Among all the news on AI, you would almost forget that in two weeks, Apple is expected to announce its first new device since the Apple Watch in 2015. It will be mixed reality glasses that could cost as much as $3,000 (three thousand!). All the omens are that the Apple Vision Pro will be a flop - a flop by Apple standards, that is. But that's not a bad thing at all. At least Apple is trying to develop something new again, and that's better than unimaginatively buying back its own shares for hundreds of billions, as it has in recent years. Apologies in advance for this long speech below, but I felt like it.
What can Apple's ski goggles do?
The glasses, likely to be called Apple Reality, are expected to feature an internal screen for virtual reality, while outward-facing cameras will allow users to view the real world inside the headset with augmented reality overlays. This combination is known as mixed reality, or blended reality.
Angry tongues claim that the first pair of glasses Apple is expected to release late this year is a poor compromise between these two visions, with external video cameras thus capturing the environment and displaying it on the screen in front of the eyes when users switch the headset from VR mode to AR mode. In technical terms, video pass-through.
What does this mean in normal Dutch? Bassie (of Adriaan) would say that the glasses allow you to see the inside of your eyes. Because the first function is that of "regular" virtual reality glasses, giving you the experience of standing on stage next to Beyonce or at the top of Mount Everest. But the second function offers the user the chance to simply look through the glasses at the real world, in which mom asks if you've taken out the trash yet. Possibly supplemented by information projected over that sad reality (augmented reality), showing, for example, that the garbage truck won't arrive until the day after tomorrow and you can continue gaming in peace.
But for how many people are the potential applications actually relevant, informative or fun? The Wall Street Journal logically headlined: Can it be more than a nerd helmet? The expected primary applications of the Apple headset are FaceTime, Apple Fitness+ and gaming. Those are applications that already work well on computers, iPhones, gaming consoles and smart watches, such as the underrated Apple Watch.
Is the Apple headset becoming serious business?
Among all the rumors about the Apple headset, I enjoyed the garbled listing of all the materials purchased by Apple, called the Bill of Materials. If correct, Apple has already spent $1500 on component purchases. More details here.
These expensive components are one reason that the much made comparison between the Apple Headset and the Apple iPod is completely flawed. Optimists point out that when the iPod was introduced in 2003, only 3 million MP3 players had been sold worldwide, compared to over 8 million VR headsets today. In other words, Apple is now entering a much larger, more mature market than back then with the iPod.
This ignores the fact that the first iPods cost $399 and $499 respectively in 2001, which for a device you use every day was expensive, but not insurmountable. Compare that to the whispered introductory price for the Apple Headset of $3,000 for a device you just don't use every day. A market for that kind of device in that price range does not exist and is not going to exist.
Apple hopes that like the iPod and iPhone previously, people will use the Headset for hours, if not continuously. But the applications to do so are lacking. That leaves you with nerds and gamers, and that seems like a great market. But not at these prices and especially not when there is little spectacular new content available. Before MP3 players, there was music. In fact, more music than ever before. The device feasted on the huge supply of pirated music that flooded the Internet via Napster, Limewire and Kazaa.
Because what is often forgotten is that MP3 players, including the iPod, benefited from the ability to listen to music by artists whose entire CDs you would never otherwise have bought. I am man enough to confess that How Do I Live by LeAnn Rimes was high on my iPod playlist for years, but I had never bought an entire CD of hers.
Content development for the entire VR/AR/XR market, on the other hand, is complex, expensive and time-consuming. The Apple Headset will have to run on legal content (read: no porn) and that costs money. So where the iPod was relatively cheap and played free content, the Apple Headset will be an expensive device with expensive content. And that suddenly reminded me of my graduate thesis and the huge failure of the Apple Newton.
In Search of the Holy Grail
Exactly thirty years ago, in 1993, Apple launched with much fanfare the Apple Newton, a handheld computer whose main asset was the possibility of handwriting recognition, which would make a keyboard unnecessary. That same year, Frans Straver and I graduated together on a study of success and failure factors of interactive media in the consumer market, entitled In Search of the Holy Grail. The conclusion after a year-long analysis of more than 600 scientific articles and pieces from the international trade press, was not shocking: interactive media that want to be successful in the consumer market must be cheap, easy to operate and preferably provide a hefty amount of erotic coziness.
Philips misread our conclusion and was kind enough to let us present the results at a conference in Ahoy. After I showed the picture showing that Philips' interactive compact disc player, the cd-i, would be mercilessly crushed between the PC at the top of the market and the game console at the bottom, Frans and I were thrown out before lunch.
What we ourselves and the brains at Philips overlooked at the time was that the Apple Newton suffered from exactly the same shortcoming as the CD-i: high price, no necessary new applications and no supply of pink content, as it was so nicely called at the time.
Wired published a great article 10 years ago about the failure of the Newton. CNET seems inspired by this and recently came out with this video in which it takes 8 minutes and 30 seconds to draw the parallel between the Apple Newton and the Apple Headset.
The best analysis I've come across so far on the chances for the Apple Headset is this video from the Wall Street Journal. Within Apple, there also seems to be division over the potential of the glasses, and executives are now keeping their appropriate distance from the project. Hopefully the tech gods will be merciful to whoever presents the Apple Headset on June 5. My guess is that it won't be CEO Tim Cook.
Apple Headset will be a flop - by Apple standards
Reports are that Apple hopes to sell half a million to a million Headsets in the first year. Even if that market doubles every year for the next few years, which it won't, that's still change for Apple. Because that's the downside of a company heading for $500 billion in annual sales: it's unimaginably difficult at that scale to bring something new to market that has more impact on sales than, say, a marketing campaign for a new type of Airpods.
But I'd rather see a relative failure of a fundamentally new product, than more of those hopeless share repurchases that Apple has been peddling in recent years. Is there nothing better to invent, build or buy than spending $90 billion on share repurchases? That Headset isn't going to be it, but surely there will be products in development within Apple that can match the success of the... Apple Watch!
Because notice:
- Apple had over 30% global market share in smart watches by 2022
- that 30% market share led to as much as 60% revenue for Apple from every penny that went into the smart watch market (30% market share vs. 60% dollar share)
- Apple will sell over 50 million Apple Watches this year
- the annual growth rate of the smart watches market is nearly 20%
- Apple has higher watch sales than the entire Swiss watch industry
- Swatch Group, LVMH and Richemont collectively achieve lower watch sales than Apple
- Rolex's annual sales are around $10 billion
- Apple does not publish specific figures on Apple Watches sales, but with 50 million Apple Watches sold, Apple is at least twice the size of Rolex
Combined with the success of the Airpods, which, with the Apple Watches, fall under the Wearables division, with the emergence of the Services division, this leads to a dramatic change in the structure of revenue for Apple. See these excellent charts on Apple's revenue by product line and region over the years. Sales from Wearables now exceed those of the iPad and Mac. Apple is a computer company where revenue from traditional desktop and laptop computers is still only 8%.
It would make sense for Apple to organize revenue distribution differently, for example:
- computer hardware (Mac, iPad, Apple TV)
- services (Music, Movies, TV Shows, Apps, Books)
- wearables (Airpods, Watches, Headset)
- iPhone (you know)
I conclude about the Apple headset with the same consideration as when the Google Glass came out 10 years ago: over half the people on earth are women. Do you know one who will walk around with a device on her head all day, messing up her hairstyle?
News about AI
- Amazon is adding AI to its search function. This is evident from job ads posted by Amazon
- There is an iPhone app for ChatGPT. Unfortunately not yet available in the Netherlands
- Palantir shoots up after Cathie Wood's ARK bought additional shares. Investors believe in PLTR's AI, share rose 46% in last 12 months
- Google's Bard not in Europe, no Google AI in Europe at all? 'More penguins than Europeans can use Google Bard'. Is Google pestering us?
- EU AI legislation may thwart startups. We should be glad that Brussels is short on time and not as slow as usual
Notable links
Dutch photography marketplace Unveil unveils Early Access Card
- Buyers of the Early Access Card (price under $100) will get access 24 hours earlier to purchase exclusive artwork through the Unveil platform.
Worldcoin raises $100 million via sale of tokens
- The other startup by Sam Altman of OpenAI gives free tokens to people who have their iris scanned with a new device.
One million wallets hold at least 1 Bitcoin
- It could be one person with a million wallets, but I don't think so.
ASML has no job openings for a week due to server maintenance
- Holland's favorite tech company apparently has servers made of papier mâché.
Spotlight 9: Google again winner of the week
Alphabet stock was again the riser of the week and I have no idea why. Google is throwing generative AI at every product right now and experts say this is a very risky strategy for the company.
I can't possibly characterize the bizarre market right now any better than this article on Crunchbase:
"Suppose you would have invested $100 in a Nasdaq Composite Index fund at the height of the boom. That would have been on Nov. 19, 2021, when interest rates were low and technology stocks were very popular.
Today, that investment would be worth about $76. It's a disappointing return that reflects how technology ratings have steadily declined in recent quarters. But it could have been even worse.
Now imagine if, instead of the index fund, you had chosen a basket of promising, venture capital-backed startups founded in the past 15 years. You know, companies like Airbnb, Coinbase, Rivian and Uber.
Let's say you had invested at the market high point in November 2021. And let's say you bought a share of the startups that launched the 19 biggest IPOs of the past 10 years. If you had held on until now, every $100 you had invested would be worth about $32. That's a much steeper drop than the drop in the technology-focused Nasdaq Composite Index and points to the public's deeper disappointment in mostly unprofitable new market entrants."
Two conclusions: profits are currently considered more important than growth. And investing in tech stocks is and remains highly risky. Because even Apple does not score on every try.
Opinions like this in your mailbox weekly? Sign up for the free newsletter and receive my views on the latest developments in technology, entrepreneurship and innovation every week.