Why Apple could finally make mainstream

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Apple (AAPL) is working on a pair of augmented reality and headsets, according to separate reports by The Information and Bloomberg. 

The first headset, which is said to feature both VR and AR functionality, will launch between 2021 and 2022. The second unit, which is meant to resemble a pair of normal eye glasses but include AR capabilities, is set to debut in 2023. The headgear is designed to bolster Apple's hardware division in the coming years as smartphone sales stagnate across the globe.

For all of their potential, AR and VR headsets have yet to break into the mainstream. Whether it's their price, a lack of killer apps, or their ergonomics, there's yet to be a headset that has managed to truly take off among the gamers and early adopters they're largely marketed to.

AR and VR have the potential to change work, travel, how we watch movies, play games, and communicate. But no single company has managed to make a worthwhile option.

Apple could change that. Just as the company helped usher in the smartphone revolution as we know it, Apple has the means and incentives to make mainstream AR and VR headsets a reality.

Apple Arcade and Apple TV+ are primed for AR and VR

Apple has poured millions into the AR and VR space. In 2015, the company acquired the German AR startup Metaio. Then, in 2017, Apple debuted its ARKit, a software development kit to help developers create AR apps for the company's iOS devices. The firm is now on ARKit 3.

Apple also has two new offerings that could benefit immensely from its investment in AR and VR: its game subscription service, Apple Arcade and its TV streaming service, Apple TV+.

"We view the biggest opportunity for Apple in AR and VR on the gaming side," Wedbush Securities analyst Dan Ives explained to Yahoo Finance. 

"Because ultimately, I think down the road they are going to integrate it with Apple Arcade, and I think that's something where there is real applicability, where they can really differentiate themselves."

Apple Arcade launched on Sept. 19 and provides customers with a steady stream of games they can download for offline or online play.

Apple's push into original streaming content could also be a potential avenue for its AR and VR efforts to gain traction, according to Gartner vice president Annette Zimmermann.

"If I wanted to predict what makes more sense for Apple strategically, then I would say it is VR — glasses — mainly, because of their big push around services," she explained.

"Apple TV+ content could be interesting for this. And since Apple is producing its own TV shows, making this content VR-glasses ready would be a good way to promote this new service."

Comfort and killer apps

To date, no AR or VR headset has broken into the mainstream. Samsung's Gear VR, which was powered by the company's smartphones, saw some interest from consumers, but the company seems to have put the brakes on the hardware.

Google (GOOG, GOOGL) also chose to exclude support for its own smartphone-powered Daydream VR service from its new Pixel 4 smartphones. HTC and Facebook's (FB) Oculus continue to push their own hardware, but neither has managed to successfully court the average consumer.

Outside of a lack of worthwhile apps, AR and VR headsets have proven uncomfortable and difficult to set up. If Apple is going to make its headgear worth wearing, it will have to address both of those issues.

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But Apple has a track record of refining existing hardware and software concepts for mainstream consumers. For proof of that, you simply have to look at what the company did with the smartphone market. 

Prior to the release of the iPhone, physical keyboards and clunky designs were the norm. After former CEO Steve Jobs unveiled the company's sleek rectangular handset, smartphone designs and interfaces changed, hewing closer and closer to the look and feel of the iPhone.

"I think when Apple gets into it, they're going to come out with one hell of a hardware solution,” IDC research director Ramon Llamas said, referring to AR and VR headsets. “Because that's in Apple's DNA."

An iPhone replacement is a hard sell ... for now

Apple is in the midst of a major transformation. As global smartphone sales continue to stagnate, the company is looking for its next major consumer hit.

Story continues

Services like Apple Arcade and Apple TV+ are lined up to help supplement any losses Apple sees due to a decline in iPhone sales, but AR and VR headsets could provide yet another revenue stream for the company.

CEO Tim Cook expressed his own bullishness for AR technology in 2017, telling The Independent that he regarded AR as a "big idea, like the smartphone."

Whether a headset could rake in the kind of cash as a smartphone, though, could be a tall order, according to Ives. AR and VR headsets, as they exist today, are unwieldy, have short battery lives, and have limited display resolutions.

"The promise of VR thus far has fallen on deaf ears in terms of where the market's gone. I tend to be more skeptical about the broader market opportunity relative to Apple," Ives said.

"In other words, I think it could move the ball forward in terms of market share, but I don't compare the market opportunity to a smartphone. I think a lot needs to happen before that in terms of applications and other functionality within the consumer ecosystem."

We're still a few years away from the reported launch of Apple's headsets, though. And if any company is able to get consumers to take notice of AR and VR, it will almost certainly be Apple.

More from Dan:

Got a tip? Email Daniel Howley at [email protected], and follow him on Twitter at @DanielHowley.

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