It’s been a rocky period for the AR company since the lacklustre launch of its Magic Leap One headset in 2018. But now it has a new CEO, new hardware coming and a new focus. Can Magic Leap finally come good?
Back in 1999, the interactive artist group Blast Theory debuted Desert Rain, one of first augmented reality theatrical installations – then known as mixed reality. Players picked their way through virtual images from the 1991 Gulf War projected onto a curtain of water as they tried to complete an amorphous mission inspired by Jean Baudrillard’s assertion that the Gulf War was a virtual event.
Since then, the tech-focused group has created eerily prophetic pieces about surveillance tech, the rise of the far right and, in 2019, the effect of a flu outbreak in US cities that ignored social distancing – so co-founder Matt Adams has uncanny predictive form when it comes to discussing recent issues in AR’s consumer tech stumbles such as Magic Leap and Google Glass.
“At its heart, the recent crash and burn is a misunderstanding of the use case for VR and AR,” Adams argues. “The whole use is predicated on you using this in your living room – but you don’t normally put headphones on and absent yourself with other people there. The traditional video-games model is people sitting and watching each other play. It’s still not great in terms of resolution, latency and content, and the question that’s not been answered is: what kind of experience needs to be in that environment? All of these things may yet be solved – it’s not fatally doomed. I’ve seen training for miners underground when there’s a disaster. For that idea it seems really sensible.”
This shift to training and enterprise is the new hope for Magic Leap, founded in 2010 by charismatic CEO Rony Abovitz. Abovitz raised nearly $3.5 billion (£2.6bn) in venture funding from investors such as Google, Alibaba, Fidelity and Andreessen Horowitz, valuing the company at $6.4 billion (£4.8bn), according to PitchBook, but his long-awaited headset failed to take off.
Last December, the company launched its selling-to-businesses strategy. In April, it laid of 1,000 employees, Abovitz departed in May, and, in August, Peggy Johnson, 58, was appointed CEO – having run business development at Microsoft, brokering partnerships and shepherding its acquisitions, including the 2016 purchase of LinkedIn. It’s her job to oversee the new direction, but, she says, it’s also to nurse Magic Leap’s plans to return to consumers when the time is right.
“I had a pretty good view of the company from outside because I knew Rony,” she explains. “He’d invited me down to see the factory in Florida about two years before I started, and I was impressed with the tech. What I found when I got to the company was that nothing was broken. The tech was better than I thought, and what they did in the factory was amazing. If they needed something, they would just build it – the iteration was impressive.”
“The biggest issue was: we needed more focus,” she says. “Like any early technology you’re not sure where this is going to resonate best and earliest. That happens to be in the enterprise space, much like mobile phones started in enterprise before we were all carrying them.”
Johnson spent 24 years at Qualcomm before joining Microsoft in 2014. She serves on the board of directors at investment management giant BlackRock Inc, and in 2016 set up Microsoft’s venture capital fund M12 to invest in cloud computing and AI start-ups. She sees Magic Leap’s immediate future as focusing on healthcare, defence and telecommunications – with healthcare “maybe a little bit supercharged because of the Covid-19 situation” and defence “already used to the idea of Heads-Up Display in night vision, so it’s a natural progression.” Although the company prefers to say it’s in “spatial computing”, she still likes to talk about AR.
“There are companies in those sectors that are trying to solve a problem who don’t know much about AR, so we sit down together, and we come up with solutions,” she explains. “That’s been a big focus area of ours – understanding what problems people are trying to solve.” Recently, she explains, Magic Leap worked with a team of surgeons at UC Davis Children’s Hospital in California who were operating on cojoined twins Abigail and Micaela Bachinskiy, born connected at the head – an issue that occurs once in every 2.5 million births.
The 30 surgeons involved in the operation explored the complex network of blood vessels the team would need to detangle and separate inside the twins’ heads using Magic Leap’s headset, running through the procedure before bringing the twins into the operating room. “You can take a room of people who are very good at brain surgery and the can practise something that’s not done very often to show them what it’s going to look like,” she explains.
Right now, the company is still selling the three-piece Magic Leap One headset, which launched in 2018. “The first-generation hardware is phenomenal,” Johnson explains enthusiastically. “It’s a hands-free high compute, high field of view experience. That has a lot of value and it’s something we can leverage right now. Our next generation product is going to be less weight on the eyes, larger field of view, so we’re excited about where we are going.”
Onlookers are cautious. “Even including the enterprise space, the total number of units shipped was just over 100,000 last year,” says George Jijiashvili, senior analyst at Omdia. “Enterprise is certainly a much better fit for Magic Leap, but success in this space is far from guaranteed. AR headset makers Google, Microsoft, and Vuzix have focused on enterprise for many years and will be a force to be reckoned with. Magic Leap is actually looking to become more of a service provider than selling headsets. That’s its real business model.”
“We are a platform company,” Johnson agrees, moving the company away from Abovitz’s vision of a closed system run with an emphasis on secrecy. “Partners will help with some of the go-to-market side of things. I have a partnering background – so in this situation with the current device I can’t go and build up a huge sales team, but there’s a lot of people that have an enterprise sales team that I can work with. We’re also looking to work with companies who have come up with an amazing app – when you open up the APIs to the third-party ecosystem you see brilliance come out.”
She still sees Magic Leap as consumer product in the end. Long-term forecasts are optimistic. A November survey from Businesswire predicted the global augmented reality and virtual reality market will account for $1,274.4bn in 2030, up from $37.0bn in 2019. “It’s so similar to the journey I was on in mobile where you had big phones at the beginning… it looked so cool back then, but now you laugh at them,” she recalls. “It wasn’t a phone you could put in your pocket, but if you were out and about you could make this call – and that is the stage we’re in right now with AR.”
“I think there’s more value in the Covid world,” she adds. “We’re not going to be going back to catching planes at the drop of a hat, so maybe more meetings will be virtual.” Johnson says that as there’s more demand for the technology, price and size will come down. “There will be more integration with the silicon – that was the big breakthrough in mobile phones when all the chips could be integrated into one system. That’s where we’re headed.”
It’s a cheerful view. In the short term, the reality is likely to be much more complex. “There is currently next to no market for consumer AR headsets as it stands,” explains Jijiashvili. “The only company that could move the needle is Apple. It’s rumoured that they’re working on something in this space, but even that is no guarantee.”
“I think much of it is a size game,” Johnson offers, confidently. “We saw that with mobile phones. They got smaller, and then Apple came out with the app store and made it into something new with a whole new ecosystem. We are well positioned even today because we’ve taken a lot of the weight out of the headset and you wear it on your waistband or belt. You’ve got to get the mass-market silicon stage where you can take weight and power consumption out – because power drives the battery and the battery is heavy. Those are the box checks to get us to consumer, and we’re very positioned. We’ll be back.”
Peggy Johnson was one of the speakers at WIRED Live – the inspirational festival bringing the WIRED brand to life. Find out more about future WIRED Events here