Here come the headset wars

Apple is expected to finally unveil its mixed reality headset at WWDC next week. I’ll be at the Steve Jobs Theater in Cupertino on Monday for the keynote. Please reach out if you’ll be there, too; I’d love to connect on the ground. (Flighty, my favorite flight tracking app, has put together a fun map of people who are flying in from around the world.)

This week: Apple and Meta gear up for the headset wars, Epic Games closes in on a new round of funding, Andreessen Horowitz’s latest marketing ploy, and Twitter… err, “X” is readying a big push into financial services.

Scheduling note: Starting next week, new issues of Command Line will be sent on Friday mornings Pacific time instead of Thursday evenings.

Yes, Meta’s announcement of the Quest 3 headset today was as rushed as it seemed. Ever since Apple announced its WWDC dates — and reports confirmed that it planned to debut a VR headset there — Meta has been scrambling to make sure the world knows that we were here first.

First, there was the announcement that it would host a Quest “gaming showcase” event just days before WWDC. More recently, the decision was made to pre-empt Apple’s big day with an early announcement of the Quest 3, including its $500 price point, despite the device not shipping until the fall. The price of the existing Quest 2 is being lowered as well — a move that makes sense when you’ve essentially told the world to hold off on buying your current hardware until the new model ships. Apple’s first headset, by contrast, will cost roughly $3,000 and require a tethered battery pack.

Even with the early lead it has in VR and AR hardware, Meta knows Apple is about to spin its own vision of the metaverse, though Tim Cook and co. of course won’t call it that. Apple’s pitch, I’m predicting, will lean on its pro-privacy marketing and highlight the AR features of the headset. I can imagine the billboards and ads for the Reality Dial, or whatever Apple will call it, on the side of the visor that lets you go in and out of immersive VR to AR. Mark Zuckerberg has been saying for the last couple of years, including in interviews with me, that the feeling of “presence” — of feeling like you’re physically near someone even when you aren’t — is the real selling point of this hardware category. I expect Apple to offer up a similar pitch but also present it as a new computing platform, akin to desktop and mobile.

What will make this coming era of the headset wars so fascinating is not the similarities and differences of the devices, but the philosophies and business models underpinning them. As Zuckerberg told employees during an internal meeting last year: “This is a competition of philosophies and ideas, where they [Apple] believe that by doing everything themselves and tightly integrating that they build a better consumer experience.”

Meta, by contrast, sees itself as the Android to Apple’s iOS. It’s making the cheaper, more open platform that won’t primarily make money from hardware sales. “It’s a very deep, philosophical competition about what direction the internet should go in,” according to Zuckerberg. He has laid out his vision already. We’re about to see Apple’s next week.

Fortnite creator Epic Games is talking with investors about putting together a substantial round of funding, I’m told by people familiar with the talks. I haven’t been able to learn the exact size of the round, though I wouldn’t be surprised if it was north of $1 billion.

That’s because, despite raising $2 billion last April, Epic needs the cash. In late March, I reported that Epic told its investors to not expect profitability for at least the next couple of years as it invests in reigniting Fortnite’s growth, new products, and its Unreal Engine. Shortly after that, a hiring freeze and push to cut costs was announced internally.

I’m told that Epic’s overall business has continued to trend in the wrong direction this year, and the burn rate is a concern. The company lost over $1 billion last year, with top-line revenue coming in at about $4 billion, down from about $4.7 billion in 2021. Given the more difficult fundraising environment and the overall decline in the gaming sector, the terms of this new round should certainly test the prowess of CEO Tim Sweeney. (A spokesperson for Epic declined to comment on funding talks.)

Will an existing investor or outsider step up to lead the round? I’ve heard that CFO Randy Gelber flew to Saudi Arabia several months ago but those early talks went nowhere. For investors and employees sitting on stock options, the question of whether Epic can avoid a painful down round from the $31.5 billion price it raised at last year is top of mind. I doubt it, though some investors have suggested that certain structuring and governance changes could potentially alleviate a steep decrease in valuation. Perhaps the most important governance change I’ve heard is not on the table: Sweeney giving up voting control.

After a trial run in Los Angeles last year, Andreessen Horowitz has made its version of Tech Week a bigger, multi-week affair, starting with a smorgasbord of events in San Francisco this week, LA next week, and New York City in October.

I say its version of Tech Week because a16z has decided to ignore the Tech Weeks that have already existed for years in each of those cities. People who have been involved with the volunteer-organized Tech Week in SF, which took place last fall for the first time since the pandemic, told me that no one from the firm reached out about collaborating. Instead, a16z’s employees have quietly pressured other funds and companies to not participate in these grassroots Tech Weeks.

A16z, meanwhile, controls the official event schedule and email list for its Tech Week, which now numbers over 40,000 sign-ups. The list of speakers on the website this year is chock full of the firm’s partners, portfolio companies, and VC friends.

This has understandably caused frustration and a sense among some that a16z is co-opting the scene to exert control, market itself, and show relevance after making a series of big, splashy investments that are now being called into question. (Who else remembers Clubhouse raising at a $4 billion valuation in 2021? What a time that was!)

As my colleague Liz Lopatto recently explained, no VC firm understands the power of marketing better than a16z. In making itself synonymous with Tech Week while maintaining the illusion of it being a grassroots event, the firm gets the best of both worlds: the free labor of others participating on panels and the ability to flex to founders and limited partners. Ali Wong, hot off her hit Netflix show Beef, was the SF opener this week at August Hall. As attendees entered, they saw “brought to you by a16z” displayed in big letters on the marquee outside. Afterward, they drank cocktails with ice cubes that had “a16z” carved on them.

Like my other colleagues in the tech press, I remain iced out of a16z events and blocked by Marc Andreessen on Twitter. My request for comment on this story was also ignored.

Elon Musk is laying the groundwork for Twitter’s push into financial services as part of his now-stated plan to rebrand the app to the “X” super app. His employees were spotted at the Finovate fintech conference in SF last week. They weren’t on the agenda or attendee list but instead holed up in a separate room, covertly meeting with banks and other vendors. “CIA-type shit,” as one observer put it to me.

Musk wants Twitter to offer a full suite of financial services to users in the near future, including high-interest savings accounts and even the ability to issue physical checks. He’s also talking about publicly rebranding Twitter to X, which is already the name of the Nevada holding company he used to make the acquisition.

Meanwhile, Twitter investor Fidelity now values the business at about one-third of what Musk paid for it, and I’m hearing the company will be lucky to make $2 billion in revenue this year.

Luckily, money isn’t really an issue for Musk. His mysterious OpenAI competitor, X.AI, bought up “much of Oracle’s spare server space” earlier this year, according to The Wall Street Journal. The choice of cloud provider makes sense given that Musk is close with Oracle founder Larry Ellison, who invested $1 billion to fund his Twitter takeover and was until recently on the board of Tesla.

“While some worry AI may take their jobs, someone who is expert with AI will” - Nvidia CEO Jensen Huang during his commencement speech at NTU shortly after the company hit a $1 trillion market cap. (Wall Street has finally realized how in-demand the company’s chips are for AI.)

That’s it for this week. I’ll be back next Friday with another issue.

If you have ideas for a future story or feedback on this issue, I’d love to hear it. Respond to this email, and I’ll get back to you. We can take the conversation to Signal or offline if need be.

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