What Apple Could Do to Profit from the VisionPro, Explained in 3 Minutes
The world’s biggest company has really low expectations right now.
When asked if the average person could afford the VisionPro, Tim Cook said, “I don’t know.”
He then went on to describe the VisionPro’s engineering prowess before the interview would end, but that’s beside the point.
As most people know, the VisionPro is expensive and not a product ‘for the masses.’ What’s less known, however, is how Apple will make money from the VisionPro.
As it stands today, I see two paths Apple could take.
The first, is to do what Facebook/Meta and other gaming systems (aka consoles) do. They sell their hardware at a loss (Facebook loses $100-$200 per VR headset), and recoup the money through software and services (e.g. App Store Purchases, V Bucks, Xbox Game Pass)
The reasoning behind this is that cheaper hardware helps drive platform adoption, which in turn allows for more profit via additional purchases, increased engagement, etc. Assuming Apple is already selling the VisionPro at a loss, they’d attempt to drive more subscriptions to their services business (e.g. Apple TV, iCloud, App Store, Apple Music) (Notably, their services business is predicted to produce half of the company’s profit by 2025 — $50 billion).
The main flaw with this is that besides developers, most VisionPro users will be Apple enthusiasts who already have several Apple products, including Apple Services. Out of the 1.65 billion people that use Apple devices, 40% of them subscribe to some sort of service offering from Apple. 60% (or 990 million) is still a large available market, but if they don’t use a service from Apple, I don’t see how the VisionPro will change that. Maybe, they might purchase a year of Apple TV or Apple Arcade, potentially buy VR apps from the App Store, but that’s probably a stretch.
The second path is what most experts expect Apple to do, and likely what Apple is already doing as well.
Known as the “Tesla Approach” or price skimming, Apple will sell X number of headsets in their first year (say 150,000), and then (gradually,) drop the price next year. From there, Apple might sell closer to 1 million VisionPro headsets, a number that’s still lower than the Oculus Quest VR devices. However, this enables profit to be maximized throughout the entire process because Apple leverages their high margins among the few high-end consumers, and then, as price decreases, they gain market share with more consumers purchasing the VisionPro.
For instance, in 2017, the iPhone 10 was released at $999, a price higher than any iPhones before it. Now, you can find it at $449, and potentially even as low as $210.
Regardless of paths, Apple will likely figure a pricing model; one that sends the VisionPro to the masses. Until then, all eyes are on early 2024 (and maybe Barbenheimer).
-Nathan MT
P.S. This is Part2 of analysis I’ve written on the VisionPro. See Part1 here.
