Magic Leap raised billions but its headset flopped. Now it's trying again

In 2018, Magic Leap released an augmented reality headset that could show crisp, three-dimensional images as though they were right in front of you on a coffee table or living room floor. It was years in the making, and came after the company raised billions in funding — and it was a flop.

Now, the company is trying again, with plans to launch a new headset later this year. But this time, it's doing some things very differently. For starters, Magic Leap is no longer aiming the product at developers and other early adopters who it had hoped would come up with compelling uses for it (and then, perhaps, drive consumers to pick it up). Instead, it's focusing on a narrow range of companies that might find its AR offering more useful and also be less intimidated by the price tag, which has yet to be announced but will continue to run more than $2,000 per headset.

The company is also hoping its timing will be better in 2022. While the market for AR headsets is still tiny, a related technology — virtual reality — is growing at a rapid clip thanks to the popularity of Meta's Oculus Quest 2 headset. (While virtual reality headsets can give the wearer a sense that they're in an entirely different world, AR headsets mix the real and the virtual.) Growing comfort with headsets in general and interest in the idea of a "metaverse" — that still-squishy concept of an interconnected virtual world — could help Magic Leap gain fans.

Magic Leap's upcoming headset, Magic Leap 2, will be aimed at businesses, rather than consumers.

"Absolutely, we're taking it," Magic Leap CEO Peggy Johnson, who took over after founder and CEO Rony Abovitz left the company in 2020, told CNN Business this week about the broader embrace of headsets. Despite the fact that VR has been taking up much of the conversation, Meta's announcement in late 2021 that it would focus on building a metaverse "was a tailwind" for Magic Leap, she added.

Johnson, who was previously an executive at Microsoft, said Magic Leap is pushing the headset toward three types of business uses: visualizing objects in 3-D; training employees (such as for medical procedures); and getting remote assistance (such as a factory worker who needs help fixing a piece of machinery).

The buzzy, secretive, South Florida-based startup has raised well over $3 billion from investors since 2014 (including $500 million in October), with the promise of building a headset that can mix digital imagery with reality in ways that appear realistic and dynamic. Sales of its initial headset reportedly came up short, and the company reportedly laid off half its workforce in the early months of the pandemic. Just over a month later, in late May 2020, Abovitz resigned.

The strategy for Magic Leap 2 sounds much like competitor Microsoft's approach with its HoloLens headset, but is also a continuation of a strategy Magic Leap said it deployed in 2019, when it pushed its first headset to businesses.

The Magic Leap 2 is somewhat lighter, more powerful, and sleeker than its predecessor, Magic Leap 1. It has a field of view that's nearly twice as large (though still much smaller than what humans can typically see with the naked eye) making it possible to see bigger digital objects close up. It has a feature that essentially functions like a dimmer switch for the real world, allowing the wearer to turn the ambient light streaming through the headset's lenses down (or off) in order to focus on digital objects. As with the Magic Leap 1, the new headset connects to a circular computer that needs to be connected to the user's clothing or worn with a shoulder strap, and works with a handheld controller.

Magic Leap 2 doesn't yet have a release date; the company said it is coming in the third quarter of the year, which means late summer or in the fall. The company also won't provide a price beyond that it will be more expensive than ML 1, which Magic Leap currently sells for $2,295 and up. (For comparison, the cheapest version of the HoloLens 2 costs $3,500.)

Why you can't have legs in virtual reality (yet)

Magic Leap let CNN Business try out its new headset this week, via several short demos in San Francisco. With mid-morning sunlight streaming through several large windows, I got a glimpse at an app for tracking and monitoring wildfires. It showed a topographic view of an area where a wildfire was spreading, set atop a round tabletop, while a two-dimensional map was affixed to an actual wall behind it. I could use the handheld controller to tap virtual icons — which could be seen from various viewpoints around the table as I moved from left to right — to see the paths of emergency helicopters and their supply levels, or video of the fire itself.

The digital images looked fairly solid, and I was able to move a virtual slider to blacken out the ambient light in the room, highlighting the images while the actual objects and people around me disappeared. All the while, the fan from the headset's wearable computer hissed.

Despite the new focus on business customers, Johnson does envision Magic Leap offering an AR headset for consumers, as Abovitz originally had hoped — eventually. But Johnson, whose past work includes more than two decades at mobile chip maker Qualcomm, thinks that, like the popularization of mobile phones, it's "going to take time."