Quest U?

Is the Meta Quest a Wii U-sized flop? Software numbers suggest it might be

Analysis: Meta's VR software sales are comparable to Nintendo's failed console.

Kyle Orland – Sep 28, 2023 7:43 PM | 165

Meta's estimated Quest software sales are worryingly close to those for the Wii U at a similar point in its life. Credit: Ars / Kyle Orland

During Wednesday's Meta Connect keynote presentation, the company announced a new milestone for its line of standalone Quest headsets: $2 billion in lifetime revenue from Quest apps and software since the platform launched back in 2019. On first glance, that's a pretty big number that suggests the formation of a pretty healthy VR software ecosystem.

But looked at in context, Ars' analysis suggests the Quest software market is roughly the same size as that for the Wii U at a similar point in its short life cycle. That's not a great comparison for Meta to be facing, since the Wii U was rightly considered an embarrassing flop by the standards of the video game market.

Comparing apples to... VR apples

In making that comparison, Ars compared Wii U software unit sales numbers from Nintendo's own quarterly reports to estimated software sales numbers based on Meta's sporadic public announcements of Quest revenue milestones. To convert revenue numbers to unit sales estimates for the Quest, Ars divided total Quest revenue by the median sale price for best-selling Quest software ($19.99) and the mean sale price for that same software ($17.60).

These unit estimates are necessarily rough and don't directly account for revenue made from Quest DLC, such as Beat Saber's popular music packs. They also don't capture sideloaded Quest software purchased on platforms like Sidequest or itch.io, which are not included in Meta's own numbers.

Quest software revenue picked up significantly after the late 2020 release of the Quest 2 headset. Credit: Ars Technica / Kyle Orland

Even accounting for those adjustments, though, the software markets for the Wii U and Quest (at similar points in their life cycles) would seem to be in similar neighborhoods. The Wii U's sales of nearly 99 million software units in its first 1,594 days on the market is just behind the roughly 100 to 114 million pieces of Quest software Meta has sold in 1,559 days, according to Ars' estimates.

Ars Video

To be fair to the Quest, software sales for the headset have shown a distinct upward trajectory since the launch of the Quest 2 in October 2020. If you disregard the 16 months of Quest 1 software sales that preceded the Quest 2 launch, the headset has been selling software at a significantly faster rate than the Wii U. Meta also deserves credit for building the Quest's software library from what was essentially a standing start into a robust storefront with over 500 apps. Comparing a new VR platform to a Nintendo console that could lean on ultra-popular first-party franchises developed over decades isn't completely fair to the newcomer.

At the same time, many of the Wii U's most popular first-party games consistently sold for $59.99, with exceedingly rare official discounts. That means Nintendo's console likely generated much more overall software revenue than the cheaper software on the Quest. The Wii U was also selling its software to just 13.57 million Wii U owners (as of March 2017), compared to reports of over 20 million Quest headset sales so far. This suggests that the average Quest owner is spending a lot less on software than the average Wii U owner did.

A report from earlier this year suggested that only 6 million Quest owners were still using their headsets at least once a month as of last October. That could help explain why relatively healthy Quest hardware sales haven't translated to Quest software sales on the same level.

A worrisome comparison

The fact that the Quest is even in the same neighborhood as Nintendo's notoriously underperforming console is probably bad news for the health of Meta's VR platform. In fact, in terms of sales benchmarks, pretty much any hardware platform would want to avoid comparisons to Nintendo's least successful home console.

These bars smooth out what is likely much noisier changes in the actual month-to-month data, but still show a slight slowdown in recent Quest software revenues. Credit: Ars Technica / Kyle Orland

After relatively healthy launch window sales, Nintendo quickly lowered its Wii U sales expectations in early 2013 before many third-party developers started abandoning the slow-selling system. The console's quickly apparent death spiral led to real concerns for Nintendo's overall financial health, which had to be buoyed by the 3DS for a few years. Things didn't turn around for the company until after the 2017 launch of the Switch, which sold more hardware in less than a year than the Wii U sold in its full run.

Yes, Meta sells the Quest as more than just a fancy head-mounted game console. But games continue to be the most popular use case for VR headsets, meaning comparisons to dedicated game consoles are warranted (you could also argue that the Quest's other functions should make it more marketable than a dedicated game console, but that's a bit orthogonal to the point here).

To be sure, even a Wii U-sized software market has been capable of generating a fair number of hits on the Quest. Meta reported over 124 Quest games had earned over $1 million in revenue as of last year and that 40 Quest apps had hit the $10 million revenue milestone earlier this year.

Still, Quest software revenues aren't rising as quickly as they once were. Estimated software revenues (based on Meta's sporadic data) have fallen from about $58 million per month in the February to October 2022 period to just $48 million per month since then, a roughly 17 percent decline.

None of this means that the Quest line is destined to be remembered as a Wii U-level flop, though. While hardware sales for the Quest 2 have slowed a bit lately, the headset still seems to be selling at a faster clip than the similarly aged Wii U (which was on the verge of being made obsolete by the Switch at a similar point in its life). The pending release of the improved Quest 3 and anticipated VR titles like Asura's Wrath 2 and Assassin's Creed Nexus could also conceivably jumpstart Quest sales.

Can the upcoming Quest 3 help juice platform sales? Credit: Meta

But Quest's overall revenues will have to get a lot healthier to justify the massive investment Meta has made in the hardware line. The company's Reality Labs division has lost $21 billion since the beginning of 2022, over and beyond the $2 billion it spent on the company then known as Oculus in 2014. Quest software and hardware would have to start selling orders of magnitude better than the Wii U to make up for that kind of continuing investment in the technology.

Back in the late 2010s, you could argue that VR headsets were an immature and risky new concept that might take a while to catch on with the masses. Now, in late 2023, the market has had enough time to reach something approaching its full potential. That this potential currently seems to mirror one of the worst-received game consoles of the modern era should be deeply concerning to Meta and those with high hopes for virtual reality in general.

Listing image: Photo by Wired / Manipulated by Aurich Lawson

Kyle Orland Senior Gaming Editor

Kyle Orland has been the Senior Gaming Editor at Ars Technica since 2012, writing primarily about the business, tech, and culture behind video games. He has journalism and computer science degrees from University of Maryland. He once wrote a whole book about Minesweeper.

165 Comments

Staff Picks

TROPtastic

Even if the Quest is the biggest fish in a small but growing pond, I think it's important to not underestimate that Meta has spent more than $20 billion to create the pond and the fish. I don't know if Nintendo's total expenditure before the Wii U was even in that order of magnitude.

Meta's current strategy of "take tens of billions of dollars in losses in hopes of making the market big enough to be profitable" is more similar to that of Amazon and their Alexa division than anything Nintendo did, but perhaps with the caveat that they at least have a path to profitability if they cut their spending.

September 28, 2023 at 8:11 pm