Author | Zhang Mengfan Typesetting | Gao Le

Source: Metaverse Metaverse

Looking back at the ups and downs of the past market, the XR industry has experienced a frenzy of capital followed by a rapid cooling, once a rapidly developing emerging industry. However, some recent data releases are not optimistic.

In terms of equipment, the 2023 VR/AR device sales half-year report released by RUNTO Technology (RUNTO) shows that in the second quarter of 2023, the total channel sales of VR/AR devices in China were 178,000 units, a year-on-year decrease of 51.2%. Among them, VR device sales saw a particularly severe decline, with a year-on-year decrease of 60.9%.

Image Source: RUNTO Technology (RUNTO) online monitoring data, unit: %

In terms of investment and financing, according to the "2023 H1 VR/AR Industry Investment and Financing Report" released by the VR Gyroscope Research Institute, the investment and financing amount in the VR/AR industry in China in the first half of 2023 was 2.34 billion yuan, a year-on-year decrease of 69.2%; the number of investment and financing transactions totaled 48, a year-on-year decrease of 29.4%.

Looking at the global XR industry's investment and financing situation, it is also not optimistic. In the first half of 2023, the global VR/AR investment and financing amount was 8.74 billion yuan, a year-on-year decrease of 73.2%. In terms of the number of investment and financing, there were 127 VR/AR investment and financing events globally, a year-on-year decrease of 26.1%, with an average single financing amount of about 70 million yuan.

In fact, the decline in the heat of the XR industry and the sharp drop in equipment sales did not suddenly appear, but began to show signs as early as 2022.

Affected by various factors such as the new wave of generative AI, international tensions, and the overall economic environment, the global VR headset shipments in 2022 were 10.14 million units, a decrease of 8.65% from 2021. The total investment and financing amount in the global VR/AR industry was 49.15 billion yuan, a contraction of 11.4% from the previous year.

Does this mean that the XR industry has entered another "painful period" after its first trough? Whether the market will experience a new birth or a difficult delivery after the pain, we do not know. However, the sharp decline in XR device sales may provide answers from the VR device marketing of domestic device giants Pico and Qiyu VR.

Starting in 2022, Pico's VR products frequently appeared on various TV variety shows, such as the seventh season of "Ace vs. Ace" and the Spring Festival Gala on Mango TV. It also launched the Neo 3 in collaboration with the "The King's Avatar" anime IP, and even the presence of Pico can be seen on some overseas VR websites.

In terms of offline self-service machine marketing, Pico adopted a free trial + viral marketing approach. After registering for a Pico member account using a mini-program, users could obtain free trial opportunities by following the official WeChat account of Pico and inviting friends. The trial opportunities could be accumulated, meaning that the more new users invited, the more free trial opportunities one could receive.

Qiyu VR went even further, directly stating that it was free. In February 2022, Dream Unfolding announced the launch of the Qiyu Dream Premium Edition, with an initial price of 2699 yuan, officially on sale on March 4. It also launched the "300-day exercise check-in to get a full refund" activity, which means that users can get a free VR device after checking in for 300 days.

The effect of spending money to attract customers was very significant. As of 22:00 on March 3, the number of reservations for the Qiyu Dream Premium Edition on JD.com exceeded 75,000.

Various benefits and welfare activities indeed led to a surge in VR hardware sales. Since its launch in mid-December last year, Qiyu Dream has sold 43,000 units, with an average monthly shipment of over 10,000 units. Seeing the promising situation, ByteDance directly raised Pico's shipment target for 2022 from 1 million units to 1.8 million units.

However, behind this exciting sales volume, there were huge investments in marketing by major companies, substantial subsidies to sales channels, and high return and idle rates on the user side.

It seems that after this wave of excitement, it has only consumed users' expectations for XR devices and the coffers of major manufacturers, leaving nothing behind.

Looking back now, Qiyu VR is facing a financial crisis, with almost all employees receiving delayed wages and the technology business at a standstill. The situation for Pico is also not optimistic, resorting to various measures to retain users.

According to multiple internal sources, in 2022, in addition to content from Watermelon Video and Douyin, Pico also produced and introduced some VR videos, but the overall development was lukewarm. In contrast, Pico has gained some traction through live streaming.

"In terms of content, it's a bit on the edge, mainly featuring beautiful women dancing, because the supervision of VR live rooms is relatively low, so the scale needs to be larger. This has indeed attracted many users to give tips, with some users giving thousands of yuan in tips in one night. The income from live streaming basically exceeds that from games, and the stickiness of these users is also very high," joked an internal Pico employee. "There is indeed no console culture in China, but there is a streamer culture."

Pico's means of retaining users is not through social interaction or games, but through edgy live streaming, revealing underlying problems. However, this is not because Pico has "given up," but rather a result of the overall environment, as the shortcomings of VR devices are obvious.

One is the content shortfall.

According to market observations and user feedback, the content library of XR devices currently on the market is relatively small and lacks diversity. Some of the content is also of unsatisfactory quality. There are limitations in application development and support, and the frequency of content updates and upgrades is also unsatisfactory, leading to users feeling bored and uninterested in long-term use.

The other is that XR devices are not a necessity.

The high cost and low acceptance and familiarity have meant that the public does not have an urgent need to purchase XR devices. The limited application scenarios (such as games) also lack sufficient appeal. Therefore, although XR was once crowned as "leading the future trend," XR devices have always been seen as optional entertainment and gaming experiences rather than a necessity.

According to 36Kr, ByteDance lowered Pico's sales volume expectations for 2023 from the original 1 million units to 500,000 units.

This obvious slowdown has left XR practitioners with mixed feelings. Optimists believe that ByteDance has gained a correct understanding of the industry's situation in its failure and plans to engage in long-term operations steadily. Pessimists, on the other hand, believe that with the retreat of leading companies such as ByteDance and Tencent, the domestic XR industry will once again enter a cold winter.

After all, from a hardware perspective, there is little difference between the devices of major manufacturers, all carrying the same Fresnel lens solution/Pancake lens solution and equipped with the Qualcomm Snapdragon XR2 chip. The only difference lies in the product's appearance design and internal ecosystem. Therefore, it can be said that the XR industry rises and falls together.

But for the XR industry after 2023, there are still bright prospects worth pursuing.

Looking abroad, Meta and Apple will respectively launch their new head-mounted devices, Meta Quest 3 and Vision Pro, at the end of 2023 and the beginning of 2024.

The release of Apple's Vision Pro immediately attracted global developers and users, sparking heated discussions. Apple refers to this device as a "spatial computer," aiming to seamlessly integrate digital content with physical space, allowing navigation through eyes, hands, and voice. This device uses the latest XR technology, is equipped with a high-resolution display and powerful graphics processing capabilities, and is highly likely to have facial tracking and gesture recognition functions.

Meta Quest 3 is a next-generation mixed reality (AR) and virtual reality (VR) all-in-one head-mounted device launched by Meta. The device emphasizes providing an independent, portable, and multifunctional XR experience, using advanced AR and VR technology, built-in tracking cameras, touch controllers, and voice recognition technology. Its standalone design eliminates the need for external computers or devices, providing users with a higher degree of freedom in XR experiences and a rich variety of games, media, and entertainment content.

Looking domestically, major manufacturers are also not to be outdone: PICO announced 17 new VR works and DLCs during ChinaJoy, aiming to create a higher-level user ecosystem;

In mid-year, the globally leading AR glasses brand XREAL (formerly Nreal) officially released a new hardware product, the XREAL Beam projection box, creating the industry's original "AR spatial screen";

Rebird Innovation released the consumer-grade XR glasses new product Rebird Air Plus on August 26, further enhancing display, sound quality, content, and comfort, enriching the XR content ecosystem;

On October 26, AR smart glasses company Rokid released the consumer-grade OST (Optical See Through) personal spatial computing platform Rokid AR Studio, making breakthroughs in human-computer interaction.

In October, consumer-grade wireless AR glasses manufacturer INMO Vision Technology will hold a new product launch event to release the second-generation product INMO Air2, marking a leap in display and performance.

Even though the current situation of the XR industry seems somewhat bleak, with a series of high-quality products driving it, we believe that the future development of XR, both domestically and internationally, still holds good prospects.

XR companies, stay calm.

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