Apple’s New Mixed Reality Device Is Overpriced – But That’s The Point

Summary:

• This week Apple unveiled its first virtual reality headset, the Vision Pro, which carries a price tag of $3,500 and has elicited some strong reactions from the community.
• Many have scoffed at the notion of spending that much money on a new device, but it wouldn’t be the first time Apple has been down this road.
• Apple’s reputation for innovation and loyal customer base are expected to drive sales as the company knows early adopters will turn up at launch.
• For Apple, it is that group of early influencers that traditionally has helped them make an impact in the market – and to them, money is less of an issue.
• From a competition standpoint, the Vision Pro’s more open and transparent design, as well as Apple’s stronger reputation for data privacy compared to others, may also give them an edge.

This week Apple (NASDAQ:AAPL) unveiled its first new piece of hardware in over a decade and officially joined the world of virtual reality. As with most of Apple’s big reveals this one was not exactly a big secret. Just as the company toyed around for years before entering streaming, we knew some type of mixed reality headset was on their radar.

And we knew it would be costly.

Well, at least most of us knew… for many the $3,500 price tag was still a big shock to the system.

That price went over about as well as you’d expect.

“For $3,500 I will personally come to your house and move your couch closer to the TV”

“For $3,500 the box better have $2500 in it.”

“For $3,500 I expect Tim Cook to hand deliver it to my house and cook me a 3-course dinner before singing me a lullaby and putting me to sleep.”

Then again this is Apple and overpriced devices are kind of their thing… but it works and investors should have little concern that this won’t net a similar result (even if it does takes some time).

First as always, some background.

Companies have been trying to make VR happen for years. The problem is nobody could quite move what had traditionally been a draw for theme parks to the home for a low cost. The equipment was expensive, the interface was clunky and the selection of games/apps were limited.

It has come a long way since then with Meta (NASDAQ:META) and Sony (NYSE:SONY) giving the concept more validity. Both have developed two generations of units (so far) that has made VR more affordable and the offerings more plentiful.

And yet many still don’t care.

People have been told the Ready Player One world where we all live inside a VR simulation was “just around the corner” and the “metaverse” was going to help usher that in.

Not quite.

In fact, the “metaverse” became such a joke that it dragged VR down with it.

What has essentially happened now is that VR is there if you want it, but most people would rather buy a gaming console because that’s what their friends usually have. By comparison VR units are actually cheaper than consoles (unless you want the souped up models), but again a number of big franchises haven’t made the jump – and some of the ones that have are not fully built out so nothing has changed overall.

The point in all this is that VR never caught on in the way companies had hoped, so for Apple to come in and charge so much more for a unit has confounded a lot of people.

And yet this is textbook Apple.

Regardless of the space the company is going to enter, Apple tends to barge in like they are the only ones that matter and eventually convince consumers into thinking that’s true.

Apple didn’t invent the phone, the tablet or the MP3 player – they just evolved the technology in ways nobody else was doing at the time. Yes, Apple has rivals in each of their hardware businesses, but a large part of the population also don’t care. They want an iPhone, an iPad or Apple Watch because its Apple and the company has a reputation for being new and innovative.

Apple is a company because of those people – they have made a fortune off early-adopters who are willing to effectively beta-test their product in market and pay for that honor.

It doesn’t matter the price-tag… they don’t care that the first-generation model usually comes with expensive first-generation equipment.

That group will pay it and do so with a smile on their face.

And just like the other “i” products, eventually word of mouth will reach a fever pitch and the next group of consumers will splurge – and not long after, prior models will be cheaper and more people will buy which will lead to the market being flooded with those devices until its common place.

Apple TV is a great example – at present you can buy a Roku or Amazon Fire Stick for around $25 and have a full complement of entertainment apps at your disposal (plus other features). Yet, a basic Apple TV device costs around $125 (new) and while it may produce higher quality video/audio and work (mostly) seamlessly with your other Apple devices, is it really worth the extra $100 to the average consumer?

No – but that shiny Apple logo seems to do the trick with a certain group.

Apple is banking on that again with Vision Pro.

It’s the magic of the Apple brand and that prestige factor. Make no mistake Apple buys into that magic – if you need proof look at their recruitment of Disney (NYSE:DIS) and its CEO Bob Iger to be a part of the presentation. Disney is a company built on magic so their inclusion here made a lot of sense.

Apple wants to use the XR features of the device to create stories – immersive stories – that place users at the center. Whether it is as simple as being front-row at a concert or interacting with nature while you’re in your living room, it creates a narrative for the user to step into – sound familiar?

What’s interesting though is that Meta’s third iteration of Quest will also have a version of AR/MR component that Vision Pro will have – and at a fraction of the price ($500). Yet it’s the Roku/Fire Stick argument again…while you could spend less for a similar device, a select group will opt for the more expensive model because of the name.

And Apple also did something smart here – they designed their headset to have a more open and transparent front… whereas the Quest and Sony models are all enclosed. While Quest will let you interact with the outside world through strategically placed cameras…you can see through Vision, meaning others can see you as well.

It is a smaller aspect but most consumers will see a closed version vs. an open one and purchase off looks alone – they won’t realize (and some won’t care) that both have the mixed-reality element. The Vision’s eye-tracking and hand-tracking ability (i.e., no need for controllers) will also be of note to potential buyers – it’s all part of the same “wow” package.

There’s also the Meta of it all – people aren’t comfortable with the amount of personal data Facebook collects, so bringing another device capable of that into their homes is a non-starter.

Where Apple shines is its ability to know its audience. The company is very aware of the profile of their typical consumer and they play to it beautifully. The Vision Pro will look impressive and be a big step up in terms of MR visuals – but it’s just an initial pass.

This is proof of concept at a high level.

They will then use these learnings and adjust for the next one and the next one and the next one.

Apple wills its products into the mainstream and this new foray into mixed reality won’t be any different. Investors are familiar with this and most who have invested long enough to understand know something others don’t – there is no clock with Apple.

The company’s products come when they want them to come and they will always look to keep “perfecting” them… and yes that comes with a cost, but one Apple’s core audience can afford.

This isn’t a race, it’s not even a sprint. This is methodical approach to expanding into a new area where Apple sees significant value and at times it will seem unorthodox.

Investors just need to stay focused and not get distracted – this isn’t an overnight change and it was never meant to be.

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