Magic Leap lays off employees as it abandons consumer products

Magic Leap dropped some unsurprising news today: it's laying off employees because its business operations have been impacted by COVID-19. CEO Rony Abovitz delivered the bad news in a blog post titled "Charting a New Course." Half of the company's employees totaling 1,000 people were laid off, reports Bloomberg.

"While our leadership team, board, and investors still believe in the long-term potential of our IP, the near-term revenue opportunities are currently concentrated on the enterprise side," wrote Abovitz.

The key part of this sentence is: concentrated on the enterprise side. That's it. The final nail in the coffin. Magic Leap, once the poster child for AR for the people is retreating to the enterprise — the business side of things where its IP can be used for B2B and other non-consumer focused applications.

Abovitz said this pivot to the enterprise is the only solution to "ensure delivery of Magic Leap 2" and "expand product-market fit and revenue generation."

This story is both disappointing and familiar to anyone who has been following AR headsets and "spatial computing" over the last few years. The same thing happened with Google Glass and Microsoft's HoloLens. Both AR devices promised to revolutionize computing by bringing it to the masses. But despite new technology breakthroughs, attempts at consumer AR (in a face-worn device at least) have largely been a failure in the last decade. Nobody has cracked the code. Will anyone be able to succeed where so many have not?

Magic Leap's fall has all the makings of a Hollywood movie. Startup secures $2.6 billion in funding from big tech giants like Google and Disney and Alibaba to develop and sell an AR headset that's supposed to blow minds with its life-like augmented reality experiences.

In reality, the overpromised AR technology that eventually made its way to a finished product was nothing like originally hyped. The Leap 1 headset finally launches and bombs badly. Potential buyers are turned off by the $2,300 price, the jarring design, and the poorly-supported developer platform. Naturally, the Leap 1 fails to excite and sells only about 6,000 units instead of 100,000 in the first six months.

Now it lays off employees, pivots to enterprise, and, perhaps, is still exploring a sale. What. A. Story.

History repeating itself — Magic Leap's problems aren't surprising. As I said, we've seen this all play out before.

When Google Glass came out, it was positioned as this paradigm shift that would see phones replaced by face-worn computers. But it quickly became clear that it wouldn't stick with consumers. Not only did consumers mock "Glassholes" who wore it, but there was never any killer app that made its then $1,500 price worth it.

Google has released new versions of Glass since 2014, but the headsets are largely used in the enterprise by factory workers and the like who could benefit from its hands-free experience. It doesn't get more clear who Glass is now for when it's literally called "Glass Enterprise Edition."

The same thing happened with Microsoft's HoloLens. Announced at its Build developer conference in 2015, Microsoft touted the mixed reality headset as the future with Windows Holographic. Microsoft demoed games like Minecraft in AR, showing how the building game could come to life on top of a real table. That year, I even got to try a Halo 5 experience at E3. I ultimately walked away disappointed by the headset's super narrow field of view, but I was hopeful subsequent versions would improve things.

After a few years of relative quietness, Microsoft decided to focus HoloLens on the enterprise and not consumers. That's why the HoloLens 2 unveil didn't come with any game demonstrations and why you can't just buy it online (you need to put in a request to purchase).

Pivoting Magic Leap (and the Leap 2 headset) to the enterprise sure doesn't make for a sexy headline and it essentially means most people can stop lusting for the AR headset. However, it's not unexpected. Just like Glass and HoloLens, there's no must-have app for the Leap 1 headset and maybe there will never be one.

A wide opening — This new void could be an advantage for other technology companies to fill. Apple is reportedly developing an AR headset built on the backbone of ARKit experiences it's steadily improved on iOS over the last couple of years.

Apple was reportedly targeting a launch for 2022, but with COVID-19 setting back operations and roadmaps for the foreseeable future, these plans may be delayed. Regardless, Apple (or Facebook or anyone else building an AR headset) has its work cut out. Without a killer AR app, Apple's headset will fail just like everyone else's.