Meta has not been active in China since Facebook was blocked there in 2009. However, the company is reportedly planning to make a comeback by releasing a new, more affordable version of its virtual reality headset through an exclusive deal with gaming powerhouse Tencent. The Wall Street Journal has reported that this strategic move is aimed at taking advantage of the expanding market in China.
The new headset, tentatively set to debut in late 2024, is said to be more powerful than the Quest 2, but will use lower-quality optics than the Quest 3, based on the report. It is designed to be a more budget-friendly option, and it’s anticipated that Meta would earn a larger share of the headset sales, while Tencent would benefit from more content and service revenue, such as software subscriptions and game sales.
This deal presents a significant opportunity for Meta’s VR division, which has been struggling financially and in need of a boost. However, it remains uncertain whether Tencent will require government approval to sell the devices due to China’s strict rules and regulations.
While the gaming industry has been a popular VR activity, China’s strict policies have already had a significant impact on Tencent, the world’s largest video game company. In addition, China’s VR market may not be a cure-all for Meta’s weak VR division, as other players, such as TikTok owner ByteDance and its Pico headset, are also struggling with sales in China.
Tencent itself was reportedly on the verge of disbanding its VR division, but apparently resurrected it once the Meta deal appeared imminent. Headset sales globally have dropped by nearly 45 percent this quarter compared to the same period last year, further emphasizing the challenging market conditions.
If the deal goes through, Meta would regain a foothold in China after 14 years of absence. The company currently holds a 50 percent worldwide share of the VR market, with Sony’s PlayStation VR2 and Pico’s VR headset following behind. It is worth noting that Apple is also poised to enter the market with its $3,500 Vision Pro headset, although it is not expected to have a significant presence until it releases a more affordable version in the future.
The potential return to China comes at a crucial time for Meta as it looks to reinvigorate its VR division. The exclusive partnership with Tencent could provide the much-needed catalyst for growth and help Meta regain its standing in the competitive VR market. While there are challenges and uncertainties that lie ahead, the move to release a new VR headset in China has the potential to reshape Meta’s presence in the region and revitalize its VR business.