Mark Zuckerberg breaks down Meta’s metaverse spending

Welcome to Lowpass, a newsletter about the future of entertainment and the next big hardware platforms, including smart TVs, ambient computing and AR / VR. This week: Zuckerberg explains what Meta has been spending all that metaverse money on.

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The dream of the metaverse is alive at Meta

Meta isn’t done spending billions of dollars on AR, VR and the metaverse: During yesterday’s earnings call, the company’s new CFO Susan Li said that losses of the company’s Reality Labs unit will increase in 2023.

Reality Labs lost a whopping $13.7 billion in 2022, compared to $10.2 billion in 2021.  “We're going to continue to invest meaningfully in this area, given the significant long-term opportunities that we see,” Li said.

Sounds like business as usual? Well, yes and no. Li and Zuckerberg did commit to staying the course on AR and VR, but Zuck in particular tried to add a bit more nuance. Notably, for the first time, he broke down where exactly all of this money is going by outlining three key areas:

• AR. This is “actually the biggest area” of investment for Meta in this space, as Zuckerberg pointed out for the first time yesterday. “It is still a large research problem,” he said. “There is still a lot of work there, and we haven’t actually shipped the product yet.”

• VR hardware. Quest 2 sales may have slowed down, but Zuckerberg reiterated that the headset did “quite well.” He didn’t talk about the commercial success of the Quest Pro, but told investors that he was “really proud of it,” calling it “the first mainstream mixed reality device.”

• VR and metaverse software. Zuckerberg specifically pointed out that this area was the smallest piece of the puzzle “by budget size.” “That doesn't reflect the importance of it,” he added. “The software and social platform might be the most critical part of what we're doing. But software's just a lot a lot less capital-intensive to build than the hardware.”

Meta isn’t just sinking billions into legless avatars. Critics have seized on Meta’s little-used Horizon Worlds platform in particular to point out that its metaverse bet is a costly mistake. Zuckerberg’s comments yesterday did sound like a response to that criticism. A promise that bigger things are coming, and that Horizon isn’t actually all that expensive.

So what’s next? Zuckerberg did caution that we won’t see results of its investments in AR for some time, but he did outline a few near-term priorities.

• Mixed reality. Meta’s new Quest Pro offers video-pass through, and allows developers to build mixed reality apps that combine real-world environments with virtual objects. Zuck called it “the first mainstream mixed reality device,” during yesterday’s call, and said that the Quest 3, which is scheduled to launch later this year, will offer similar mixed reality features.

• Generative AI. Pro tip: Don’t use “Stable diffusion” as your drinking game phrase during this year’s earnings calls. Every CEO is in love with generative AI these days, and Zuckerberg is no exception. His remarks were generally vague, but he did suggest that Meta could use AI to generate avatars and 3D assets for the metaverse.

• Efficiency. Meta isn’t cutting back on AR and VR spending, but it is looking to spend its money more purposefully as part of a company-wide effort that Zuckerberg dubbed “the year of efficiency.” “We’re going to be more proactive about cutting products that aren’t performing or may no longer be crucial,” he said about the new company-wide approach.

The bottom line: Meta will keep spending big on AR and VR, at least for now. Here’s how Li put it: “It is a long-duration investment, and our investments here are underpinned by the accompanying need to drive overall operating profit growth.” Translation: The dream of the metaverse is alive at Meta as long as Instagram keeps printing money for the company.

What else

Paramount is folding Showtime into Paramount+ with Showtime. The studio is combining its two streaming services to one with a really long name, because just calling it Showtime would have been not confusing enough.

TuneIn will start streaming Audible shows. Originals like “American Football” and “Punk in Translation” will go live on TuneIn in the coming months.

“Westworld” is heading to free streaming services. After removing some cancelled shows from HBO Max, Warner Bros. Discovery is licensing them to Tubi and The Roku Channel.

4chan users have been abusing an AI voice generator. This is why we can’t have nice things.

Samsung teams up with Google for XR devices. Qualcomm is also in the mix, but we don’t know yet what exactly the companies are working on.

Judge rules against FCC in Meta/Within case. As things stand, Meta may be able to finalize the purchase of Within, the startup behing the VR fitness app Supernatural, early next week.

Spotify now has 205 million paying subscribers. The company released better-than-expected earnings a week after laying off close to 600 people.

New Peacock subscribers now have to pay up. NBCUniversal’s streaming service still has a free tier, but it’s not being offered to new subscribers anymore.

That’s it

Another week is in the … can? Rearview mirror? Whatever the right metaphor may be, I’m glad it’s almost Friday once more. It was another busy week in the world of tech and entertainment, which is why you may have missed an interesting study: Using popular image generation algorithms, researchers were able to prove that AI actually remembers individual images it has been trained with, and is able to recreate those images when asked. Kind of makes you wonder how many of the AI-generated art we’ve seen everywhere in recent months was just plagiarized, doesn’t it?