Meta
Platforms is returning to China, 14 years after Facebook was shut out of the country. This time, Meta will be looking to attract Chinese consumers to its virtual-reality technology rather than its social-media platforms.
Meta
(ticker: META) has reached a preliminary agreement to sell a lower-priced version of its VR headset via a partnership with China’s
Tencent Holdings
(TCEHY), The Wall Street Journal reported late Thursday, citing people familiar with the matter.
Meta shares were up 0.7% in early trading on Friday. The company didn’t immediately respond to a request for comment on the report.
If it won’t quite make up for Facebook being blocked in China since 2009—Instagram and WhatsApp are also prohibited—the deal is a potential positive for Mark Zuckerberg’s investment in the metaverse and its vision of a world of virtual interactions.
Zuckerberg has said Meta’s priority is now artificial-intelligence technology. But the company’s Reality Labs division, which focuses on the metaverse, still lost $11.47 billion in the first three quarters of the year. Its losses are expected to widen in 2024. Adding a significant consumer market could help allay concerns about the division’s spending.
The market remains largely skeptical about Meta’s metaverse ambitions. The global market for AR/VR headsets was 9 million units in 2022, down 20% from the previous year, implying a total market of $4 billion, according to a Morgan Stanley analysis.
In the Chinese market, downinated by ByteDance and DPVR, shipments of extended-reality headsets came to more than 1.1 million units in 2022, according to Counterpoint Research. But shipments fell by 56% in the first half of 2023 compared with the same period a year earlier as Chinese consumers have pulled back on spending.
Meta recently started shipping its Quest 3 virtual-reality headset at $499. The launch comes just months ahead of the expected launch of Apple‘s (ticker: AAPL) first hardware entrant into the VR segment, the Vision Pro, which is scheduled to ship early in 2024 at a significantly higher price.
Meta’s headset for the Chinese market will use cheaper lenses than the Quest 3 model. Sales are set to begin late next year. Meta will take a bigger share of revenue from device sales while giving Tencent a bigger slice of content-and-services revenue, according to the Journal.
Write to Adam Clark at adam.clark@barrons.com
Read the full article here