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 naïveté 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.