Roundtable: Social Reality or Virtual Nightmare?

Thoughts from the GI team on Oculus' acquisition by Facebook

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.

James Brightman

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.

Steve Peterson

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.

Dan Pearson

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...

Rachel Weber

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?

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Latest comments (9)

James Brightman Editor, North America, GamesIndustry.biz3 years ago
Thanks Andreas.
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" 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"

Yeah... Mark says lots of things, all of them entirely true
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Jack Pochop Studying Telecommunications, Indiana University3 years ago
I see good and bad in all of this. I saw yesterday that an IGN editor had posted something about how Oculus, an originally Kickstarter-backed entity, had essentially sold a crowdfunded effort and turned a profit. While a pretty bombastic claim, there is some truth to the sentiment. Serious consideration should be taken in future, forward-thinking and high-dollar Kickstarter projects. Kickstarter's already grey lines are getting awfully muddy.

Then again (the good), Oculus's stumbling block was always lack of cash. With Facebook now playing Oculus's Warbucks, there's no reason the project can't be accelerated in ways it never could without serious financial backing.
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I am afraid of a few things from this, well perhaps more than a few

1) What happens when the market finally pops and corrects itself and FB goes back to the teens ( where it probably belongs)
2) What are the expectations of Oculus now, does it become like a AAA game and if it doesnt sell enormous numbers right out the gate is it a failure?
3) With regard to the above, I think VR regardless of who releases it is going to need at least a year or two for the techies, nerds, and gamers to embrace it, they/we will be the community that tries it first, and then showcases it to the rest of the world. There is no way VR just pops out on the shelves and mom and grandmom facebookers are gonna buy it. This is where I think Oculus might have really blown it, techies/nerds.gamers arent gonna be thrilled to embrace a facebook anything. Big win for Sony here.
4) Corp culture always invades, I dont believe for a minute that Oculus will the same company it was 2 years from now.
5) Facebook, I dont want anything to do with it and that sentiment is only growing among people it seems.

I mean if Oculus was already released and had gained it foothold in gaming and VR was a nerdy but real thing, if it was say a few years from now and Oculus saw it was running up against market penetration due to lack of funds/reach etc.. then , perhaps then I would see the reason to merge with a larger corp, but Valve, even google or microsoft etc would of sat better with me.

I hope for the best but I fear the worst. All I know is a few days ago Oculus was the most exciting tech in my mind, now I find myself looking for VR solutions elsewhere.

Edited 1 times. Last edit by Todd Weidner on 26th March 2014 4:55pm

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Richard Browne Partner & Head of Interactive, Many Rivers Productions3 years ago
James hits it spot on I think, and people are WAY overstating the price. The cash spend here is $400m, absolute chump change to Facebook, which even after the WhatsApp purchase still had somewhere around $7.5 BILLION in cash. The rest is Monopoly money stock. It's a small bet on something that now stands a much better chance of elevating itself out of the niche it was destined for in private hands.
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Neil Young Programmer, Rebellion Developments3 years ago
I'm a bit bemused by the level of confidence in non-gaming applications. It sounds good in theory, but there's fairly major obstacles to overcome in terms of input and practicality, meaning it's probably quite a long way off outside of occasional niche uses. For the short to medium term, OR will probably be earning it's keep through games.
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Christopher Bowen Editor in Chief, Gaming Bus3 years ago
I was actually writing up something very similar to what the IGN editor said - that they took everyone's Kickstarter, and basically sold it off, betraying the backers in the process - but honestly, I think it might be too negative and dramatic to print. But there's truth there; there would have been far fewer backers if Kickstarter made one mention of Facebook being involved down the line. This might be an overall win, but in a gamer community that, outside the casual space, is fairly against everything Facebook stands for, this is a disaster.
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Yiannis Koumoutzelis Founder & Creative Director, Neriad Games3 years ago
A wonderful move by Facebook! And a great boost for VR and Oculus in particular.

Having access to the vast resources of Facebook and reaching to a whole different level of VR applications can only be a good thing.

The backers supported the idea, got what was promised to them, and that is a wonderful thing! People should be happy seeing an idea they supported reaching for the sky! Congrats to those who had the idea and brought it to the public as well as the backers for helping such a nice thing happen! Everyone involved should feel proud!

edit: Christopher if there was word that Facebook was involved with this project from the very beginning, trust me there would be many more millions from actual investors lined up for this project.

Edited 1 times. Last edit by Yiannis Koumoutzelis on 26th March 2014 11:56pm

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Axel Cushing Freelance Writer 3 years ago
I was probably in the same boat as a lot of people when I first heard the news. "Facebook bought Oculus? WTF?!" I was looking out the window to see if angels were dumping bowls out on the ground and multi-headed beasts were gamboling across the landscape, smashing office buildings in their wake.

Dropping into "cold blooded suit bastard" mode for a moment, the raw numbers are pretty impressive. $400M USD cash, another $1.6B in Facebook stock (which isn't doing too shabby these days), Oculus wouldn't have just been fools to refuse, they'd have been stupid damned fools. That's money for raw materials, fabrication, salaries, everything they could need to push Oculus Rift in particular and VR in general from a minor niche product to a commoditized technology as ubiquitous as PCs are now. To steal an analogy from astronomy, VR has been one big series of brown dwarfs, plenty of heat but never massive enough to ignite into a star because there's not enough fuel and not enough pressure. This just added a lot of fuel and pressure.

VR has, for good or ill, always been associated with games. It's natural for us to think of it those terms, even though we've had plenty of suggestions for the technology being used in other areas such basic computing (Gibson's concept of cyberspace, which became the default "cyberpunk" vision of cyberspace; the OASIS from Ready Player One) and scientific pursuits (genetic manipulation in Spielberg's Jurassic Park). Games are undoubtedly going to be one of the biggest driving forces behind the technology once it reaches critical mass, and Rule 34 will ensure porn will be the other one. New operating systems, rapid prototyping for manufacturing and engineering, improved methods of videoconferencing and telepresence, the potential and ultimately practical applications are going to astound for years to come.

All of that said, there are some inherent limitations that need to be addressed. The first and probably the biggest is that this is primarily a display technology, an output device. Unless Facebook was going to mandate the installation of a program that behaves like a proxy for your mouse and keyboard, filtering clicks and keystrokes through a spybot while the Rift was active in order to report back to Facebook's servers, it'd be highly unlikely that Zuck would know your K/D ratio in Call of Duty in its original form. More to the point, given the heightened sensitivity people have to anything which might be spying on them these days, Facebook would be shooting themselves in the head if they did package such a spybot into the software package needed to run the Rift. It would provide Sony the perfect opportunity to pull another coup in the gaming/technology space by smiling and not doing a damned thing, much like it did with the PS4 after the "Xbone" fiasco, only with their recently announced VR headset. Until the Rift iterates to the point where you can "click" with your eyes inside the rig, there's too much risk and not enough payoff for trying to slurp user metrics like that.

Finally, there's Palmer Luckey himself to contend with. Admittedly, Zuckerberg and the Facebook board might very well try and cram data slurping elements into the Rift, directly or indirectly, and there might not be anything to stop them from a technical standpoint. But those shares of Facebook give Luckey a voice within Facebook's structure, and a guy who could organize a Kickstarter, two rounds of VC funding, and a sale to Facebook as rapidly as he has done is probably not somebody even a seasoned corporate veteran would casually think about crossing swords with. It would be a bloody affair, and it'd probably destroy Oculus as an entity, but I wouldn't count on him sitting by and quietly letting Facebook jeopardize one of the most exciting tech products in years. If anything, between public opinion and and shareholder alliances, Luckey could very badly damage Facebook if he did things just right.
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