The company halved its forecast for shipments of the PSVR2, which is set for a Feb. 22 release, this quarter to about a million units, said people familiar with its deliberations. Sony had previously aimed to have 2 million headsets ready for the launch quarter and leverage its second-generation headset to drive user growth and adoption for VR.

The Tokyo-based electronics giant has told a supply partner to expect reduced display panel orders, according to the people, who asked not to be named as the information is not public. The company now plans to ship around 1.5 million units between this April and March next year, they added, though that figure may be adjusted further in response to demand.

Consumers globally have taken to VR less rapidly than initially hoped, held back in part by a lack of titles that can showcase the technology. After diving in 2022, worldwide shipments of augmented and virtual reality headsets are expected to grow 32% to 12.8 million units this year, according to IDC estimates. The market is currently dominated by Meta Platforms Inc.’s Quest range, with nearly an 85% share. Sony does not rank among the top five providers and its first-generation PSVR has failed to secure even a 1% share.

Sony began accepting PSVR2 pre-orders on an invitation basis in November, but it soon relaxed conditions so that anyone wishing to buy the gadget could order one. The PSVR2 will work only with Sony’s PlayStation 5 console, which starts at $399. The headset is priced at $549. With less than a month to go until the PSVR2’s release, most stores are still taking pre-orders without a wait list — whereas hotly anticipated gaming gadgets are usually limited in supply at launch.

Sony had expected launch game titles such as Horizon Call of the Mountain would entice strong demand, a person familiar with its thinking said, but the new hardware’s pricing may have blunted consumer appetite.

A Sony spokesperson declined to comment as the company does not discuss its product inventory.

The new headset’s cost and incompatibility with other consoles will likely confine it to niche status, according to analysts. Unlike Meta, which has invested heavily in making VR more affordable and attainable, Sony’s offering is deemed an effort to keep a footprint in the VR segment rather than truly expand it to new audiences.

“The PSVR2 will be no more than an expensive accessory for the PS5,” said Damian Thong, an analyst at Macquarie Capital.

The lackluster demand comes at a bad time for the VR industry. Meta’s Quest 2 sales dropped after the company raised the product’s price and cut jobs in its hardware department, while Microsoft Corp. decided to scale back its HoloLens goggles business.

VR headsets have long held the promise of the next growth frontier for computing hardware and services, attracting interest from Alphabet Inc.’s Google and Apple Inc. Facebook founder Mark Zuckerberg rebranded Meta to signal his commitment to creating a VR metaverse, but some of the most successful metaverse projects to date — such as Reality by Japanese mobile game maker Gree Inc. — are not compatible with headsets at all.

“The current head-mounted displays are bulky and it’s hard to keep yourself motivated to use one every day,” UBS Securities analyst Kenji Fukuyama said. “That platform is not attractive for software makers to create games because it doesn’t promise strong sales. Augmented or mixed reality, not virtual reality, may turn out to be the future.”

Cooling consumer and market sentiment is not discouraging suppliers, according to Display Supply Chain Consultants co-founder Yoshio Tamura. Many component providers, especially display makers, continue to invest heavily in advancing optical technologies for use in goggles, including ones for Apple’s planned device launch later this year.

“The VR era will come,” Tamura said. “We’re just not there yet.”