When Apple held a corporate retreat in Carmel Valley, California, about five years ago to discuss its next major product, longtime design chief Jony Ive used a clip like an Apple ad The same beautiful concept video attracted 100 top executives of the company.
Video shows a man sitting in a London taxi wearing an augmented reality headset and calling his wife in San Francisco. “Do you want to come to London?” he asked, two people who saw the video said. In no time, the couple were sharing views of London through the eyes of their husbands.
The video got executives excited about the possibility of Apple’s next business-changing device: a headset that merges the digital and real worlds.
But now, as the company prepares to unveil the headphones in June, Apple’s enthusiasm has given way to skepticism, according to eight current and former employees, who spoke on condition of anonymity because of Apple’s policy against talking about future products. Concerns were raised about the device’s roughly $3,000 price tag, doubts about its usefulness, and concerns about its unproven market.
That divide has taken a surprising turn within a company where employees are single-mindedly building devices — from iPods to Apple Watches — for missions to the moon.
Some employees left the project because of doubts about its potential, three people familiar with the matter said. Others were fired for a lack of progress on certain aspects of the headsets, including using Apple’s Siri voice assistant, a person familiar with the matter said.
Even Apple’s leadership questioned the product’s prospects. It was developed at a time when morale was strained by a wave of departures from the company’s design team, including Mr. Ive, who left Apple in 2019 and stopped advising the company last year.
An Apple spokesman declined to comment on the company’s plans for future products.
Apple’s headsets are considered leaders in virtual and augmented reality. For more than a decade, technology leaders have touted it as the next wave of computing after the smartphone. Apple CEO Tim Cook, Tell Last year’s college student said that in the near future “you’re going to wonder how you lived without augmented reality, just like today you wonder: How did someone like me grow up without the internet?”
But from Google Glass to Magic Leap, from Microsoft’s HoloLens to Meta’s Quest Pro, the road to delivering augmented reality has been fraught with failures, false starts, and disappointments. Apple is considered a potential savior because of its success in combining new hardware and software to create revolutionary devices. Nonetheless, the challenges remain daunting.
Facebook’s parent company, Meta, has spent billions of dollars trying to build a virtual reality business. The experience was humbling.Sold About 20 million in its $400 Quest 2 Launching headsets since 2020, it recently slashed the price of its high-end device, the Quest Pro, from $1,500 to $1,000 due to sluggish sales.
By comparison, Apple sells more than 200 million iPhones a year at an average price of more than $800.
Unlike the iPhone, which combines many existing technologies, virtual reality will require Apple and other companies to design new chips and wearable displays, said Matthew Ball, author of “The Metaverse: And How It Will Revolutionize Everything.” “The difficulty of this problem is far beyond anyone’s expectations,” he added.
Uncertainty about the potential of Apple’s project has led some involved in the project to speculate that the company might delay the launch, these people said, especially if the economy is shaky. The company has delayed launching other new products in the past, including the coin-sized location-tracking device AirTags, which Apple shelved for more than a year to address privacy concerns. But for now, manufacturing of the earphones is well underway and is scheduled for release in June, people familiar with the matter said.
Apple is expected to ship fewer than 500,000 earphones a year, according to market research firm Counterpoint Research. By comparison, the company expects to ship about 40 million Apple Watches after its debut. Modest expectations for headphones illustrate the challenge for a category whose sales fell 12 percent to $1.1 billion last year, according to market research firm NPD Group.
Trying to define an emerging market is an aberration for Apple.
“Apple has always been very good at entering a market when it’s already established and changing that market,” said Carolina Milanesi, a consumer technology analyst at research firm Creative Strategies. “That’s not the case with Apple VR and XR. There’s still a lot to learn.”
Some internal skeptics questioned whether the new device was the solution to the search problem. Unlike the iPod, which puts digital songs in people’s pockets, and the iPhone, which combines music player and phone functionality, headphones don’t have the same clarity, these people said.
The product was born during an uncertain time. This year, Evans Hankey, Mr Ivey’s successor in charge of industrial design, departed. With design leadership in throughput, engineer Mike Rockwell has led the development of the device.
The headset looks like ski goggles. It features a carbon-fiber frame, a battery-backed body pack, an external camera to capture the real world and two 4K displays that can display everything from apps to movies, two people familiar with the matter said. Users can turn a “reality dial” on the device to increase or decrease real-time video from the world around them.
The New York Times has previously reported on certain features, Bloomberg and Information.
The headset is expected to cost around $3,000, three of the people said. It is seen as a bridge to future products, such as augmented reality glasses, that have broader appeal but require technological breakthroughs.
Because the headset doesn’t fit glasses, the company plans to sell prescription lenses for the display to people who don’t wear contact lenses, a person familiar with the matter said.
During the development of the device, Apple focused on making it great for video conferencing and spending time with others in the form of an avatar in a virtual world. The company calls the device’s signature app “copresence,” a term meant to capture the experience of sharing a real or virtual space with someone in another place. It’s similar to what Facebook founder Mark Zuckerberg called a “virtual world.”
The device will double as a tool for artists, designers and engineers, tracking them to draw freely in space in image-editing apps, and tracking hand gestures to edit virtual reality movies. Finally, it will serve as a high-resolution TV, playing custom video content from Hollywood filmmakers like “Iron Man” director Jon Favreau.
Apple is expected to market its device as a different product than what Meta is launching.In an interview last year with Dutch publication BrightMr Cook said he avoided using the word “metaverse” because it was foreign to ordinary people.
The headset’s price and use suggest that it appeals more to businesses such as design firms than many of the 1 billion iPhone users. Apple has made its fortune selling expensive smartphones, but has always struck a balance between price and utility.
Mr. Ball, author of “The Metaverse,” compared the company’s strategy for the device to that of Tesla’s Roadster, its original $100,000 electric car. Ultimately, Tesla followed suit with lower-priced vehicles with broader appeal.
Ms. Milanesi said Apple’s experimental approach to the goggles seemed more like an implementation of the Apple Watch than an iPhone launch. Apple initially described the watch as a tiny extension of the iPhone. After understanding what consumers do with the watch, the company positioned it as a Fitbit-like fitness accessory.
“It’s not quite like an apple,” Ms Milanesi said. “But Apple is a very, very different company.”
