On Wednesday, the tech world woke up to fairly shocking news with the announcement that AT&T would be the exclusive wireless carrier for the forthcoming Magic Leap One, as well as an investor in Magic Leap.
The deal harkens back to the introduction of Apple's iPhone, the device that defined an entire product category. For a new product in an emerging category, Magic Leap is essentially putting all its consumer eggs into one basket.
Is this a good move? Let's look closer.
Apple aligning with AT&T worked for the introduction of the iPhone. However, other new product entries, such as the Amazon Fire Phone, have not fared as well.
Pro: Magic Leap One (ML1) will benefit from marketing support from AT&T to drive initial sales. And as a retail partner and investor, AT&T will be highly motivated to push ML1 units to drive its own revenue performance. Since the intial introduction of the iPhone in 2007, AT&T's subscriber base has doubled. A new product category gives AT&T yet another stream for subscriber both, which benefits Magic Leap as well.
Con: The iPhone actually saw flat sales growth during AT&T's window of exclusivity. It wasn't until other carriers began selling the iPhone in the US, starting with Verizon in 2011, that the sales curve began truly trending upward. The exclusivity also gave rise to Android-powered smartphones as carriers looked for alternatives; this latest deal may also influence carriers to support Magic Leap's competition as well.
Pro: By selling through AT&T, Magic Leap establishes constant connectivity for ML1. While not confirmed, history tells us that consumers may need to purchase a data plan along with the device, which will ensure that the device isn't relegated to the home or office. According to Root Metrics, AT&T's network ranks a "strong second" behind Verizon, so ML1 users will have consistent connectivity as well.
Con: The deal also ties ML1 to AT&T's service experience. According to J.D. Power, AT&T ranks behind fellow full-service carriers Verizon and T-Mobile in terms of customer service response on social media. In terms of attributes that determine customer loyalty, AT&T is not the leader in any single category.
The AT&T that secured exclusive rights to the first iPhone is a very different company in 2018. The company now acts as an ISP, cable provider, and, with the approval of the Time-Warner merger, a content owner. Considering that Magic Leap is placing an emphasis on nurturing content creation ahead of the ML1 launch, this is particularly significant.
Pro: With the addition of Time-Warner's vast library of content, Magic Leap has a vast array of potential content opportunities for immersive content. AT&T, by way of Time-Warner, is a broadcast partner of the NBA, and we already know that an NBA app will be available for ML1. Furthermore, AT&T's content services, including U-Verse, DirectTV, and HBO, are tailor-made for the Screens app. Magic Leap could have a wealth of TV shows, movies, and sporting events available for users to watch right out-of-the box. Will Magic Leap deliver the dragons from Game of Thrones (now an AT&T property) in augmented reality? I sure hope so.
Con: The deal also places a potential chilling effect on competing content making it to the device. With the reversal of the FCC's net neutrality policy, does intertwining ML1 with AT&T's network make it prohibitive for other content providers to support the device? What if Comcast, with its ownership of NBC and Universal properties, is (for various, competition-oriented reasons) slower to roll out content for ML1 than it would be otherwise? And do I dare mention the idea of bloatware from AT&T?
Though we don't know exactly when it will be available or how much it will cost, we at least now know where we'll be able to buy ML1.
Pro: While initial availability will be limited to select markets (with New York City and Magic Leap's home state of Florida conspicuously missing from the initial list), Magic Leap will eventually have 2,200 brick and mortar retail locations available for possible ML1 demos. Since the company insists that the device must be seen in-person to truly appreciate the spatial computing experience, access to the device is a big deal.
Con: ML1 will have less control over the sales experience, at least until it rolls out its Magic Shop concept.
Pro: Reading between the lines of the AT&T announcement, the Creator Edition will likely be a developer-focused device, shipping to "qualified designers and developers" at first. This will allow Magic Leap to iron out the first-generation kinks before opening the device up to the general public.
Con: By confirming that there will be a wide consumer launch, Magic Leap also faces some of the potential pitfalls that Google encountered with Google Glass. That device launched as an Explorer Edition, available at first to select individuals who were also willing to pay a relatively steep asking price, with a consumer edition to follow. Limited availability and social backlash led to Google eventually stepping back from offering the device as a mainstream consumer product. Today, Glass is considered a flop, even if it was really just a public beta.
After all is said and done, we may look back at this development as the catalyst for Magic Leap's success, or the turning point toward a massive misstep, framed by billions in investment dollars. Either way, the story has now begun in earnest, and it's going to be a wild ride.