• Recession fears mean Metaverse will hit the brakes and focus on refining hardware and software
  • Consumers aren’t likely to see affordable access trickle down for several years
  • You probably won’t see headsets under $300 until late 2024 at best

 

The metaverse – a shared, immersive, 3D virtual space – has the potential to be a very democratising experience for the average end user.

With interconnected technologies around augmented reality, virtual reality, virtual 3D worlds it can add layers of presence, tactility and personal expression to remote interactions.

But it could be some time before its affordable for consumers.

S&P Global Market Intelligence research analyst Neil Barbour says that, as the spectre of recession looms and consumer confidence erodes, he anticipates the industry will take this opportunity to refine the metaverse software and hardware stacks with a mind toward less price-sensitive revenue opportunities in the form of wealthy tech enthusiasts and enterprise clients. 

The end goal is still the lucrative consumer market, but the develops made in the years ahead will take a while to funnel down to more affordable, mass-market products.

“Meta and a handful of other companies made a strong effort to push VR hardware and digital experiences to consumers over the past two years, but inflation is making it more difficult to deliver the metaverse at affordable price points,” he said.

“We expect the focus to turn to enterprise and power users in the near term.”

 

Refining tech and testing on the rich folk

While the world recession strikes fear in the hearts of most investors, it would be an opportunity to refine the metaverse tech – and test it out on rich people and businesses who can afford it.

“From a hardware perspective, some of the key improvements include component size and efficiency,” Barbour said.

“Right now, VR and AR headsets are still a little too bulky and uncomfortable, and they tend to run down battery life relatively quickly. 

“We saw some advancements in this area at CES from display and sensor companies like Sharp as well as optics vendors like LetinAR. 

“But it’s also contingent on the improvement of chipsets from the likes of Qualcomm and NVIDIA.”

As the hardware gets better, that will flow through to the capabilities of the software, because better chips usually mean better graphics, etc. 

But Barbour did note that metaverse software developers also need to improve on user creation toolsets and grow the amount and complexity of interactions users can have in these environments.

 

You probably won’t see $300 headsets til late 2024

“Wealthy consumers and enterprise clients are now getting headsets with the highest resolutions, refresh rates and tracking tech,” Barbour said. 

“Having those headsets in the market for a few months or years with developers working on software targeting those features will help vendors decide which of those features should filter down to more affordable devices.”

So, when are we likely to see more affordable, mass-market metaverse products for consumers?

Probably 2024, Barbour says.

“It has a lot to do with inflation and other macroeconomic factors,” he said.

“If components become more affordable and consumer confidence improves, it’s possible we could see someone like Meta try to drop prices later this year or early next year. 

“I would not expect to see a wide array of stand-alone VR headsets in the $300 range until late 2024 or beyond.”

 

Via: S&P Global Market Intelligence.

 

What about metaverse uptake for businesses?

So, will businesses adopt the metaverse as a solution to hybrid work anytime soon?

Probably not, but the metaverse has an opportunity to lock into the virtuous cycle of business and personal use cases feeding into one another’s development cycles, even if it is not in a strong position to capitalize on consumer growth in the near term.

Barbour points to S&P Global Market Intelligence’s Voice of the Enterprise survey in December 2022, which showed that, in the industrial space, plans are already in place to use metaverse technologies in 22% of 578 respondents working in operational technology, with 39% expecting to adopt in the next few years. 

Specifically, of the 115 manufacturing respondents, 43% expect to be adopting in the next few years.

For context, Enterprise Customer is usually a business with annual revenues that exceed $25 million or that employs more than 100 full time equivalent employees.

But it seems the metaverse as a solution to hybrid work is still a far-off concept for most companies, because 22% of enterprise players is kind of low.

Barbour says to improve uptake, we need better defined use cases, a more robust software ecosystem and better user literacy.

“These are improving incrementally, but it’s a slow process,” he added.

Here’s just one of the boundless potential use cases in the workplace….

 

There’s a home for the metaverse in NFT gaming

In the video game market, one potential vector for new engagement and higher average revenue per user is infusing virtual goods with real-world value. 

This is the target for developers and publishers working with NFT gaming. 

Barbour said that allowing in-game items, avatars and virtual real estate to be traded in, out and even between experiences is a core tenet of a robust metaverse. 

While NFTs may not be the only route to achieving this goal, they stand as one of the most mature.

And the NFT game segment is growing, S&P analysis of Capital IQ data indicates its seen at least $2 billion in investment since 2018, with investment accelerating rapidly in 2021.

In the year ahead, S&P Global Market Intelligence anticipates a second wave of NFT games focused on gameplay and user acquisition will begin to materialize, “despite such challenges as the reluctance of the major platform holders to embrace cryptocurrency-related transactions and business model’s dependence on the speculative value of the in-game items rather than the quality of the gameplay”.

However, Barbour expects the monetary investment this year to be flat or down.

“The crypto crash cooled some excitement around this space, but there are definitely still big projects in development,” he said.

“I would expect the success, or lack thereof, of the NFT games entering the market this year to guide continued investment.”

 

 

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