Kuo, a widely respected industry expert who closely follows Apple’s products, estimates Apple will sell about half a million Vision Pro units through the year. With a starting price of $3500 per device, Apple should bring in at least $1.75B in sales from the Vision Pro this year. This number seems insignificant given that the iPhone maker makes about $300B a year selling its hardware products.

But for Apple, these numbers will be seen as an early sign of victory in its quest to prove its vision that the Vision Pro is perhaps the next iPhone-type product, that revolutionizes consumer electronics.

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Closing Thoughts!!

With Apple Vision Pro, Tim Cook and co. will be hard at work to reinvent the iPhone moment. It will be the company’s first new entire product category in years and its most ambitious yet. But with a price tag of $3500 and the virtual/augmented/mixed reality target market still nascent, the issue that Apple has at its hands is whether the Vision Pro is truly ready for mainstream adoption.

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Are you planning to buy the Apple Vision Pro? Do you already own an mixed-reality headset? If so, which one and what all do you use it for?

Do you think this is the next iPhone moment for Apple?

Please let us know your thoughts in the comments section below.

See you all tomorrow for Friday 5!!!

Uttam and Amrita 👋🏼👋🏼