The FTC case shows just how badly Mark Zuckerberg wants a VR fitness app


San Jose, California. One day in February 2021, Michael Verdu wrote to some colleagues that their boss, Meta CEO Mark Zuckerberg, had asked him to consider getting a virtual reality-powered fitness app. “It’s a very strong signal that he cares about the class,” Verdoux wrote.

Verdu, Meta’s former Vice President of Augmented and Virtual Reality who left the company in 2021, He recently testified in federal court here that the conversation was one of several he had with other Meta executives over the past two years to find out how to expand into the VR-based fitness market.

“What I do remember is that we were very much in agreement in looking at it as a way to broaden the audience for virtual reality,” said Verdu.

FTC lawyers are using testimony from Verdu and other Meta employees to make the argument that Facebook’s parent company is crushing competition in the niche market for VR fitness apps by buying the maker of the popular exercise game “Supernatural.”

The FTC case is based on the idea that Meta’s decision to acquire Inside rather than build its own VR fitness app robs consumers of vital options in the marketplace at some point in the future. Meta’s lawyers countered that the company was never serious about building its own fitness app because it would have been too complicated a process. Zuckerberg is expected to testify possibly as early as next week about the acquisition.

Testimony in the last week and a half About Meta’s years-long effort to expand into the VR-enabled fitness market revealed just how difficult the company’s larger goal of building a metaverse has become. Meta has focused its future on the idea that one day people will want to work with their colleagues, shop with their friends and spend time with their loved ones in immersive digital worlds accessible through augmented and virtual reality services.

Meta has funneled billions of dollars into trying to make its metaphysical vision a reality. Even as the company has suffered declining revenue and cut 13 percent of its workforce this year in the face of an uncertain economic environment, Meta has remained steady in its investment in VR. The company said earlier this year that it expected its virtual and augmented reality division to lose more money next year. In October, Meta unveiled the Quest Pro, a new $1,500 virtual reality headset aimed at helping businesses and workers improve their productivity.

So far, since buying small virtual reality company Oculus eight years ago, Meta has become the dominant player in the headset industry in the space, accounting for 78 percent of all virtual reality headset sales in 2021, according to the lawsuit.

But Meta faces intense competition in a still nascent market. PlayStation plans to release a new virtual reality headset early next year. Apple is also expected to release a competing headset next year, according to Bloomberg News. Taiwan-based High Tech Computer Corp., and Pico — owned by China’s ByteDance, which also owns TikTok — are also rivals in the space.

At the center of the FTC case is a buzzy virtual reality app created by Los Angeles-based studio Inside called Supernatural, which presents its users with daily exercise routines in seemingly extravagant settings. Instead of cycling on a stationary bike while looking at your living room wall, Supernatural promises its subscribers that they can don a virtual reality headset and take an aerobics class on a snowy mountain or take on a new sport in a futuristic setting for less than $20. Month.

Over the past week and a half, executives have highlighted some of Meta’s hurdles in driving VR adoption that they believed VR fitness apps could help solve. For starters, the current Meta headset users are mostly young males who are drawn to the immersive video games on the Quest headset. In December 2019, Verdu told employees that only 7 percent of Quest headset users are women, according to an exhibition and testimonial. Meta executives believed the fitness app would bring more women and older users to their services.

“If you look at the age profile of the users in a lot of those [fitness] Apps – A lot of these people are actually a lot wider in their age range than you would normally find in VR, said Anshel Sag, an analyst at Moor Insights & Strategy who covers the VR business. “He. She [VR fitness] reach a larger audience of men and women.”

Meta also saw VR fitness as a strategy to expand its revenue model. Currently, many VR game makers earn money when users first purchase the game and sometimes through customized in-app purchases. Meta executives believe fitness apps can adopt a subscription model, which can deter game makers from overcharging their customers while providing the social media giant with steady income, according to a testimonial. Meta usually takes 30 percent off app purchases made on its Quest headphones.

Fitness apps also have the potential to turn the Quest VR headset into a routine for its users. Historically, people would often only use a Meta VR headset for a few weeks after purchasing it. But if Quest headphones are part of users’ exercise routines, it could lead to more regularity in people’s use of the devices.

Testimonials and exhibits reveal that Meta’s interest in fitness-related VR products began as early as 2019. On September 30, 2019, Verdu emailed Nir Blumberger, now Meta’s vice president of corporate development, and Rade Stojsavljevic, now a director at the studios The company’s interior and other employees titled Project Saturday, according to Verdoux’s testimony. That was the internal codename the company was giving their efforts to acquire the studio behind Beat Saber, a popular rhythm game in which users slash objects that rush towards them along to the beat of energetic music in a futuristic world.

In this email, Verdu announces that Beat Saber is a Quest “system vendor” — a term used in Silicon Valley to describe the content and software that drives hardware platform sales. In fact, in September 2019, at least 50 percent of people who later purchased a Quest headset downloaded the Beat Saber. Verdu also wrote that Beat Saber also has “strategic value” as a potential subscription service and as fitness-oriented.

“It’s kind of like if you go to a nightclub and you dance and you sweat,” Verdoux testified. “It’s like you’re really getting some fitness benefits out of that,” but the app isn’t geared specifically for fitness.

In November 2019, Meta announced that it had acquired Beat Games, maker of Beat Saber. Over the years, Meta executives considered whether to redesign Beat Saber as a fitness app. While some within Meta thought this would be a great way to capitalize on an emerging market, others thought it would dilute the brand of a widely successful product. There has also been some discussion of forming a relationship with Peloton — an idea that Zuckerberg has endorsed at one point, according to Ferdow.

“I’m a fitness optimist. Partnering with Peloton for Pete Saber sounds great,” Zuckerberg wrote. “I’d like to see that happen. Let me know how I can help.”

Mark Rapkin, vice president of virtual reality at Meta Reality Labs, said Friday that he doesn’t think Meta has the expertise to create its own fitness app. And he was totally against making a fitness version of the Beat Saber or forming a Peloton partnership.

He testified that the idea had not gone anywhere beyond the early discussions.

According to Witnesses, there have always been challenges to turning Beat Saber into a fitness app. For starters, Meta would have to hire experts to verify that the app is in fact improving fitness if the company is going to market it that way. Then, the company may have to create a daily cadence of exercise routines to deliver enough content to make it a viable product. Meta has promised Beat Games leaders that they will retain creative control of the product after the acquisition but have focused on other priorities, according to Ferdo.

Verdoux testified that “there is a lot of work even when the founder is queuing up”.

FTC attorneys countered that the Meta employs thousands of developers who could have helped reconfigure an existing Beat Saber app or even create their own VR fitness program. companyAnd the which earned $27.71 billion last quarter, has had the resources to hire more experts, they say.

But by 2021, Zuckerberg seemed to favor taking over a fitness app. On February 22 of that year, Zuckerberg emailed Verdu and asked, “After the Games, have you considered getting FitXR or Supernatural,” referring to two of the leading virtual reality fitness apps. Verdoux responded by saying, “I’m kidding on FitXR.”

Two days later, Verdoux texted his colleague, saying, “Zuke still stalks me about fitness too!” In March 2021, Verdu emailed a colleague saying “Zuck has pressured me 5 different times about getting a fitness company.”

Meta executives discussed whether to buy FitXR or a VR fitness app, according to Furdo. According to Verdu, FitXR, which also offers exercise classes in virtual reality, was cheaper because it had not yet matched Supernatural’s ability to deliver new content daily. Meta was inclined to buy the more established company Inside, but what precipitated that decision, as Verdu has attested, was a rumor that Apple was also considering acquiring Supernatural. Verdu testified that he believed the Inside app was worth the $500 million purchase price.

Although Meta wasn’t quite ready to “pull the trigger” on the deal to acquire Inside, Verdu wrote to a colleague in July 2021, According to his testimony.

Months later, Zuckerberg revealed how much he wanted to. On October 28, 2021, the company renamed itself Meta, indicating that transforming human communication through augmented and virtual reality is the next stage. A day later, Meta announced that it had acquired Inside.

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