Facebook has a new strategy to get people interested in virtual reality: cutting the price.
The company’s VR subsidiary, Oculus, announced Wednesday that it’s lowering the cost of its Rift headset and touch controller from $800 to $600. The headset still requires its own PC setup, which Oculus sells at a starting price of $500.
Oculus’s decision to cut prices highlights the growing competition it faces from the likes of Sony, which recently announced that it has sold 925,000 units of its PlayStation VR headset to date. Oculus hasn’t disclosed sales of its headset, but third-party estimates show that Rift sales have fallen well behind Sony and the HTC Vive.
Despite Facebook’s early bet on virtual reality with its purchase of Oculus for $3 billion in 2014, early demand for the technology has been tepid. Oculus recently closed nearly half of its demo stations for the Rift in Best Buys across the USafter some stores went days without demos. And Facebook was recently ordered to pay $500 million in damagesas the result of a high-profile lawsuit between Oculus and game maker ZeniMax.
In an interview with Business Insider, Oculus cofounder and head of Rift development Nate Mitchell defended Facebook’s mission to make virtual reality the next major computing platform. He said that Sony’s early success “demonstrates the excitement for high-end VR,” but also echoed Facebook CEO Mark Zuckerberg’s claim that it will take years for VR to reach mass adoption.
“We have always tried to set the expectation that VR is a very, very long-term play,” Mitchell said. “We had talked a lot, even pre-Facebook, about there being decades of work in this space to really bring VR to where it needs to be as a computing platform.”
You can read our full interview with Nate Mitchell on the state of Oculus, its forthcoming products, and the overall VR industry below. The conversation has been lightly edited for clarity.
Business Insider: A big moment for Oculus was the reorganization that happened in December with Brendan Iribe stepping down as CEO and joining the PC team with you. And then there was the formation of the separate mobile team. I’m curious what it says about Oculus’s overall strategy now that those two teams have been solidified.
Nate Mitchell: I don’t actually think much has changed there strategically. At a super abstract level, Brendan and I were focused on the entire business, Rift and mobile. As we looked at the natural evolution of the business and team structure, it actually made more sense to have fewer people focused on certain areas and really going deep.
For example, Rift now has 100 percent of my time rather than 40% Gear, 40% Rift, and 20% everything else. So for me, I’m really excited to really be able to focus on the Rift community and user base and everything we want to do on Rift. Brendan is obviously in a similar vein, although he oversees more.
The teams really works super closely together. We’re in there every day working on the platform and overall product strategy. So for us, there’s actually not that much changed in how we operate day to day. It’s actually about being able to move even faster with even smaller, more autonomous product teams within the organization.
BI: I’ve heard that the focus within Oculus is increasingly on mobile. That’s where the mass market is. Now that mobile has been solidified as its own organization within Oculus, what’s the momentum like there?
NM: For us, mobile is really about bringing as many people into VR as possible as fast as possible.
In terms of affordability and scalability, more people than ever are getting their first VR experience on [Samsung’s] Gear VR. That’s super exciting. We’ve always said that mobile is going to be one the key paths that VR takes.
On the PC, you’ve got the high-end, high-fidelity experience. I think the content is going to be a little deeper there, especially at the onset. There’s going to be a bigger gaming focus there. We do see these two directions feeding off each other across the board, actually.
So whether it’s using the Rift to develop for Gear VR, or the fact that some of the leading Rift titles were actually developed for mobile first and then we brought them over to Rift. It’s a constant interplay.
I think one of our biggest strengths as a VR platform creator is that we have tools, services, and SDKs that let you develop the ecosystem on both sides. So, a great example of this: “Dragon Front,” which is an Oculus Studios title that we funded from scratch, you can actually play against Rift users on Gear VR, or vice-versa. That cross-platform play is something that only Oculus offers, and we think it’s really important for the future of the ecosystem, especially as we see new categories of new VR systems come to life.
We really think about VR holistically more than any other company out there, and I think it shows in our overall and developer strategy and the experience you have on any Oculus device.
BI: What’s it been like with Hugo Barra as part of the team? Has he had a lot of face time with you guys at Oculus? I know he’s technically over all VR at Facebook, and Facebook has its own VR team outside of Oculus now.
NM: He’s just getting ramped up, so he hasn’t dug in too deeply just yet. We could not be more excited to have Hugo onboard.
I’ve spent a decent bit of time with the guy and I’ve been really impressed. I think his title is VP of VR at Facebook, so he’s going to be over a lot.
- Mark Zuckerberg/Facebook
VR is a big bet at Facebook. We’re big, big believers in the future of VR, and obviously Oculus is fully representative of that. Part of the reason we’re here is because Mark really shared our vision of where we want to take VR and he was really supportive of accelerating that vision and doing it the right way.
We’re all one team. We’re all one company, Facebook, pushing VR forward. Just like we talked about PC and mobile, there’s a lot of super bright folks working on Facebook in VR and we work really closely with them.
BI: Is the Facebook VR team more about creating the future of Facebook in VR versus what Oculus is doing with the core hardware and software development?
NM: I think you can think of it just about social and doing a lot of exploration of what social experiences should be like in VR.
At its root, Facebook is a platform for sharing experiences and connecting with people. When you think about VR as a technology, there’s actually never been a better technology ever for sharing experiences, and it’s going to open up all kinds of new doors.
We have a lot of projects internally focused on social experiences. For example, we just launched Oculus avatars on Rift. We just launched Oculus Rooms on Gear VR, which lets you connect with anyone across the meta-verse instantly and hang out in a space that we created.
I don’t think anyone has cracked the code just yet. We have a lot of irons in the fire. We’re really trying to push forward on a lot of different social experiences. And this is something you’re going to continue seeing us talk about and release products around. There’s so much more we are doing and are excited to share later this year.
BI: Mark Zuckerberg just showed off the VR gloves you’re working on. He visited your R&D team up in Washington. The Gear VR controllers have been announced. What’s the strategy of adding these peripherals, and how integral is it to the VR experience?
NM: Across all of Oculus, we have a lot of different technologies in development, most of which we don’t talk about. We have a lot of ideas for future products. We really do have a big vision for the future of VR.
Mark’s picture you’re referencing was of a glove. We don’t have anything to announce quite yet on future products. We have a lot in the fire in that regard and we’ll have more to share.
I think touch [controllers] was a major step forward in terms of natural VR interaction. The ability to actually reach out and pick up a virtual object in the real world has been really impactful.
On the Gear VR side, we just announced the new controller with Samsung that’s going to be launching later this year.
Input has moved super quickly. It’s going to continue to move fast. We’re not at the end-all-be-all of VR input just yet. I can’t say too much more than that. We’re not at the stage where Mark’s picture is representative of a product that’s shipping to consumers in a month or anything like that.
BI: Speaking of products that you haven’t announced yet, I’m curious how development is going on the Santa Cruz prototype you showed off last year. How do you see an untethered and a tethered Rift working together? It seems like they’re created for different environments.
NM: Santa Cruz is a feature prototype on a path to a new market for a product that’s standalone – an all-in-one device that doesn’t use your mobile phone. We’re really excited about that product category, and we’re obviously investing in that.
I can’t say much about how things are going. Santa Cruz as a prototype is done, and we’re investing heavily in the overall mobile and standalone ecosystem. Nothing new to share today, but expect more news over the course of this year because we’re definitely firing on all cylinders.
- Twitch/Oculus VR
Santa Cruz leverages a mobile CPU and GPU, so it’s more along the content class of a Gear VR. With the Rift, I think the options are: should the Rift potentially have onboard compute, or should we explore something like wireless, or should we stay with a tethered experience.
There are benefits and tradeoffs to each one of those approaches. We decided to not go with wireless for Rift 1 for a bunch of different reasons. There was price, there was weight. I don’t think the technology was quite ready. When you add a dedicated wireless module, you actually need a pretty significant battery. and this is all stuff you wear on your head.
We’re thinking a lot about the future of Rift and what a Rift 2 might look like. We are excited about wireless. There are going to be tradeoffs. What we’ll see in hardware is how far people are pushing the experience versus. looking at some nice features like wireless. And then there’s how you want to optimize between cost and power and everything else.
We’re thinking a lot about it, and we’ll have more news on the future-facing features at a later date.
BI: On competition, you’ve got HTC Vive and PlayStation VR. Sony just disclosed sales for the first time. Why hasn’t Oculus disclosed its sales? What do you think of Sony’s sales? Do you see it as a good sign for the VR industry?
NM: I thought it was a great thing for the industry. I thought Sony framed it well. They had set an aggressive goal in their mind for 1 million units, and it looks like they’re going to surpass that goal.
I think that sales figure really demonstrates the excitement for high-end VR. They did a great job building a product that people are super excited about.
- AP Photo / Eugene Hoshiko
We know people are super excited for Rift and that they’re blown away by touch. We’re confident that we actually have the best VR system out there and the absolute best content lineup. And that’s not just hardware and content, it’s also the software experience, whether it’s asynchronous time-warp or asynchronous space-warp.
If you go out there and read the reviews, there’s no better place to play in VR than the Rift. Our price drop and our content lineup are setting us up a really big year in 2017.
BI: So in terms of why Oculus doesn’t release sales, is that because it’s still early and you don’t want to show too many of your cards? Is there a point in the future when you say how many units you’ve sold?
NM: We just generally have a sales policy for not sharing sales figures for any of our software products.
BI: So no update on that.
NM: No update today.
BI: Facebook is probably the biggest proponent of saying that VR is the next big platform. Critics say it’s too expensive and too cumbersome to use. When do you see it reaching critical mass adoption in the same way that the original iPhone was seen as the next big thing?
NM: We have always tried to set the expectation that VR is a very, very long-term play. We had talked a lot, even pre-Facebook, about there being decades of work in this space to really bring VR to where it needs to be as a computing platform.
We joked early on that Rift was going to be the Apple II moment where you had great VR that was going to be available to everyone for the very first time, but that it was far, far, far away from the iPhone. If you look at the delta in time between the Apple II and the iPhone, it took a long time for us to get through the form factor, the compute, the user experience and everything else needed to make that leap forward.
I still think that it’s going to be awhile before we get to that ‘iPhone moment’ for VR.
I still think that it’s going to be awhile before we get to that ‘iPhone moment’ for VR.
When I think about the iPhone moment, it was really about the user experience that the iPhone delivered. It was the user experience that set the iPhone apart. You know when you got your hands on an iPhone that it was something special. It really set the tone for phones as a computing platform because people loved the device and you could do so much on it.
What I’d also point to was that iPhone sales, and I’d have to double-check on this, were pretty small for its initial launch. And it was of course limited with its partnership with AT&T. But I’m pretty sure it was just a couple million units.
People were saying at the time, “Look at what a failure this is, this thing is a total disaster.” But iPhone consistently built a user base over the years that continued to double in size. You’ll see a lot of products doing this, whether it’s the Kindle or the original iPod.
If an industry and a platform is growing 2X every year, I’d say it’s on a really strong trajectory to be a smashing success. I think when you look at where VR is today, we’re on a great trajectory. I think the early generation [of VR] has surpassed expectations in terms of the quality of the experience. We’re going to do everything we can to drive forward the hardware, the software, the experience to get VR in the hands of many people as possible.
We’re out here to make VR into a computing platform, to make it ubiquitous. I think what you’re going to continue to see from Oculus, and please hold us to this bar, is that we’re out there leading in that regard. We’re really excited about what we’ve accomplished so far and what’s next.