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Oculus must open the warchest and show us the software

By Rob Fahey

Oculus must open the warchest and show us the software

Thu 07 Jan 2016 2:55pm GMT / 9:55am EST / 6:55am PST
Virtual Reality

$600 makes Oculus Rift into a platform, not a gadget - and that makes it absolutely essential that Oculus prove its worth in software

Oculus' announcement of its $600 price point raises many questions - from the obvious one of what this does to analysts' expectations for installed base growth (probably wildly optimistic from the outset, now almost certainly so far into the realms of fantasy that they risk being kidnapped by an ice queen and befriending a talking lion), through to pondering over how Oculus allowed price expectations to be so mis-managed. Pricing, of course, is a "real" thing - you either have enough money to buy something or you don't - but it's also a psychological and emotional thing, and for Oculus to have allowed the notion of a much lower price point to persist for this long speaks to a certain na´vetÚ and lack of experience on the communications and marketing side of the company (and it probably doesn't help that Facebook, Oculus' parent company, has precisely zero experience of selling Things to Consumers, being instead entirely concerned with the business of selling Consumers to Advertisers).

One question I find myself returning to while considering the VR landscape in the wake of this price announcement, however, is this; what is the boundary between a "gadget" and a "platform"? A gadget, I'd argue, is something consumers will buy simply for its novelty - their interest is held by the functionality and purpose of the hardware itself, at least for long enough to get them over the hump and into a purchase. A platform, on the other hand, is something that must justify itself as a part of a broader context; it must have (or very firmly promise) software, it must explain the position it will occupy within a consumer's life or their device ecosystem, and it must face a far more rigorous assessment and interrogation before justifying itself for purchase.

"It would be interesting to know what kind of warchest Facebook has granted Oculus for its software ambitions, because despite the company's strong efforts in this regard, it's hard to ignore the fact that it's got a severe handicap in software compared with its rivals"

Of course, the boundaries of those definitions will shift from person to person; one person's impulse-bought gadget may be another's carefully considered platform purchase. I'd argue, though, that price is a really big factor in determining whether a consumer views something as a gadget or a platform. If something is cheap (by your personal standards), it's easy to justify buying it "just to try it out"; even if it never pans out and ends up gathering dust in a drawer, you can blow a little cash on something that feels like a glimpse of a potential future. If something is expensive, though, it barely matters how interesting it is in theory - it needs to justify itself as a device that will deliver a return, providing or promising software and entertainment over a term long enough to amortise that original investment.

That brings us back to Oculus Rift and its $600 price point (which is $600 minimum - expect it to be significantly higher in other territories). Six hundreds bucks is a platform, in the eyes of the vast, vast majority of consumers. $300 may, for a fairly broad swathe of consumers with decent disposable income, be worth a punt just to "see what it's like", to own the latest thing, to show off to friends; $600 needs to justify its existence in far broader terms. Oculus Rift's pricing pushes it squarely into the position of being a platform, and it must present and justify itself in those terms. In short, now that the price is on the table, Oculus has to prove itself on a harsh frontier that has often sunk even the toughest and most deep-pocketed of challengers; it has to deliver software, software and more software.

Oculus knows this, I think. It's bundling EVE: Valkyrie and Lucky's Tale with the headset, which is a good start - VR needs a solid showcase, front and centre, to play the "Wii Sports" role in the inception of this new platform, and hopefully one or both of those titles can pull off that frontman role. It's notable also that Oculus focused heavily on promises of software in its announcement of the pricing; it claims 100 games will launch for the Rift by the end of 2016, of which 20 are Oculus Studios titles. One of the quiet stories of last year was the extent to which Oculus was spending Facebook's money to secure software support from top developers; studios like Crytek, Insomniac and Harmonix are among those whose VR titles will be published by Oculus, thrusting the company into the unusual position of being an unusually large publisher focused exclusively on what will be, for the first year or so at least, an unusually small platform.

It would be interesting to know what kind of warchest Facebook has granted Oculus for its software ambitions, because despite the company's strong efforts in this regard, it's hard to ignore the fact that it's got a severe handicap in software compared with its rivals. Oculus Studios had a standing start; Sony and Valve, both of whom will have VR headsets on the market in the near future, have long and distinguished track records as game developers and publishers. Sony, in particular, is a tough company to bet against in this regard; it has fantastic internal studios and third-party relationships alike, a track record of consistently delivering platform-supporting software, and the knowledge and know-how to market and distribute a platform - something which Valve, for all that Steam is an amazing and brilliant service, has comprehensively failed to do (either by accident or by design) with its Steam Machines and other hardware initiatives, and that Oculus/Facebook has simply never faced before. On past track record alone, it's not hard to visualise an opening year for VR in which Valve and Oculus have the better hardware, but Sony has the lion's share of the good software and total dominance of consumers' imaginations; echoes, perhaps, of the PS1 era in the console market.

"Oculus must ask some of the industry's top developers to create software for a platform which has enormous R&D costs...but has an uncertain and likely to be quite small installed base. That means paying a lot of money; there's no way around it"

Avoiding that situation is going to require rapid evolution and skills acquisition at Oculus (and Valve), because the company now finds itself in quite a different battle from the one it's been in up until now. Until the price was announced, this was a strange, phony war of hardware specs and media impressions; a battle between engineers and designers to make good, credible VR hardware, a race to invent the future. Oculus was an early leader and a powerful competitor in that battle; its engineers are a formidable bunch. Now, though, we have a price and a date, and we're not in an engineering war any more; this is about software, about developer relations and project financing, about marketing and about communicating. Oculus will need to build skills at an institutional level to make itself good at those things, while competing with two of the biggest and most experienced players in the industry - and it will also need the ability to draw very deeply indeed upon Facebook's financial resources, because all of this will cost money. A lot of money.

Consider; Oculus (and its rivals, who face similar challenges albeit from a position of more experience and momentum) must ask some of the industry's top developers to create software for a platform which has enormous R&D costs, because doing VR software well is far from being a satisfactorily solved problem, but has an uncertain and likely to be quite small installed base. That means paying a lot of money; there's no way around it. It should also cause you to raise an eyebrow at Palmer Luckey's statement that Oculus isn't making a profit on its $600 VR headsets, meaning that all of this spending is going to happen without a revenue stream to counterbalance it. Perhaps Oculus hopes to start making money from headset sales down the line, as hardware costs fall faster than prices; perhaps it intends to make money from software sales, though licensing is a risky gamble on PC (where players may simply choose to source software elsewhere and would howl blue murder at any attempt to lock Oculus Rift compatibility up with DRM and licensing fees) and the business model for VR software is completely unexplored territory. More likely, given Facebook's commercial predilections, Oculus' approach is to build a market and an audience and to worry about how to monetise it later on (though with some ideas in mind already, no doubt).

VR spent 2015 grandstanding on a high diving board, flexing and showing off; 2016 will be the year in which it finally takes its dive, and we get to see whether it enters the water gracefully, belly flops to disaster or, most likely, lands somewhere in between. With Oculus' price on the board and pre-orders opened, we now know the shape of the dive it will attempt, and we know what game we're playing; a software game, a platform launch game. My contention is as simple as this; the only thing that's going to determine success or failure for the VR competitors this year is software and the ability to market that software. We're out of the realms of gadgets or toys. VR headsets prove themselves as credible, desirable platforms for great software, and hit the water gracefully; or fail to do so, and belly flop to oblivion.

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10 Comments

Raymond Goldsmith Chairman & CEO, ISM

14 10 0.7
A far more logical and coherent article to the ridiculous fantasy rubbish published yesterday...Difficult to believe they both come under the same editorial controls !!

Software and the marketing of, has always been king and as stated here, will prove to be the case for VR...It's a PlayStation win win....

Posted:7 months ago

#1

Martyn Brown Managing Director, Insight For Hire

150 68 0.5
Surely it cannot be considered a platform until it's a stand alone hardware experience. Currently it's an accessory, with a niche core interest and an investment community baying for the next new thing. I think it's still early days and there are wires and USB connections going on. We're a while off being able to have wireless HD visuals at the frame rates required.

Short term VR is likely to have its best chance via Sony & PS4, which has the install base and existing hardware capable of driving HD experiences - and I use experiences because I think it's still up in the air if people will be able to spend lengthy gaming time in VR.

(For the record, I backed the Oculus Kickstarter. I remain sceptical about the commercial impact for developers just yet)

Edited 2 times. Last edit by Martyn Brown on 8th January 2016 7:26am

Posted:7 months ago

#2

Klaus Preisinger Freelance Writing

1,473 1,851 1.3
Popular Comment
I bet on Sony not because they have 35 million units out there compared to who knows how many gaming PCs with the proper specs. I bet on Sony because they know what mainstream appeal really means. Even early adopters need that. People buy a new monitor and/or new Playstation every few years anyway. The device does not have to be perfect, the fantasy does.

VR is the promise of fantasy becoming virtual reality. Fantasies are implanted into people by IPs. You do not get viral because you have to explain the fantasy, you do because everybody is infected already. You can have a great space shooter all year, when Peter Moore steps on the stage wearing an X-Wing VR shirt you pray to god that he will mention compatibility with your monitor device in the next 60 seconds. And that's all he has to do, hold up the VR set with one hand, a VR game with a $200 price tag on the screen behind him, he will respectfully show the audience the finger and how to use it to push the pre-order button. You will then do the same. Because you are not sold on VR, you are sold on fantasies. Star Wars is one, rock climbing isn't.

Posted:7 months ago

#3
VR is going to be a thing when we all have chips in our brains that connect wirelessly to game servers on Mars. VR goggles are same kind of engineer built unnecessary accessory like Kinect and PS Eye: they were built because they could be built and then games were made for the devices, but they sucked as games because they were done to suit the devices. It only works the other way around where devices are built based on the needs of games in order to make them better.

Edited 1 times. Last edit by Kim Soares on 8th January 2016 3:17pm

Posted:7 months ago

#4

Nick Parker Consultant

354 248 0.7
All forecasts I have seen (pre and post Oculus price announcement) put PS VR ahead of its rivals for the reasons already stated. Although VR is a new development opportunity for studios, the hardware remains a peripheral accessory especially for Sony - "bought a PS4? Now buy the headset for it." Oculus Rift falls between a platform and an accessory (platformssory!?) - for developers it's a platform, for consumers it's an accessory.

The $600 Oculus Rift price point is a challenge, especially as most PC gamers would have to invest in a new GPU/rig anyway, but Facebook may be thinking longer term - maximise revenues on the early adopters then review a price optimisation strategy to follow; rather than wow that cost us more to build than we expected. Also, OC is not just for gaming so should be priced for all deployments, some of them where capital expenditure is a rounding error for corporations. I would bet Sony is considering $300/$400 as PS VR should compare with or undercut the prevailing PS4 hardware price.

Edited 2 times. Last edit by Nick Parker on 8th January 2016 4:43pm

Posted:7 months ago

#5

David Canela Game & Audio Designer

99 206 2.1
Good article, thank you.
While reading it, I was wondering whether Sony truly has an advantage when it comes to being able to offer software right from the start; if there was one criticism of the PS4 in its first years, it was actually a lack of first-party software, after all. Or was that precisely caused by their secretly invesing heavily in VR games? It seems very possible No Man's Sky is to be their killer app. Also makes you wonder how The Last Guardian's creature would come across in VR.

Finally, Sony already has their move controller's ready and could try to use that as a selling point ( not sure when all that stuff is supposed to release, though, so the other VR controllers might be out by then, though will probably be more expensive).

Then again, I find it strange how the rigs required for the Occulus get so much attention, yet nobody talks about Sony's disadvantage in terms of horsepower at all anymore...

Posted:7 months ago

#6

Klaus Preisinger Freelance Writing

1,473 1,851 1.3
Strategy? Just imagine you had a $600 device that you assumed was bought by owners of $1200 PCs. You then bundle it with a 3D platformer aimed at ten year olds and the three other Kickstarter Indie dev millennials who would make them. That lacks a certain business predatorial instinct, don't you think? That's straight from the playbook of dads from the "my teenage kid unfriended me on social media" support group subreddit.

Seriously, if the device comes bundled with two games and you have an industry site running a feature "Oculus must [...] show us the software", then something is going terribly wrong and it isn't the device itself or its price. Sure, HTC is in full PR bullshit mode as well, but the worst you can say about their front facing camera is that you will at least be able to find your beer and Doritos while watching a VR sports broadcast.

Posted:7 months ago

#7

Jeff Kleist Writer, Marketing, Licensing

749 500 0.7
One thing I don't think people understand about the Rift is that they rally mean it they aren't making money

The panels they're using are essentially custom. Super fast refresh rates and low decay rates. Essentially the same reason why 3D couldn't be done on existing LCD TvS. The phone panels they were using are centered around color reproduction, not speed.

Developing, tooling, and initial small batches with low yield makes this very expensive.

As a parallel, the Blu-Ray laser in the PlayStation 3 added $100 to the build cost alone. Because they only had a 10% yield. A year later this was cut by 75%, and today it's just a few dollars.

Posted:7 months ago

#8

Bob Johnson Studying graphics design, Northern Arizona University

38 72 1.9
I'm tossing around this notion in my head that the Rift is more like a triple-monitor setup for gaming than another platform.

IT's going to have a life as hobbyist product. Anyone that has triple monitors and a steering wheel is the market this product is going to find because of the cost and the setup and devotion required. You look at the games I've seen others say are the good games coming out for it and it is lot of "cockpit" games and some old games retrofitted for it.

I guess maybe it was never really meant to take on the consoles or pc as a gaming platform. Maybe that's obvious since it requires those things in the first place.

Any VR system, that can get under $100 maybe $150 with a real (from the ground up) VR game, could do well as a gaming sku no different than a guitar hero or dance mat etc.

Posted:7 months ago

#9

Greg Wilcox Creator, Destroy All Fanboys!

2,588 1,635 0.6
@Bob: Oh, you'll see those $100-$150 "VR" devices sooner than later, I'd bet. Made in PRC, quite crappy and geared to people who can't afford the entry level price of a Rift, Vive or Morpheus.

You can also expect the "hoverboard" effect when those far more poorly made units start failing or fail to do anything to make believers out of anyone but the cheapest of cheapskates who hasn't seen actual VR (wait, isn't that an oxymoron? Oh, I dunno!). I'm hoping this doesn't happen and cheap VR that sucks will hit the big guys hard if they don't have a good counter to that other than telling people who can't afford the tech to go spend money they don't have or insult those consumers by telling them they're not too bright in the first place.

Posted:7 months ago

#10

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