The market for virtual reality games is still too young to return significant profits, but CCP Games believes it is on the "path to break even" after a total investment of nearly $30 million.
With the Oculus Rift launch title EVE: Valkyrie and the multi-platform Gunjack, CCP has been one of the most prominent and active VR developers since the technology re-emerged as a viable consumer product. Indeed, in his keynote address at DICE Europe this week, CEO Hilmar Petursson admitted the extent of the company's investment so far.
"We were fortunate enough to have some early success, so we have added a bit of investment into the field," he said. "So I think we're now, by the end of this year, we'll have invested $30 million into virtual reality games. And we're just about seeing a path to break even... We'll probably hit it in a few months, so we're extremely proud of that."
That pride stems from Petursson's reaction when CCP first started working on VR prototypes: a combination of amazement and the belief that, "I don't think you can make any money on this for a few years." Speaking to GamesIndustry.biz after his talk, Petursson clarified that CCP's $30 million VR investment to date isn't the same $30 million it raised in October last year - the similarity in the amounts, he said, is "coincidence" and nothing more.
"I think there's a good year of just introducing this [VR] concept to the world. I don't think it's until 2018/19 that things really pick up"
He also clarified that the "path to break even" is purely based on the games it has already launched: EVE: Valkyrie on Oculus Rift, and Gunjack on Gear VR, Rift and Vive. These close partnerships with the major platform holders were key to CCP being in such a relatively secure financial position.
"We got tremendous help from the platform holders to be in that position," he said. "It's a combination of starting early, and working with all the platform holders - we've been fortunate to work with close to all of them, so that got us to a place where we were able to invest so much, and bring so much product to market."
Being a prime mover in any market carries an elements of risk, and the fact that VR is such a novel concept to consumers only amplified that. However, CCP capitalised on the opportunity by exercising caution, taking a "very conservative view" of what the first three years of working in VR would be like.
"Basically, the way we looked at the market, it's kinda just shaping up [like] our conservative plans," he continued. "Not that we're trying to guess the market per se. We're just seeing, okay, can we make a business from this low of an installed base? And that [low installed base] came to be, and I think that will continue.
"I think there's a good year of kinda just introducing this concept to the world. I don't think it's until 2018/19 that things really pick up. At least, that's our conservative outlook, and we're trying to make decisions based on that. If it happens faster, or more, then fantastic, but we're just making sure we maintain the conservative stance we had on the first three years...even though we've been able to get to the place we are now without breaking the bank."
Given this outlook, CCP is still largely focused on PC development, with Petursson roughly estimating that 30% of the company if working on VR projects. Internally, hopes for the future of VR games remain high, but for now it is just one aspect of its near-term strategy. In his keynote talk, Petursson referenced a "really difficult period of restructuring" that has now been completed, one that likely included disappointments like the cancellation of World of Darkness and the sunsetting of DUST 514.
"I can tell you, the second album is a hard thing to put together," he said with a rueful smile, greeted by knowing laughter from around the room. Along with VR, CCP will continue to strengthen EVE Online, "so it grows and prospers for another decade, and another decade after that." It is also working on "new PC concepts," some of which are part of an ongoing period of experimentation within the company.
"I can tell you, the second album is a hard thing to put together"
"Think about sending people through the desert to see if they can find water," Petrusson said. "And if they aren't going to find water, we pull them back."
And if that metaphor gives an impression of desperation, that's certainly not the case in reality. Petursson told the DICE crowd that CCP has been "building a cash position," which now equates to $50 million in the bank. Ultimately, he'd like to double that amount.
"Not everyone agrees with me on that," he said. "'Why do we need $100 million?' Well, I don't need it - that's the point. I just want to have it there."
"We have learned that when you have that environment...people feel safe, and they're more likely to do something super inspiring. We're building the company towards that."
[CORRECTION]: This article originally labelled EVE: Valkyrie as an Oculus Rift exclusive. It is only available for Rift at the moment, but has also been announced as coming to Vive and PlayStation VR.