By Xav de Matos, Director of Editorial + Community | Follow @GamingInsiders on Twitter
Last week Oculus announced the consumer Rift VR headset will cost $599; nearly double the price of its developer kits. Despite mixed reactions to the price across the social network landscape, the Rift pre-order website saw frequent crashes during its launch day. Ordering a Rift today puts you in line for a three month waiting period.
Since the price was announced, Oculus co-founder Palmer Luckey has publicly apologized for his part in generating some of the misleading expectations on the consumer Rift’s final price point. “I handled the messaging poorly,” Luckey said in an extensive Reddit AMA soon after the announcement. “It is expensive, but for the $599 you spend, you get a lot more than spending $599 on pretty much any other consumer electronics devices – phones that cost $599 cost a fraction of that to make, same with mid-range TVs that cost $599. There are a lot of mainstream devices in that price-range, so as you have said, our failing was in communication, not just price.” Luckey took to Twitter to reiterate, noting that at $599, Oculus doesn’t “make money on the Rift.”
Despite the explanation sales predictions have since shifted, as analysts and developers had focused on a $350 price range for the device.
“My predictions had been that Oculus would sell 3 million units in 2016. I had been assuming a price point between $399 and $499,” American video game designer Jesse Schell tells the Gaming Insiders community in a call for reaction to the price.
“$599 plus the extra cost of the Touch [which Schell estimates will be about $199] is going to be prohibitive for many. I’m inclined to revise my prediction to be between 1 and 2 million units [in the] first year for Oculus.”
In a recent New York Times interview, former Microsoft executive Robbie Bach discussed the launch stumble of the Xbox One, pointing at its price as a contributing factor to falling behind Sony in North America. “People have never bought a console at premium,” he told the Times. “That’s never worked very well.” At $599, the Oculus Rift ceases to be a gadget and puts itself into the same platform category as the Xbox One. Its price immediately invokes some snarky comparisons to the 3DO and Neo Geo across Twitter and Facebook, but Kongregate’s Anthony Pecorella thinks Atari’s groundbreaking console is a more apt comparison.
“Unlike those other systems [3DO, Neo Geo] Rift is a forerunner in an entirely new technology and media consumption experience. I would liken it more to the Atari 2600, which launched for $199 in 1977, which is somewhere around $750 in today’s dollars.” Though Pecorella sees it being a popular device in the early adopter phase, which has been evidenced by the current wait time for new orders, the mass market will require reduced costs.
“Hitting mass market though is where the prices do need to come down and content becomes essential. I don’t see VR going mainstream this year, though PlayStation VR could get it closer to that hump thanks to entry cost being much lower. But I also don’t think that’s a death sentence for Oculus or VR in general, it’s just a natural first step for an expensive new technology,” Pecorella says.
“At a $1,500 price point [Rift+Recommended] I expect that (well) over 50% of the first three million units will not go to consumers / gamers,” adds Guy Bendov, CEO of Side-kick Games, which is currently investing heavily in VR-focused content.
In Bendov’s opinion, the Oculus Rift is a premium priced product that is meant to fit the pro market: extreme VR enthusiasts, government, content creators, academy and business.
“In my opinion, the current high price points and space requirements (due to motion/movement features), of the HD-VR market lead to a premium niche with difficult [return on investment] proposition for publishers and game makers,” Bendov says.
Defiant Development founder Morgan Jaffit adds: “I think the only reason to look at high end VR right now is to get into an exciting market early. While there will certainly be fortunes made, it’s very high risk when you’re looking at addressing markets that may only be a couple of million in total size by the end of this year, especially for most of the GI crowd who tend to work with very wide demographics.”
Josh Levitan, VP Product & Marketing at AirMedia, agrees. “It’s all about the content. Even the early demos for Rift were cool in terms of immersion and sense of presence. Connecting that with enough cool games, VR films (or whatever they wind up being called) and apps is what will drive folks to buy them at $200 or $600 plus.”
“High-end VR does not have to be mainstream on Day One,” adds Tipatat Chennavasin, Co-founder and General Partner at the Venture Reality Fund, a VC focused on VR and AR investments.
“VR is truly ready to be mainstream when you think about how the $1500 PC of today will cost much less [a year from now] and there will also be a lot more content and also much better consumer appetite since they know about VR from the low-end mobile [market] and from trying demos at their early adopter friend’s place.”
Chennavasin reminds us that VR is already available and affordable. “People are forgetting that the Rift is not the only Oculus offering. If people want affordable, good quality VR, they can opt for the Samsung Gear VR.”
The emergence of VR popularity also propels the potential for even cheaper devices, such as Google’s Cardboard which launched in 2014. While it doesn’t carry the same punch as Samsung’s VR offering, it gives users a unique experience at a low cost. With so much talk about virtual reality, lower cost experiences may benefit from a public interested in joining the conversation.
Nintendo struck gold with the Wii console when it launched worldwide in 2006. Despite its perceived negatives as a lower-resolution console in the enthusiast market, the Nintendo Wii was a colossal mainstream success because it gave users a wholly unique experience. While enthusiasts appreciate the graphical capabilities of the Oculus Rift, does it better position Samsung’s device for major gains simply as a more affordable experience?
“Mobile VR more than passes the ‘holy shit’ bar for normal people right now,” Gaming Insiders CEO, David Kaye, adds.
“Nothing new or interesting has happened in the gaming world for five years, and gamers are ready for something new, and this is something new and powerful, especially when it goes social,” says Jesse Schell.
Prior to the Rift consumer price announcement, research firm SuperData estimated the addressable audience for VR gaming across all devices should reach 56 million unique users, with an installed base of around 38.9 million by year’s end.
“Initially, affordable smartphone devices will drive the bulk of sales as consumers first explore virtual reality before committing to the more expensive platforms,” said SuperData Director of Research Stephanie Llamas. “After this first wave, consumers will likely move more high-end VR devices on PC.” SuperData estimates 30 million sold units by year’s end would be in the mobile VR space and only 6.6 million would be for PC hardware.
Taking SuperData’s estimate and applying it to a recent study of the most popular brands of VR devices based on consumer awareness from research-based consulting firm Frank N. Magid Associates, 25% of that 6.6 million would be the Oculus Rift, equal to about 1.65 million units. This rough estimate falls in line with even adjusted projections after Oculus announced its price.
GPU heavyweight Nvidia estimates that when the Oculus Rift ships, there will only be 13 million PCs that are able to run an optimized VR experience.
“For gamers, I bet on PlayStation VR,” Guy Bendov adds. “PlayStation is better positioned to bring must-play VR content. But even at a 5% attachment rate to units, you talk about 1 to 1.5 million VR units. Not a huge market for [return on investment], especially when players of the PSVR expects HD/AAA quality games.”
“In regard to total up-front costs, if $599 plus remotes plus PC hardware anchors the price point at $2,000 for consumers, all of a sudden PlayStation has a real opportunity here,” Robert Khoo, President at Penny Arcade, adds.
“Even if PlayStation VR comes in at $599, having 35 million consoles that meet the only-spec – let alone the minimum spec – or being able to enter clean at $349 seems big.”
Ignoring manufacturing limits, Jesse Schell says that “unless they make a major blunder, Sony is positioned to be the sales unit leader for 2016.”
“My reckoning is that they will have 40M PS4’s out by end of 2016, and that they will be able to sell VR in to 5-10% of them, easily, for a total of 2-4M units.”
Now all eyes are on Sony and HTC’s pricing plans. HTC and Valve have since announced that pre-orders for the Vive will open at the end of February. Pricing is expected to be revealed when the pre-order page goes live, but Morgan Jaffit doesn’t expect the Vive to come in under the Oculus Rift price.
“It’ll stun me if the Vive comes in anywhere under the price of an Oculus plus Touch plus an additional camera and I expect it to be substantially more. There’s a lot of expensive gear in the lighthouses, just for starters.”
How Oculus Rift pricing will affect the hardware is unknown at the moment, as enthusiasts rush in line to purchase the hardware. As new devices make it to stores and companies are forced to compete for a plot of land on this new frontier, the market will dictate a more digestible pricing tolerance.
“This version of the Oculus will be for first adopters, and isn’t intended for mass adoption so the price makes sense,” reiterates David Diaz, Vice President of Developer Relations at Fyber. “When VR takes off in a year or two, games won’t be the medium that is being consumed the most, it will be other forms of immersive entertainment and the price of future sets will drop between $200 – $300, which people will gladly pony up as they hear the press and first adopters speak about how game changing VR is.”
“VR is the next mobile. We are just at the beginning.”
Oculus Rift begins shipping in March 2016.
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