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Why Magic Leap might live up to its augmented reality promises

While the US company has not hit the projected sales target for its AR device, the sector is still mooted for big things

Crown Prince of Saudi Arabia Mohammed bin Salman Al Saud (R) met executives of Magic Leap in Los Angeles in April 2018. Photo: Getty Images
Crown Prince of Saudi Arabia Mohammed bin Salman Al Saud (R) met executives of Magic Leap in Los Angeles in April 2018. Photo: Getty Images

Founders of tech companies often assume a visionary status to help sell their grand ambitions to investors and the masses. Perhaps they learnt it from Steve Jobs, Jack Ma or Elon Musk, to name a roll-call of founders known for their inspiring speeches.

But what happens when the reality doesn’t match the hype? In the late 2010s there are stories of tech founders who have fallen victim to their own hype and grandiose claims, which on further inspection did not stand up to scrutiny. And in the world of augmented reality (AR), the hype has been heated even more.

Magic Leap, an augmented reality, or mixed reality, company based in Plantation, Florida, has been under pressure following reports it vastly under-delivered on sales of its first product, the Magic Leap 1. The founder and chief executive Rony Abovitz originally projected his company would sell 100,000 units within the first year of its launch. But only 6,000 units were sold in the first six months since it was released, according to The Information.

The goal of selling one million units in one year is overly ambitious. Even 100,000 is outrageously ambitious.

George Jijiashvili, tech analyst

Magic Leap did not deny the sales claim, in a statement following the story, but rubbished the report for being “littered with inaccuracies and misleading statements". Magic Leap did not respond to The National's request for a comment.

If Magic Leap has only sold 6,000 of its first product, this does not bode well for the well-funded start-up despite the industry being tipped, in some quarters, for mainstream adoption within a few years.

The Magic Leap 1 is an AR headset — what the company calls a “wearable spatial computer” — that allows users to see digital content overlaid on to their actual, real-life environment. Imagine being able to see notifications, stock charts, and the weather forecast while moving around, getting ready in the morning. Or perhaps imagine putting virtual furniture into your room or playing with virtual butterflies floating around you. That was the promise of Magic Leap and Mr Abovitz had bold expectations, with internal claims he wanted to sell a million devices within the first year.

“The goal of selling one million units in one year is overly ambitious,” says George Jijiashvili, an analyst specialising in virtual and augmented reality hardware and content. “Even 100,000 is outrageously ambitious.”

Mr Jijiashvili says this based on a report by market research firm Tractica which put the total number of all smart AR glasses sold for 2018 at 101,000 units.

But Florida's Magic Leap, which was founded in 2010, was able to snag huge funds from big names. In May 2016, $1.4 billion (Dh5.14bn) was raised from a list of investors including Google and China’s Alibaba Group. Two years later, $461 million was raised in Series D funding led by the Public Investment Fund of Saudi Arabia, the country’s sovereign wealth fund. Other significant investors include Qualcomm, Andreessen Horowitz, and AT&T, an exclusive partner allowing the US telecoms giant to sell Magic Leap 1 in AT&T stores.

In December 2016 Magic Leap was worth $4.5bn, according to Forbes, putting it above companies such as games giant Ubisoft and adventure camera-maker GoPro despite those companies generating hundreds of millions of dollars’ worth of revenue every year. Why?

“The CEO made big promises and the original demos were fairly convincing. It seemed like a transformational technology,” says Avi Greengart, a tech analyst based in New Jersey, US, who has tracked the industry for many years. “Five years ago, if you saw early versions of that and extrapolated it to the future, in some ways it’s understandable.”

The market opportunity is “absolutely massive”, says Mr Greengart, as big tech firms like Apple, Google, Intel and IBM explore ambient computing and AR. For some investors these technologies seem the most likely candidates to be the next paradigm shift in how people interact with the world via technology. “It makes sense for VCs,” he adds.

For London-based futurist and author Amelia Kallman, MR (mixed-reality), has greater potential than virtual reality (VR). Whereas VR headsets such as Oculus Rift, HTC Vive and PlayStation VR are replacing people’s field of vision completely, mixed-reality headsets might be more suited to everyday use. But these headsets are currently priced in ways that could be off-putting when they lack what Ms Kallman says is a “killer use case for the average consumer". Magic Leap 1 is on sale starting at $2,295 while Microsoft Hololens 2 costs $3,500.

The AR sector was pushed into the public consciousness when Google announced and then released its Google Glass smart glasses in May 2014. Although the glasses may have captured attention, the device received a backlash, with wearers being referred to as “glass-holes” and generating privacy concerns as the camera-enabled glasses could capture photos and video wherever the user wore them. The public may think Google then quietly forgot the device, but the search giant never abandoned the space.

“They pivoted to enterprise,” says Mr Jijiashvili, “[AR headsets] as a solely enterprise solution is doing really well. There are clear benefits and uses cases [in enterprise].” Courier company DHL for example has invested in AR headsets for “vision picking” for inventory management; designers can view designs as 3D projections and view them in 360 degrees. Meanwhile, in medicine surgeons can also make use of AR, to list just a few examples of enterprise use for the technology.

For enterprise, Google, Vuzix (a firm based in Rochester, New York), and Microsoft are big players with their AR devices. In November 2018, Microsoft won a $480 million military contract to supply the US government with their HoloLens AR headset. But what about Magic Leap, can they succeed?

Mr Greengart is sceptical of Magic Leap’s prospects, citing their lack of impact on the market, but also pointing to their much bigger and well-funded competitors: “Targeting this space — how do you survive? Google, Apple, and Microsoft have big advantages," he says.

Mr Jijiashvili is also not optimistic, believing the company will struggle moving forward.

But the AR space is mooted for big things. Besides headsets, Apple and Google are both heavily involved in augmented reality with AR developer kits for their smartphones and mobile operating systems. There is much interest in Apple’s entry into AR headsets with different predictions — ranging from as early as 2020 to up to 2023 — of when we will see Apple Glasses.

Rumours point to Apple potentially offloading some of the processing needs to their iPhones, meaning users would wear something that look like a more traditional pair of spectacles. This change might mean the masses could finally adopt the technology more willingly.

“People who don’t wear glasses, will they start wearing glasses?” says Mr Jijiashvili. “It’s a very tricky market, actually, to get right. Once the technology miniaturises, then it’ll get interesting.”

Updated: December 16, 2019 05:23 PM

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