Oculus purchase will "appear cheap 5 years from now" - analyst
Analysts weigh in on the big Facebook acquisition and what it means for the virtual reality space
Facebook rocked the technology world yesterday afternoon with the acquisition of virtual reality firm Oculus for $2 billion. While many had surmised that an acquisition of the hot tech startup would happen someday, some were surprised that it was Facebook that jumped at the opportunity so quickly. Is this really a good deal for Facebook and Oculus? And what's the ultimate impact on VR? GamesIndustry International chatted with a few analysts to get their perspectives.
"I think this Oculus VR/Facebook deal will appear cheap five years from now, akin to Google's purchase of YouTube in 2006," said Asif A. Khan, CFO of Virtue LLC. "This deal is very important for a number of reasons. Oculus VR now has the cash backing them to ensure their product will make its way to the market instead of worrying about more future venture capital rounds. Facebook has now entered the technology hardware arena and has done so by buying one of the most innovative companies in the world."
He continued, "While many people don't understand how there could be any synergies between the two companies, I would just suggest the idea of an Oculus VR social network experience. Zuckerberg is no dummy and he saw that VR was a potential threat to Facebook's dominant position as a communications platform. Facebook's growth trajectory has changed entirely with this acquisition. I suggested that Nintendo acquire Oculus VR in a past article, but it is also true that Apple, Google, Microsoft, or Sony could have made a play for them as well. This is as big of a win for Facebook as it is a loss for those other companies. I was already a Facebook shareholder going into today's announcement and I will be adding more to my position over time."
"the purchase price of the consumer model of Oculus Rift will likely be lower now that the company can operate without the fear of imminent death that most startups have"
Patrick Walker, Senior Analyst at EEDAR, largely agrees that the deal is a positive for VR's future. "Facebook's purchase of Oculus VR is so exciting because it signals Facebook's belief in the technology's potential," he said. "There are so many ways that VR technology could revolutionize how we connect with each other and how we interact with the world. Meeting with a doctor remotely, test driving a car from your couch, having a virtual date with your long distance significant other - the range of potential virtual experiences is huge. Facebook realizes this and wants to be prepared to integrate their social graph into this technology platform early." Some question Facebook's seriousness about VR's use for gaming, but Walker's not concerned: "From a gamer's perspective, this is exciting because another major company is putting their support behind VR technology. VR technology has been an emerging technology in games for a while, and on the cusp of GDC and a wave of new product announcements, including Sony's new VR headset, appears ready to enter the mainstream. Facebook's support of the technology will make this happen even sooner."
Khan, too, believes Facebook will be getting more involved in games for a core audience. "This acquisition also means that Facebook is taking the games industry very seriously. I think the platform agnostic culture at Facebook will embolden Oculus VR to have a fighting chance against Sony's Project Morpheus," he noted. "The lack of a proprietary anchor to one platform will allow Oculus VR to make a wider reaching product over time than what Sony currently has going on. Lastly, the purchase price of the consumer model of Oculus Rift will likely be lower now that the company can operate without the fear of imminent death that most startups have. Margins may not be as important to Oculus VR operating as a subsidiary of Facebook than they would have been otherwise. I do wish we would have had a chance to see how far Oculus VR could have gotten by themselves and I wonder if they will ultimately feel like they sold too early, but we have to trade the market we have and not the market we want."
According to independent analyst Billy Pidgeon, the deal is great for Facebook's perception among investors - the social company is showing that it can be more forward thinking. "Oculus is a very interesting acquisition for Zuckerberg. Telepresence and virtual/augmented reality have been compelling ideas for decades, but the technology hasn't been ready for the consumer market until recently. Zuckerberg is right in framing Oculus as a future leading platform that has significant applications beyond games. Facebook technology has been seen as less than forward leaning as the platform has been playing catch-up with mobile over the past few years. This buy (and others like it) bolsters Facebook's potential longevity in the tech market for the long term," he commented.
"I think critical mass for VR is at least 5 years off, even in developed countries like the U.S."
"Although the patent IP prospects are cloudy, with the Oculus purchase Zuckerberg may gain competitive traction against Google, Apple and Sony (and, perhaps, Microsoft). I don't see how Oculus can be effectively used with Facebook games, so the impact on Facebook canvas games will be non-existent to minimal. Even if Oculus isn't used in direct conjunction with Facebook games, this raises the company's credibility in the games sector, as games on Facebook have been in deep decline for years."
While many of the analysts we spoke to praised the deal, IDC research manager Lewis Ward was less convinced. "It doesn't make a lot of sense to me," he remarked. "When I think VR, I certainly don't think Facebook. I can see wanting to get in on the ground floor of a new tech that may eventually have mass appeal, but I think critical mass for VR is at least 5 years off, even in developed countries like the U.S."
"Sony's headset probably won't be commercialized until late 2015 at the earliest and the available software/app library at that point will probably still be quite small," he added. "I have to assume that Zuckerberg and company have a couple things on their long-term roadmap nobody outside the company has heard of and that they consider a great fit for VR headsets. Their announcement alludes to this, but I continue to believe the retail cost of these headsets will probably be in the $750 range. It's just not near being a mass market technology at this point so the acquisition is a bit of a head scratcher."
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