Is Facebook buying Oculus a boost for Morpheus?
Why Sony must be relieved at Oculus' $2bn deal
Last week, as Sony squared up to Oculus across the GDC conference schedule, it looked like we were set for a real David and Goliath battle over the future of VR. Plucky little Oculus, given its first breath of life on Kickstarter before earning a hefty wedge from Silicon Valley venture capitalist extraordinaire Andreessen Horowitz, rekindled the VR dream; now it was to be joined in the race by resurgent behemoth Sony. Oculus had first-mover advantage, remarkable technology and John Carmack. Sony, for all its recent troubles, remains perhaps the finest manufacturer of high- quality consumer hardware on earth (second to Apple, perhaps, but with a far broader scope of operations). This was shaping up to be a fascinating fight, one which could be extremely good for VR in general - driving forward standards, igniting competition and generating endless press coverage and awareness along the way.
This week, we're still promised a battle - but it turns out that David, too, is a Goliath. Even as Sony was revealing Project Morpheus to the world at GDC, Oculus was hammering out the details of what seems to have been a remarkably rapid acquisition deal with Facebook. It helped, no doubt, that Marc Andreessen is both Oculus' main investor and a long-standing Facebook board member; his dual role was no doubt vital in making this into a rapid elopement rather than a long courtship, with a $2 billion Vegas wedding at the end of a short race down the highway.
"Sony, for all its recent troubles, remains perhaps the finest manufacturer of high- quality consumer hardware on earth"
Goliath versus Goliath it is, then. Plenty of keyboards have been furiously hammered this week regarding the implications of the deal; Facebook is untrustworthy and creepy; Facebook's money is the best thing that could have happened to VR; this is a betrayal of an implicit promise to Kickstarter backers; Kickstarter backers who feel that way clearly didn't understand what they were actually buying; and so on, and so on. I'm still interested in the upcoming battle, though. As grateful as I am to Palmer Luckey and his crew for reviving the dormant dream of virtual reality, my own interests aren't pinned exclusively to Oculus. What Facebook's involvement does to Oculus is interesting, of course, but only as part of a wider picture - what does Facebook's involvement do to VR? What does it do to the emergent competitive landscape that we started to glimpse last week?
Put yourself in Sony's position. What's the thought process within Sony Computer Entertainment about the Facebook deal? Of course, Sony will now face a competitor with a vastly enhanced budget, eliminating one of the advantages it held over its smaller rival. Despite this, Sony's actual reaction is likely to be one of relief mixed with intrigue, not concern. The reality is that Oculus was always going to be acquired by a larger company. Sony knew from the outset that it wouldn't enter the market against a $75 million company, but against a division of a larger rival; a reality to which even John Carmack diplomatically alluded when he commented on Twitter that "the FB deal will avoid several embarrassing scaling crisis".
"Oculus Rift was never going to reach the market off the back of Andreessen Horowitz' $75 million and a few million from Kickstarter"
Oculus Rift was never going to reach the market off the back of Andreessen Horowitz' $75 million and a few million from Kickstarter; anyone who thought so has no knowledge of the budgets required for an ambitious hardware launch. At some point, Oculus was going to have to look for a much, much bigger round of funding, and in a speculative market with at least one major competitor breathing down your neck, that kind of funding either comes as an acquisition deal, or doesn't come at all. Oculus was sooner rather than later going to reach a crossroads at which it would either be acquired, or implode.
Oculus' leadership knew that, of course, and Andreessen in particular would have been very conscious that once Sony made a credible entry into the race, his company's window of opportunity would start to close. If Oculus didn't make a move to secure its financial future before another major competitor could turn up - Microsoft being the most likely, with Valve also in the running - then its chances of securing an acquisition or even another round of funding would collapse entirely. Hence the rapid deal with Facebook.
Why would Sony be relieved by this development? Because if Oculus was going to be bought by anyone, Facebook isn't a bad option at all. Facebook doesn't compete directly with Sony - in fact, it's probably quite happy to work with Sony. Sony doesn't want to make money from social advertising, while Facebook's interest in making money from games is fairly marginal at best. Facebook's money backing Oculus makes the contest between Rift and Morpheus even more interesting, but doesn't change the playing field all that much. What Sony feared, no doubt, was that Oculus would be acquired by a much more aggressive partner - again, the pair mentioned above, Microsoft and Valve, would be top of the list.
"A high-profile entry into VR could finally justify the Xbox One's albatross, Kinect, since the device stands to come into its own as a controller for VR experiences"
Microsoft is working on something to do with VR, while Valve is thought to have all manner of experimentation going on, involving everything from wearable computing devices to VR. Nonetheless, either of these firms would see a major leap forward in their efforts from an acquisition of Oculus. A high-profile entry into VR could finally justify the Xbox One's albatross, Kinect, since the device stands to come into its own as a controller for VR experiences; finally, a use that core gamers can get behind. Valve, meanwhile, would have been the most straightforward marriage for Oculus, as the company which has become the de facto platform holder for PC gaming took charge of the most exciting PC gaming peripheral in years.
Either of those deals would have given Sony serious pause for thought, potentially even leading to a change in strategy or approach for Morpheus. Neither of those deals actually happened, though. We're still left wondering what Microsoft and Valve are up to in this field, but barring a truly shocking announcement (and neither firm is given to Apple-style "here's our new product, and it's out tomorrow" unveilings) it looks like Oculus and Sony remain frontrunners. Only one of those is a platform holder with enormous engineering, manufacturing and game development resources at its fingertips. Facebook's money will help to buy some of those; the ingenuity of people like Luckey and Carmack will make up some of the remaining ground; but Sony won't feel like the scales have truly tipped very much this week at all.
It's tempting to go a little further with this line of argument and say that Oculus has just handed a competitive advantage to Sony by seriously annoying its most loyal fans and supporters. Many will point out the correspondance between these events and those that transpired between Sony and Microsoft last year, when Microsoft's poor messaging and manoeuvring handed an enormous competitive advantage to PS4 without Sony really having to lift a finger. Oculus becoming part of Facebook - a company deeply disliked by plenty of core gamers - could be portrayed in a similar light, as a "betrayal" of those supporters which will drive them into Sony's camp. After all, whatever failings Sony may have, Project Morpheus has been presented to the world as a project firmly based within the Sony Computer Entertainment division and thus entirely focused on games. Just as Microsoft's incessant blather about television and other media made the early adopter audience feel like Xbox One was out of touch with their desires, Oculus' purchase by Facebook opens it to lines of criticism about not really being about games.
"As long as Luckey and Carmack remain on board, which they will, and the product continues to evolve and impress, Facebook's role will fade into the background"
It's a compelling argument but I don't believe that things will pan out that way. For one thing, where Microsoft was making fundamental changes to their product that gamers perceived as negative, anti-consumer and disrespectful of the core audience, Oculus hasn't changed anything except its corporate ownership structure. As long as Luckey and Carmack remain on board, which they will, and the product continues to evolve and impress, Facebook's role will fade into the background and this week's anger will quickly dissipate. For another thing, there is a really significant platform issue here. Rift is a PC peripheral; Morpheus is tied to the PS4. As a consequence, there's plenty of room in the market for both, but more importantly, PC gamers (a truly devoted band) are unlikely to jump ship to console over something as pedantic as a sense of discomfort regarding the corporate ownership structure of a company that makes an interesting peripheral.
Of more concern to Oculus, and representing a greater opportunity for Sony, is the apparent disquiet felt by some developers over Facebook's involvement. Led by Minecraft creator Notch, a small band of indies have announced their withdrawal from Oculus Rift development since the FB deal. Oculus will no doubt be working to make this withdrawal temporary. If Sony's developer relations team isn't also working furiously to bring some projects exclusively to Morpheus while this upheaval is ongoing, they're missing a trick - and I don't get the impression that Sony's impressive third-party relations team has missed very many tricks over the past year or two.
In the long term, I agree with the broad assessment offered by many of the more considered commentators this week; this FB deal has the potential to be the best thing that has happened to VR since Oculus first announced the Rift. It brings a major new player into the sector, provides massive funding to one of the most exciting new game technology companies of the past decade, and yet leaves the competition between Oculus and Sony wide open and ripe with opportunity. For all that the FB deal is attracting the ire of a vocal group of core gamers, it seems clear that VR this week is even more exciting than it was last week.