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Magic Leap Under Financial Stress, Halves it Size
May 04, 2020
Facing disastrous financial conditions, Magic Leap that most secretive of billion dollar start-ups became more transparent announcing its intention to focus on the enterprise market, after years of branding itself as a consumer device company. The corporate press release blamed COVID-19 for the required pivot, and nearly 1,000 employee have been laid-off; almost half its workforce. This shift toward the enterprise market is not driven by the COVID-19 crisis, as it is a case of augmented reality (AR), virtual reality (VR), and remote reality (RR) hitting up against economic reality (ER). Few people are willing to pay a lot of money for experiences that can’t populate their Instagram feed. Given a price tag of $2,300-$3,000 for its Magic Leap One goggles, market success would have required a whole lot of social cache to be viable long-term. By the end of 2019, the company reportedly sold just 6,000 of a planned 100,000 units. Coolness does have a price, but when it comes to augmented reality goggles, the market is telling us that it is far lower than $2,000-$3,000. Magic Leap managed to raise $2.6 billion from market monster investors like Google and Alibaba. They succeeded in developing interesting technology with giant distribution partners, like AT&T. But in reality, only 6,000 units sold. The technology world spent the past decade touting augmented (digitally enhanced), virtual (digitally simulated), and remote (real-time remote immersion) realities but mostly ignored the commercial realities. Some believe enhanced reality has a bright future, but it starts closer to actual reality — which makes it more accessible, useful, and monetizable. Remote reality, which is a physical extension of real reality, is more likely to be adopted in the enterprise (and defense) markets at scale. Much of the vaunted space program is executed via remote reality, albeit with much latency. If the enterprise market gets comfortable with this extension of reality it will be more willing to shell out for bigger leaps into the augmented and virtual worlds — as long as the expenditure can be justified. Magic Leap is too far removed from real reality to allow for deep penetration of the consumer market. So, the move to the enterprise and defense markets makes sense. COVID-19, while not to blame, just accelerated that realization.
May 04, 2020
Facing disastrous financial conditions, Magic Leap that most secretive of billion dollar start-ups became more transparent announcing its intention to focus on the enterprise market, after years of branding itself as a consumer device company. The corporate press release blamed COVID-19 for the required pivot, and nearly 1,000 employee have been laid-off; almost half its workforce. This shift toward the enterprise market is not driven by the COVID-19 crisis, as it is a case of augmented reality (AR), virtual reality (VR), and remote reality (RR) hitting up against economic reality (ER). Few people are willing to pay a lot of money for experiences that can’t populate their Instagram feed. Given a price tag of $2,300-$3,000 for its Magic Leap One goggles, market success would have required a whole lot of social cache to be viable long-term. By the end of 2019, the company reportedly sold just 6,000 of a planned 100,000 units. Coolness does have a price, but when it comes to augmented reality goggles, the market is telling us that it is far lower than $2,000-$3,000. Magic Leap managed to raise $2.6 billion from market monster investors like Google and Alibaba. They succeeded in developing interesting technology with giant distribution partners, like AT&T. But in reality, only 6,000 units sold. The technology world spent the past decade touting augmented (digitally enhanced), virtual (digitally simulated), and remote (real-time remote immersion) realities but mostly ignored the commercial realities. Some believe enhanced reality has a bright future, but it starts closer to actual reality — which makes it more accessible, useful, and monetizable. Remote reality, which is a physical extension of real reality, is more likely to be adopted in the enterprise (and defense) markets at scale. Much of the vaunted space program is executed via remote reality, albeit with much latency. If the enterprise market gets comfortable with this extension of reality it will be more willing to shell out for bigger leaps into the augmented and virtual worlds — as long as the expenditure can be justified. Magic Leap is too far removed from real reality to allow for deep penetration of the consumer market. So, the move to the enterprise and defense markets makes sense. COVID-19, while not to blame, just accelerated that realization.
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