Yesterday, Facebook announced it was purchasing Oculus VR in a deal worth approximately $2 billion. Words like "shocking" and "bombshell" get thrown around a lot in the press, but it's not difficult to make the argument they were well warranted here.
Oculus, a VR headset company that was scraping together funding on Kickstarter just a year and a half ago, sold for a 10-figure sum without having shipped a commercial product. At the same time, Facebook, struggling to find gaming relevance since the social bubble burst, suddenly claims stewardship of the most highly touted "next big thing" in the industry since the Internet.
Surprise aside, does the move make sense? Will the backing of Facebook really help Oculus in its quest to change the world? Was this acquisition even about video games? Will the developer enthusiasm to support Oculus survive the acquisition? Does this change your own plans to whether to purchase a Rift? Who are the big winners here? Any losers? The GamesIndustry International staff weighs in.
I've experienced Oculus Rift in all its glory in the past couple months, between DICE and GDC, and I've spoken multiple times to its executive team. Palmer Luckey, Brendan Iribe and Nate Mitchell are genuine when they talk about changing not only gaming, but the world, with virtual reality. This Facebook deal is exactly what they needed - moreover, it's exactly what VR needed. Let's face it, VR up until this point has been a niche within a niche within a niche. Sure, Oculus and Morpheus may be a "super big deal" to readers of GamesIndustry International, but today is probably the first time anyone outside the industry has even heard of Oculus - and for some, it might be the first time they've thought about VR as a concept in a very long time. If you're a fan of VR, this is a good thing. Facebook has the resources and mainstream recognition to turn Oculus into a household name.
People who are criticizing the deal simply because it's Facebook on the other end of the deal and not another gaming specific firm need to stop being so ridiculously insular. These are the same sort of people who complain that the "real" video game industry is being ruined by social, casual, mobile and tablet games. If more people can enjoy games, so much the better. And the same goes for VR. And the fact is that VR really does have incredibly useful implications for a wide range of industries besides video games. Mark Zuckerberg said that Facebook intends to let Oculus operate independently within the company and that they'll give them the resources they need to advance VR. Hopefully this means some incredible gaming experiences won't be far behind, because now Facebook can actually fund them.
"If VR can help doctors, scientists, surgeons, pilots or other fields, it would be a travesty to look at VR only for amazing gaming environments"
But let's not be selfish. Yes, the technology stems from the video game sector, but so have many other technologies. And why should we hog it, especially if it can be put to good use and actually help humanity? If VR can help doctors, scientists, surgeons, pilots or other fields, it would be a travesty to look at VR only for amazing gaming environments. And now Oculus is in the hands of a company that can truly help it go mainstream and realize its potential.
I've been covering the games business for a long, long time, and there are very few announcements that are literally "jaw dropping," but mine practically hit the floor upon hearing the news. This is easily the biggest development of 2014 so far, and in a decade we may look back and see that it was not only "game changing" but world changing.
Certainly the deal for Oculus makes sense from Oculus' perspective; a truckload of money today is a better deal than some unknown amount of money in the future. For Facebook the value is less clear. One thing is clear: Marc Andreessen's venture capital firm Andreessen Horowitz, which led the recent $75 million round of financing for Oculus VR, just got a nice earnout. Is it a coincidence that Marc Andreesen is on Facebook's board of directors? Yeah, I don't think so either.
For Oculus this provides deep pockets and a much greater chance to create a good-sized audience for VR, at least given Facebook's audience. For Facebook, though, this is obviously not going to help them in any near-term scenario. Payoff is years away, if ever. Heading into VR is a long-term bet, and one that could see Facebook angling to become a major gaming hardware platform. Maybe we'll actually see a social game that's on the cutting edge of cool.
It certainly seems, though, that Facebook could have purchased comparable VR technology for a lot less, given all the different VR approaches recently announced (several on display at GDC). The Andreesen connection probably explains why Facebook didn't take a less expensive route. However you look at it, this is a moon shot for Facebook. Maybe there are diamonds on the moon, but we won't see them for sale any time soon. If I was a Facebook investor, I don't think this would change my thoughts on the stock - except that they're going to have less cash handy.
I think Steve raises an excellent point about Marc Andreessen, and I'd be surprised if he wasn't the major driving force on the Facebook board behind the acquisition, but Zuckerberg must also have had his reasons. Of course, like all business deals, it's essentially about money. Investment in fast-moving tech is fraught with risk and Facebook's track record with acquisitions is spotty to say the least. 'Only' splashing $1 billion on Instagram might make Oculus look expensive, but at 10 per cent of the $19 billion it cost to buy What'sApp, it doesn't seem like such a big number.
$2 billion is still a long-term investment, though - a portfolio builder which, in this case, buys Facebook the leading name in a rapidly accelerating field of consumer tech which has already captivated a massive potential market. It's also brought on board some incredibly talented engineers, a crate load of developer kudos and, perhaps most importantly, tonnes of public attention. But no matter how much all that is worth, $2 billion is not an amount you're going to make back very quickly in games revenues.
"I don't believe that the games market was ever a particularly big factor in this acquisition, but then I don't believe it was ever a major factor in the long term plans of Palmer Luckey and his co-founders, either"
Both Zuckerberg and Luckey have addressed that, the former more openly, in their public statements. Whilst Oculus' new owners have essentially promised to honour the system's existing commitments to gaming and maintain it as a gaming platform, the company has far broader plans. I don't believe that the games market was ever a particularly big factor in this acquisition, but then I don't believe it was ever a major factor in the long term plans of Palmer Luckey and his co-founders, either.
Any predictions of the potential range of VR applications at the moment are going to be hyperbolic. Like 3D, it's a technology which has come and gone before, which has become a sci-fi staple. It's the Holodeck, Better Than Life, the Lawnmower Man. Perhaps one day it might be all of those things, but for now it's a televisual technology which has the potential to revolutionise remote working, health care, design, warfare, communications, entertainment and, irrefutably, the adult industry. Think about the impact that headphones have had upon the world; how much they've progressed in so few years and how ubiquitous they've become. Then think about how much more important vision is to humans is than sound.
Like the Buggles used to sing, video killed the radio star...
When news of the deal came through last night the first reaction was shock, then confusion, then the usual grumbling from people who think the government is noting every cat picture they post to their newsfeed. But on reflection the deal makes sense, knowing what we do about Facebook and Oculus. In her book The Boy Kings: A Journey into the Heart of the Social Network, Katherine Losse chronicles the early days of Facebook and that it was engineers and programmers that were revered by Zuckerberg. Couple that with the fact that Facebook recently paid $19 billion for a messaging service (making $2 billion look like chump change) and you can see why it was an attractive deal for Facebook.
"Having spent some time with Palmer Luckey and COO Laird Malamed I know these aren't guys that would have signed up to make immersive Facebook ads"
As part of the package don't forget that Zuckerberg is now, ultimately, John Carmack's boss. He's just bought himself a bunch of top engineers and programmers, and a super cool toy at the same time. Having spent some time with Palmer Luckey and COO Laird Malamed I know these aren't guys that would have signed up to make immersive Facebook ads, so I'd expect Facebook's approach to be very hands off. The social network has already proved with Instagram that it knows to leave well enough alone when a product is doing fine on its own. Oculus has already proved it can be applied to a myriad of non-gaming fields - the military, medicine, science - if one of those turns out to be social networking I'm fine with that. And, as an interesting aside, when I asked Palmer Luckey what his ideal use of Rift would be back in 2013, he mentioned Facebook.
"I think it would be some kind of massively multiplayer online game that allowed people to interact with each other online, the same way that they interact in real life. Because we do so much interaction online through things like Facebook or Twitter, and those are really kind of broken shadows of real life interaction."
Personally, I'm excited that Oculus now has even deeper pockets to accelerate its delivery of affordable and accessible virtual reality, and I can't blame Mark Zuckerberg for going outside of his usual remit to snap it up. After all, what's the point in being a tech boy king if you can't buy a new toy now and again?