Can Apple Take the Metaverse Mainstream?

A bet on injecting iPhone-esque magic into virtual reality

It’s here (or it will be “early next year”): Apple unveiled its long-awaited entry into virtual reality, or what the tech giant calls “spatial computing,” in the form of the Apple Vision Pro, a $3,500 device that looks like exquisitely designed futuristic ski goggles.

The initial reviews were mixed and skeptics questioned whether even Apple could make virtual reality anything more than a niche technology. But boosters say that if any company can make it mainstream, it’s Apple with its ecosystem of two billion iPhone, iPad and Mac users.

“We believe Apple Vision Pro is a revolutionary product,” Tim Cook told developers and journalists on Monday. It certainly like an Apple product: Unlike other virtual reality headsets, an external display shows your eyes to others, and the device is controlled using hand gestures, eye movements and your voice. A dial allows you to adjust how immersed you want to be in the virtual world, which is beamed to your eyeballs via two tiny 4K screens.

Yet what Apple demonstrated on Monday were mostly immersive versions of apps like FaceTime and Safari, as well as 3-D photos and video, rather than a wholly VR experience. Here’s what early testers had to say:

• “At the end of the demo, I took off the headset and felt two things: 1) Wow. Very cool. 2) Did I just do drugs?” wrote Joanna Stern of The Wall Street Journal.

• The device’s eye-tracking “is the closest thing I’ve seen to magic,” said the tech reviewer Marques Brownlee.

• “The most perfect headset demo reel of all time is still just a headset demo reel,” wrote Nilay Patel of The Verge.

These are tough times for virtual reality. Enthusiasm for virtual worlds, often called the metaverse, rose during the pandemic, but waned as lockdowns eased. Investors also appear to have moved onto shinier new technologies like artificial intelligence: Metaverse-related start-ups raised about $664 million in the first five months of 2023, down 77 percent year on year, according to PitchBook.

But Apple has supercharged new product categories before. Remember that the market for portable digital music players was just 3.3 million units in 2000 before Apple released the iPod; four years later, it surged to 26.4 million.

And Apple is often content to play the long game: “They know this is an evolution that’s going to take some time,” Jeff Fieldhack of Counterpoint Research told The New York Times. (Then again, not all Apple products turn out to be hits.)

Others may profit from riding Apple’s coattails. Shares in the game developer Unity jumped 17 percent on Monday on the news, while those in Disney shot up after the media giant said its Disney+ service would be available on the Vision Pro.

Even Meta, which has invested — and lost — billions in trying to make the metaverse go mainstream, may benefit: Could its lower-cost Quest Pro, whose newest version will start at $500, end up becoming the Android to the Vision Pro’s iPhone?

HERE’S WHAT’S HAPPENING

Sequoia will break itself into three. The venture capital firm said on Tuesday that its China and India investment arms would become separate businesses, citing the complexities of running a “decentralized global investment business.” The move comes amid deep geopolitical tensions between the United States and China, though Sequoia executives denied that was a motivation.

A crucial dam in southern Ukraine is destroyed. The attack on the Kakhovka dam and power plant put scores of nearby residents, grain elevators and ports at risk and raised safety concerns about a nearby nuclear power plant. Ukraine and Russia traded blame for the attack; Russian forces control the area.

Elon Musk lets Robert Kennedy Jr. push misinformation on a Twitter broadcast. The social network’s owner on Monday hosted Kennedy, a vaccine skeptic seeking the Democratic presidential nomination, who pushed baseless claims such as the coronavirus being a bioweapon. His comments came as Twitter executives worried that controversial content would continue to hurt the company’s advertising business.

The Hollywood actors union votes to authorize a strike. Roughly 98 percent of SAG-AFTRA members who voted have authorized a work stoppage, days ahead of negotiations with film and television studios. The move comes amid the writers’ strike, now in its sixth week, and follows the Directors Guild of America agreeing to a tentative deal.

The S.E.C. goes after Binance

The S.E.C. accused Binance, the world’s largest cryptocurrency exchange, of mishandling customer funds and misleading investors and regulators about its operations. The case announced on Monday could shake up the sector on the eve of a congressional hearing into new regulations for the industry.

Binance is accused of mixing billions of dollars of customer funds with a separate company owned by its C.E.O., Changpeng Zhao. The S.E.C. also asserts that Binance sold unregistered securities, and its complaint quotes an executive admitting to a colleague that the company was operating an “unlicensed security exchange in the USA bro.”

The company denied the accusations, saying it had been trying to negotiate a settlement and that the case was “misguided.” But the S.E.C.’s latest actions add to a growing list of accusations against Binance after the Commodity Futures Trading Commission sued it in March, saying the company illegally served U.S. customers.

The latest case has echoes of FTX’s demise. Binance helped expedite the collapse of its rival last fall after inspecting the company’s books ahead of a potential acquisition and warning that there were issues. Soon after, federal agencies began investigating FTX’s founder, Sam Bankman-Fried, and issued civil and criminal fraud charges against the one-time crypto industry wunderkind.

Now, Mr. Zhao, Bankman-Fried’s former mentor, is facing his own potential penalties — and industry insiders say the S.E.C. case may not be the last to hit Binance.

Crypto will be debated in Congress on Tuesday. Two House committees jointly released draft crypto legislation last week and are holding a hearing on Tuesday on the future of the sector. The Binance case is poorly timed for the industry’s champions, as they try to shift the narrative after the FTX scandal. Shares in Coinbase, a rival exchange, fell 10 percent after the case was announced.

The industry has been calling for clearer regulation and the new proposal addresses wonky issues, like when a digital asset transforms from a security to a commodity. “We think this is workable and long overdue,” Paul Grewal, Coinbase’s chief legal officer who will testify, told DealBook about the bill. But the latest accusations may dominate the discussion.

A test case on the power of regulators

Business leaders are closely tracking the battle between the Federal Trade Commission and Illumina, a gene sequencing company that acquired the cancer test maker Grail for $7 billion in 2021.

The case is viewed as a litmus test for vertical mergers, in which a company buys a business in a similar industry, and the fight became spicier on Monday when Illumina accused the F.T.C. of operating unconstitutionally.

The F.T.C. has ordered Illumina to divest Grail. But Illumina says the agency is applying a new standard to vertical mergers and exercising power that goes far beyond what Congress intended for unelected administrators. The Fifth Circuit Court of Appeals will hear the case and might be inclined to agree, based on its record in two cases last year.

• The appeals court sided with payday lenders in a case challenging the constitutionality of the C.F.P.B.; the Supreme Court will review it next term.

• The appeals court agreed with a hedge fund manager charged by the S.E.C. for violating securities laws who said the agency’s enforcement power was unconstitutional; the government is petitioning for review.

A decision could come quickly. The Fifth Circuit recently granted Illumina’s request for expedited review, and a hearing is set for August. The loser will probably appeal. But the Supreme Court has made some decisions that suggest it is not so friendly to regulators, either.

• In April, the justices ruled unanimously to streamline federal court challenges to the constitutionality of agencies, making it easier to sue administrators.

• The high court last year found that the E.P.A. exceeded its congressional authority with a rule on emissions.

Some lawyers think Illumina will eventually end up before the Supreme Court, which could rule in the company’s favor. But everything depends on timing: Illumina is also facing opposition in Europe and the company has said that it would sell Grail if it loses on either continent. A decision on Illumina’s appeal of a European Commission move to block the deal could come late this year, which may be why the F.T.C. has been asking the Fifth Circuit to slow down.

A big hotelier writes off San Francisco

Park Hotels & Resorts, operator of two of the most prominent hotels in San Francisco, is handing in the keys on the properties — and, in essence, giving up on a city that has fallen on hard times.

Park Hotel stopped making payments on a $725 million loan tied to the Hilton Union Square and Parc 55 San Francisco, the real estate investment trust said on Monday. The hotels, a few blocks from the once-bustling Moscone Center conference hall, have a combined total of nearly 3,000 rooms.

A slowing economy and a remote-work thunderclap have emptied offices across the country, with some warning of a ticking time bomb in the commercial real estate market. Slammed by a wave of tech layoffs and a steep slowdown in Moscone’s conference calendar, downtown San Francisco has been hit hard.

“Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges,” said the Park C.E.O., Thomas Baltimore, Jr.

Could others follow suit? San Francisco is highly dependent on business travel, which has yet to return to pre-pandemic levels. While JPMorgan brought back its annual health care conference this year, other events have moved out, including VMWare’s tech conference.

Not everyone is giving up. “We’re not writing San Francisco off,” James Risoleo, the C.E.O. of the rival Host Hotels & Resorts, parent company of the San Francisco Marquis hotel, told analysts in May. “It is the center of tech and it’s going to be the center of artificial intelligence as the world returns.”

THE SPEED READ

Deals

• Facebook co-founder Eduardo Saverin’s B Capital is said to be raising $500 million for its next venture fund. (Bloomberg)

• The dearth of M.&A. may push boutique investment banks into the hands of their larger rivals. (FT)

• How Blackstone’s early bet on European warehouses became one of the most lucrative real estate investments in recent years. (Bloomberg)

Policy

• JPMorgan Chase’s C.E.O., Jamie Dimon, will reportedly speak to House Democrats, after the bank said he had no plans to run for office despite speculation he might. (Bloomberg, CNBC)

• “Google’s Top Lawyer Preps for Fights Over A.I. and Tech ‘Censorship’” (Bloomberg)

Best of the rest

• “ChatGPT took their jobs. Now they walk dogs and fix air conditioners.” (WaPo)

• How much is America reshaping the global economy? (FT)

• Executives are confronting a difficult challenge: avoiding the culture wars. (WSJ)

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