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Startups are Facing a Bitter Reality as an Outcome of Meta’s German Oculus Ban

The ongoing legal struggle between Meta Platforms Inc. and German regulators has created a stumbling block for the country’s nascent virtual reality industry.

After Meta withdrew its headsets from the shelves, local startups have struggled to get their hands on them. They have to decide whether to develop apps for less popular rival headsets or abandon the industry worth 4.4 billion USD and growing altogether.

“The Oculus Meta sales stop has made a huge impact on us,” said Christian Gnerlich, founder of Brainjo, a VR firm based in Regensburg specializing in brain-training software. “Virtual reality glasses are almost non-existent.”

Meta had removed its Oculus headsets from the German market in 2020, less than three months after its social media platform, Facebook was accused of exploiting its dominant position by the country’s apex court. Later that year, the Federal Cartel Office launched an investigation into the tech giant’s requirement that its Quest 2 headgear users create a Facebook account to operate it.

The Impact on German Startups

Meanwhile, according to data provided by PitchBook, German virtual reality companies have fallen well behind competitors in Israel, Switzerland, the UK, and France in terms of fund-raising.

Data offered by the research firm IDC suggests that Meta is the world’s leading VR headset manufacturer, with over 80% of the market share. Users have spent more than 1 billion USD on Meta’s Quest store content, in part thanks to its founder Mark Zuckerberg’s infatuation with the Metaverse.

The term refers to a virtual environment that combines virtual reality, gaming, and social media. J P Morgan estimates that metaverse expenditure could eventually exceed 1 trillion USD.

Even though it is still possible for German developers to get their hands on Q2 headsets sent to Germany via Amazon stores from other EU countries, it adds to companies’ costs and reduces demand among potential customers.

Battle with Regulators

The disagreement between the Federal Cartel Office and Meta is one of many instances in Germany where the tech giant’s data policies and practices have triggered alarms.

Regulators have barred Facebook from gathering data from WhatsApp users in Germany. In addition, the apex civil court in the country ruled this year that the company can’t deny locals the opportunity to use fabricated names.

“Facebook is not looked on fondly,” stated Daniel Pots, co-founder of VR Bits, a developer for corporate safety training and marketing solutions based in Leipzig. “Data protection is very important to many of our clients since they come from critical industrial sectors like electricity providers.”

Meta’s Dominance

While Meta is the industry’s dominating player, there are indications that competition is starting to heat up. People familiar with the issue suggest that some developers have compared ByteDance Ltd.’s Pico Neo to the Quest 2. At the same time, Apple Inc. officials recently previewed a mixed-reality headset to the company’s board. Read More

“VR Bits has been working on converting some of its goods for other headsets, including the Chinese-made Pico Neo,” Pots added.

“More and more people are stating that Pico headsets are a lot easier to maintain,” said Soenke Kirchhoff, the CEO of INVR, a virtual reality production firm. “Facebook’s market dominance is crazy, and it needs to be broken. When there is only one developer, there is no market.”

According to founder Michael Schmitt, VR fitness software developer Icaros turned away from the Oculus system when Meta suspended sales.

“Virtual reality would have grown as a technology much more if Oculus hadn’t been so dominant in the market,” Schmitt added. “We’d like to enter their world, but we’d also like to see the barriers to entry fall.”

The market for virtual reality gadgets might increase at 27% each year until 2026, says Mandeep Singh, a senior tech analyst from Bloomberg Intelligence.