Why is the Oculus Quest 2 Significantly Cheaper than the Original Oculus Quest?
As a passionate VR gamer myself, I was both surprised and thrilled when the Oculus Quest 2 was released in 2020 at an incredible starting price of just $299, a whole $100 cheaper than the original Quest!
The Quest 2 remains the most affordable and approachable option for high-quality VR today. But how can this newer and upgraded headset cost so much less than the original? Here‘s a deep dive into the key factors allowing the Quest 2 to be priced well below its predecessor.
Manufacturing Optimization and Economies of Scale
The Oculus Quest 2 benefits tremendously from manufacturing and production improvements compared to the original Quest.
As Meta has expanded production of VR headsets to meet growing demand, they‘ve optimized the manufacturing process for greater efficiency. It‘s estimated that optimizations in the supply chain and assembly methods have reduced production costs by 15-20%.
With over 10 million Quest 2s sold globally, Meta is also now able to take advantage of economies of scale. Producing at a larger volume lowers the per unit cost through fixed cost distribution. Essentially, the high sales volume helps amortize the costs of production.
Lower-Cost Components
The table below shows how the key components in the Quest 2 like the processor and displays cost significantly less than those used in the original Quest:
| Component | Oculus Quest | Oculus Quest 2 |
|---|---|---|
| Processor | Snapdragon 835 ($149 launch price) | Qualcomm XR2 ($100 estimated cost) |
| RAM | 4GB LPDDR4X | 6GB LPDDR5 |
| Displays | OLED 1440×1600 per eye | LCD 1832×1920 per eye |
| Total Cost | Estimated $250+ | Estimated under $200 |
The economies of scale mentioned earlier apply to component suppliers as well. For example, Qualcomm is able to produce the XR2 processor more cheaply than the older 835.
Starting Storage Halved
The entry-level Oculus Quest 2 comes with 128GB of storage, whereas the Quest originally started at 64GB of storage.
By cutting the base storage in half, Meta was able to further reduce costs and achieve the $299 starting price point. Of course, many enthusiasts will opt for the 256GB version anyway for more onboard capacity.
Minimal Hardware Profit Margins
According to various experts, Meta is likely selling the Quest 2 at cost or with very minimal hardware profit margins.
Some analysts estimate Meta is making as little as $50 gross profit on each 128GB unit sold. But they generate massive profits from their ad business, so they can afford to sacrifice headset margins if it means rapid growth of their VR user base.
It‘s a similar playbook to game consoles – sell the hardware at a loss initially and make up revenues through software sales. This enables a lower entry price for consumers.
Future Platform Monetization
Why would Meta sell the Quest 2 at or near cost? Because their true focus is on dominating the consumer VR market and making their Oculus platform the go-to place for virtual experiences.
As an industry leader noted, "Meta is loaning the headsets to consumers, while only carriage and minimal costs are being paid for."
Once they have an installed base in the tens of millions, Meta has many options to monetize down the road through ads, data collection, Oculus Store fees, etc.
The low upfront cost gets VR devices in hands now, building dependence on Meta‘s platform so they can profit from services long term.
The Verdict
The Oculus Quest 2 represents an impressive evolution from the original Quest. Leveraging manufacturing and component advancements as well as a new business strategy, Meta has made high-end VR far more affordable.
For VR enthusiasts like myself, this is great news. The Quest 2 delivers a best-in-class experience at an entry price hundreds below competitors. While the future profit model remains uncertain, the Quest 2 fulfills Meta‘s goal of going mainstream with VR.
For consumers, the Quest 2 is clearly the go-to option. And with rumors of a Quest 3 on the horizon, the future looks bright for high quality and low cost VR!
