Just because Apple (NASDAQ:AAPL) hasn't released a virtual reality (VR) or augmented reality (AR) headset yet doesn't mean it isn't the company to watch in the space. Existing players like Magic Leap, Microsoft (NASDAQ:MSFT) with its HoloLens, and an upcoming Facebook (NASDAQ:FB) AR headset have not yet built a durable competitive advantage or any kind of scale, and Apple is watching and learning from their current mistakes.
Some people might view Apple's delay in entering AR and VR as a weakness or a strategy that will lead to lost market share. But as my Foolish colleague David Jagielski recently pointed out, Apple's slow-to-market approach is exactly the right one. And as with the iPod and smartphone, when Apple does enter the market, it'll do so with a well-thought-through product and an ecosystem of hardware and services that will make it a success. And that could potentially lead to another generation of must-have devices for this technology stock.
The undercurrents in VR and AR
While VR and AR have been around for a few years, they haven't exactly set the world on fire when it comes to market penetration. According to SuperData Research, the Sony (NYSE:SNE) PlayStation VR has the biggest market penetration with 4.7 million headsets sold since launch, Facebook's Oculus Rift is second with 1.5 million, and HTC Vive is third with 1.3 million devices.
So in over three years, there have been less than 10 million VR headsets sold by the three biggest companies in the industry. For some perspective, Apple sold about 45 million iPhones last quarter alone.
There are a number of reasons VR headsets in particular aren't selling well, but the main ones are price, content, and a combination of knowledge and accessibility. VR simply isn't something that's accessible to most consumers because it takes a lot of space and know-how to even introduce someone to VR, so knowledge about the industry is very low.
On top of that, headsets are expensive and there isn't yet a "killer app" piece of content that makes devices a must-have. All of this will change eventually, but the current players haven't been able to overcome existing hurdles. Looking at the current challenges, there's a good reason to think Apple is well positioned to overcome all of them.
Apple is set up to sell VR and AR
If you think about what the best VR or AR sales experience looks like, trying on devices is the first step. While Facebook, HTC, and Sony try to sell through big-box retail stores or online shops, Apple has its own retail stores and can control the sales experience. There can literally be dozens of demos going on in one Apple store, which isn't the case with any other retailer today.
Apple has also been testing AR with iPhones for years, so it knows where users are engaging with the technology and how they're using it. That'll be crucial as the company designs headsets and outlines early applications to build. Apple has more user data on AR than anyone, which will be another huge advantage.
The final edge Apple has is its ability to build integrated devices. Oculus and Microsoft are new to the hardware game, and Magic Leap has shipped very few AR headsets. There's no reason to think Apple's hardware won't be the best on the market when it's launched.
VR and AR tech isn't "there" yet
I don't think VR or AR are headed to truly mass adoption until headsets look more like glasses rather than the clunky contraptions we have today. Glasses will be less cumbersome and will allow users to bring them to more locations, answering some of the accessibility and knowledge challenges I pointed out above.
To get to the point where a VR or AR headset can be just a pair of glasses, computing power needs to improve, and that's something Apple is waiting on. It isn't going to ship a product until form factor and usability meet its high expectations, and that will take a few more years. But if Apple does introduce an AR headset, it won't be playing from behind. In fact, I think it will leapfrog all of its competitors in a single bound.