Facebook‘s $2 billion deal to acquire Oculus last month marked the biggest bet yet on the resurgence of virtual reality.
While any price tag that hefty for an unfinished, unproven technology is bound to spark investor second-guessing, it’s hardly a surprise that this purchase is being especially scrutinized. Like 3-D, virtual reality is a concept that has been touted for years, but has always failed to live up to its potential—and historically been rejected by consumers.
And while Oculus has greatly improved the experience—and Facebook and Sony (which is making its own lauded VR headset) are sinking fortunes into the technology—there are still plenty of hurdles virtual reality must clear. Among them:
Content: The best hardware in the world is useless if there’s not software to take advantage of it. And if that first rush of software isn’t up to par, it can quickly sour the experience.
“If anyone’s out there making VR, our message is ‘please take the time to get it right,'” said Brendan Iribe, CEO of Oculus, at CES earlier this year. “If you don’t, you get people sick. … It’s all dependent on the content.”
Virtual reality is expected to make its first splash in the video game world. Whether game publishers will be willing to bet on the technology immediately is another concern, though.
VR games aren’t cheap to create. They require very high frame rates (the number of frames shown per second) and work best in 3-D, with separate images being delivered to each of the user’s eyes. Large game publishers may support existing partner Sony, knowing that the company is planning internally developed titles as well. But Oculus, which is focusing on the PC, might be a harder sell.
Meanwhile, many indie game developers, who were backing Oculus, aren’t happy with the company’s new owner. “Minecraft” creator Markus “Notch” Persson said he has canceled plans to work on a version of the hit game, which has sold more than 14 million copies, for Oculus’ Rift virtual reality headset.
“I definitely want to be a part of VR, but I will not work with Facebook,” he wrote. “Their motives are too unclear and shifting, and they haven’t historically been a stable platform. There’s nothing about their history that makes me trust them, and that makes them seem creepy to me.”
Oculus declined to comment. Facebook didn’t respond to a request for comment.
Finding the right audience: Facebook says it wants to cast a wide net with VR, but consumers have historically shunned any sort of technological headgear. Previous efforts, ranging from Nintendo’s Virtual Boy to modern 3-D TVs, have flopped, which could indicate consumers simply aren’t interested.
“Hardcore gamers love new technologies and experiences and are willing to do almost anything to get them,” said Ed Fries, co-founder of Microsoft’s Xbox division, in a recent “Ask Me Anything” on Yabbly. “General users however are a different crowd. Given how little success the consumer electronics companies have had with 3-D TVs with glasses, I am sceptical [sic] that general users are going to be strapping this thing onto their face any time soon.”
And while the focus of VR so far has been on the gaming and commercial market, some experts say there’s really no way of knowing where the technology will find the best fit.
“What is the best case for thinking about things like VR?” asks Rob Stavis, a partner Bessemer Venture Partners. “Is it playing a video game? Is it military training or teaching? The way we’re going to learn about that is through trial and error.”
Cost: Neither Sony nor Oculus has given any indication of what the retail cost of their VR headsets will be. Oculus’ Kickstarter backers were able to get a Rift developer kit for $300, but there’s no guarantee the final product will be in that neighborhood.
Beyond hardware, there’s a question of whether software prices will be higher. Aaron Davies, director of developer relations at Oculus, said he would not be surprised to see game makers charge a premium for VR-enabled games, pushing them higher than the now-standard $60 price tag.
“In VR, suddenly objects have value—and scale and size and depth and I think there will be opportunities for developers to monetize them,” he said.
Iribe agrees, but notes there is a risk with that.
“They’d better deliver if they’re going to charge more than $50 or $60 for a game,” he said.
Meeting expectations: Part of the reason VR has failed before is it has never lived up to the hype. And after a $2 billion buyout, those expectations are only increasing.
“I think we’re living in a world where, in the last six months or so, there has been a lot of enthusiasm for how this tech can change our lives—and it’s reflected in some rich valuations for things,” said Stavis.
“You might think the Oculus deal is symptomatic of that. At the same time, at Bessemer, we continue to believe the pace of technology change will increase. … [VR] is in the early innings. so some of the valuations might be forward looking.”
—By Chris Morris, Special to CNBC.