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Oculus Rift Price Drop

In this week’s episode, the Joes are talking about a “limited time” price drop for best known, least successful first-generation VR headset: Facebook’s Oculus Rift. Is this the beginning of a bold resurgence for Facebook’s VR HMD, or just a desperate summer sale meant to keep the low-selling Rift relevant in the VR hardware market?

FULL TRANSCRIPT OF SEASON 1: EPISODE 11

00:01 Speaker 1: Welcome to the In Reality Podcast. Now starting in three, two, one.

[music]

00:08 S1: Covering all things augmented and virtual reality, the In Reality Podcast is hosted by Joe Bardi and Joe Johnson, and features news, cometary and perspective from industry veterans and experts. First up, introductions. I’m Joe Johnson, Creative Director at Marxent Labs, and I’ve been in the AR and VR industry for five years now with Marxent.

00:25 Speaker 2: And I’m Joe Bardi, I’m the senior Content Strategist here at Marxent, and I’ve been here for a little more than a year.

00:29 S1: This week we’re talking about a, “Limited time price drop,” for the best known, least successful first generation VR headset, Facebook’s Oculus Rift. How limited? Let’s talk.

[music]

00:46 S1: The Oculus Rift headset and it’s touch motion controllers will soon be seeing a discount of $100 a piece. The price drop was announced at GDC, along with a slate of new games that’ll be released throughout 2017. The most important question to be asked here is, “Will all of this generate more adoption for the Rift?” Which has dramatically failed to meet sales projections in an industry that has not quite met projections all around. As of 2016, only 250,000 Oculus units were in the wild. With HTC out selling their mid-range competitor by 40%, and Sony shipping over a million PSVR bundles, which are priced at $499, which include tracking cameras and motion controllers, this entire VR landscape is topsy turvy when compared against 2016 projections, which had the Oculus selling around 5 million units by 2017, and the then Sony Morpheus selling only 1.4 million. A grand total of 6.3 million VR headsets were shipped in 2016.

01:33 S1: So if you’re doing the math, and please check ours as always, only about 40% of that number represents efforts by the big three. HTC, Oculus and Sony. That leaves Samsung’s Gear VR, which they were literally giving away with S7 pre-orders, comprising the bulk of the remaining 4.5 million VR unit sales. So selling fewer units than Nintendo’s ill fated Virtual Boy, the Rift stands on the precipice of damning mediocrity, even as the HMD market appears ready to take off. Oculus executives have framed the price drop as a means to give the Rift a more mass market appeal, rather than as an emergency measure to compete with the lower end PSVR offering. My question to you Joe Bardi is, is that all bullshit? Are you buying this?

02:10 S2: I’m not really buying it.

02:12 S1: That seems unsurprising considering nobody else is.

02:14 S2: Yeah. It’s not that I think that they are being untruthful. I think that they certainly intend for the price drop to spur adoption of the Rift. But I think it’s far more a reaction to the numbers that you pointed out, where they’re trailing, they’re in the last place in this race. And in a world where there’s very often one or two hardware providers that really win the game, being third or fourth is not gonna get it done.

02:44 S1: Well, I can understand why Sony can offer its option at a much lower price at $499. It’s a lost leader for them. If it sells more video games, specifically VR content, then they’re like, “Okay, cool. It’s just another peripheral that we have to differentiate ourselves from say, Xbox.” Which has no, as far as I know, no VR capability of any kind right now.

03:04 S2: Yeah, still no.

03:05 S1: And even then, you look at HTC, they’re doing the same thing. If they sell 10 million more games on Steam because of VR, they’re making money hand over fist in that partnership. But I don’t see the play for Facebook. How do they make money from just getting those units out?

03:22 S2: Yeah, so obviously, Zuckerberg thinks that the future of Facebook is a virtual future, and we’ve all seen the demos of the Spaces presentation and all of that. And so there’s this idea that, going forward, the social space will not be your wall. It will be an actual construct, matrix style construct where everybody’s hanging out together.

03:42 S1: A Facebook branded construct.

03:44 S2: Exactly.

03:45 S1: What a nightmare.

03:45 S2: Yeah. But consider this day zero of Zuckerberg’s big idea. Yes, prepare now people.

03:53 S1: My eyes widen in fear.

[chuckle]

03:57 S2: As much as we may both be horrified by that, and it is sort of horrifying, it will totally be adopted. It won’t matter.

04:04 S1: To borrow a phrase from one of my favorite writers, “It is the tip of the spear of Facebook’s pulsating data mass.” So that should inspire some fear, honestly.

04:12 S2: That is horrifying.

04:13 S1: It is.

04:14 S2: But regardless, the other side of this coin is, yes, they’re dropping the price on the hardware, and the hardware seems to be a first generation loser, if I can put it that way.

04:23 S1: That’s fine.

04:25 S2: The Vive and the PSVR are gonna, at the end of this phase, will be the “Winners.” Although, HTC is… They’re doing better than Oculus, but they’re still not doing as well as Playstation, but…

04:36 S1: I think that might shift a little bit. I know they partnered with Google for Daydream.

04:40 S2: They did. Yes.

04:41 S1: So they’ll have a couple of different VR headset offerings out there at various price points, and at various capabilities. I know that Daydream has inside out tracking, and it’ll be untethered from a computer which will really reduce the price of entry for VR.

04:52 S2: Yeah. That’s the other thing about the price drop. So they dropped the price of the Rift 200 bucks back in March, and now they’ve dropped it again $200 for a limited time.

05:02 S1: Yeah. I don’t think it’ll be a limited time. I think that’s a permanent price drop.

05:06 S2: Yeah. I would be really surprised to see it go back up after… How do you make it go… I just don’t see how that happens.

05:12 S1: I guess it would depend on sales. Obviously, neither of us are experts in business, but if they do really well at the new price point, is it really a promotion? Or are they just gonna switch over and try to get more units in households.

05:23 S2: If they don’t sell a lot, is that how the price goes up? It’s like, “Well, this didn’t work guys. Let’s just make it $599 again.”

05:27 S1: Yeah. Let’s just jack that back up.

05:31 S2: But no, so it stays down. And normally what you would see is in hardware, and I’m generalizing, but in hardware when you have multiple price drops, that usually means the next generation of the hardware is right around the corner. But that doesn’t really seem to be the case here.

05:44 S1: I was gonna make the case that maybe they shouldn’t do their own hardware, Facebook maybe shouldn’t own their own hardware. But that’s not really true. I mean, Sony developed theirs, it was Morpheus and then it became PSVR. I was gonna make the case that something like partnering with HTC to get hardware might be a better solution.

05:57 S2: Right.

05:58 S1: And obviously, Google’s going that route, but I can’t say. It’s still too early to tell probably on that stuff.

06:03 S2: That’s a good hedging of their bets by both Google and HTC. ‘Cause they’re both in the second position sort of thing. And so by working together…

06:10 S1: Well, if you look at what Google does with hardware already, they don’t really make their own phones. Is Pixel LG? ‘Cause I know that all of the Nexus phones are LG. I’m sure they partner with somebody to make that stuff.

06:21 S2: It may have been HT… Was it HT… No, I don’t remember.

06:24 S1: It doesn’t really matter.

06:25 S2: They did partner, they did partner. But yeah, where are we?

06:30 S1: The reason I bring up the partnering stuff is, there are already developers who have inside-out tracking prototypes, the Daydream is one of those things. And I know that Facebook’s Oculus Labs are talking about, “Well, we’ve got inside-out tracking, but it’s coming in two years,” as opposed to now which is what Daydream is looking at. Actually, what’s the timeline for those Daydream headsets? Do you know?

06:50 S2: I don’t. I don’t remember what they… Did they give a date? That was just coming soon.

06:55 S1: Maybe it’s the same feature parity that we’re seeing in our industry, where “Markerless tracking, we’re working on it.” Simagine or Metaio via Snapchat and Apple are both working on the same… We all came at it at the same time, everybody has markerless all at the same time, and they all have different abilities and capabilities. Maybe that’s, again, what we’re gonna see here with all these VR headsets.

07:16 S2: Different levels of experience. So the Daydream two, as I’ll call it, clearly the play there is the idea that this is like a modern View-Master. You’re looking into it and you’re just seeing…

07:27 S1: I love View-Master.

07:28 S2: I do too. No little clicky thing though, unfortunately.

07:31 S1: We literally both did that, that’s good.

07:32 S2: Yes, that’s right. [chuckle] So the play there is, maybe a more fully featured system, which obviously adds a lot of expensive, technology or whatever, isn’t really necessary to get the basics of the experience across, and so that’s one way to go. It definitely feels like everybody knows what the next headsets have to do. They have to have inside-out tracking…

07:54 S1: They need forward-facing cameras, they need to be able to do AR and VR simultaneously, which is something that our CEO Beck Besecker said a long time ago at TechCrunch. He was talking about, I think it was two years ago now, he was saying, “In four or five years you’re gonna see a hybrid inside-out AR/VR platform. And everything’s going to work both ways. You can just flip a switch and you’ll have your AR experience and your VR experience.” And that’s actually really exciting to me.

08:19 S2: Yeah. It seems… The possibilities of that type of technology seem more open than either the closed experience of a VR headset, or the open experience of AR in whatever fashion you’re getting it.

08:30 S1: Well, the fact of the matter is, people just want it “to work.” And in order for that to be the case you have eliminate the downsides of VR, which is coincidentally, one of it’s strengths. Your isolation and your immersion can also be problems. You walk into walls or you don’t really have a good sense for what’s going on around you, and you start getting motion sickness or whatever. You can eliminate that by giving people anchors or tethers to the real world, and that’s what the AR stuff can give you. And then on the flipside, you get rid of the worst problems in AR, which is, stuff doesn’t look like it’s in the real world because of the rendering. Or it’s transparent on a HoloLens plastic projection. You can eliminate a lot of those problems by going with a hybrid approach.

09:11 S2: I like that what we’re really discussing here is the idea that what we’re gonna do is put a computer in between us, and our experience of the world. And that computer is going to feed us an interpretation of the real world that is captured through sensors and cameras, that we will say is real.

09:27 S1: I don’t want to get into this with you, but if you’ve ever watched scientists tracking eye movement, and trying to figure out what your brain is actually seeing as your eye scans across “Objective Reality” as you’re looking; it doesn’t look like what your brain interprets things as. We’re always receiving interpretations of the real world. Whether it’s through our ears, nose, mouth, skin, whatever. I don’t think it’s that far-fetched to put a CCD and a computer processor in between those two things, especially, not if it can provide lots of value for us.

09:58 S2: Yeah. I just find…

10:00 S1: This shit got really far of field really fast, yeah.

10:02 S2: It did, it did. I was about to go into the hallway experiment, but I’ll stay out of it.

10:05 S1: Whoa, what is that? What are we talking about here?

10:07 S2: I can’t remember where I picked this up, but it was a professor, his classroom was at the end of a hallway, and on the first day of class, when everybody came in, he would have them all write 100 words on what the hallway looked like when they walked in. And he would get 100 different descriptions of the hallway, because everybody experienced a completely different hallway even though they all walked through the same hallway.

10:28 S1: That’s fantastic.

10:29 S2: When I say, “Putting a computer in between you,” it’s like you are farming out the interpretation of the hallway.

10:36 S1: Some of it.

10:36 S2: Some of it. ‘Cause you’re still gonna interpret what you’re getting from the computer in a whittled down fashion. It’s neither here nor there, it’s just sort of a fascinating idea.

10:47 S1: And Facebook is gonna provide all this for us.

10:48 S2: And Mark Zuckerberg and Facebook will be the people who put the filter on reality for you. Do you feel the price drop says anything about the viability of the Oculus Rift, or Facebook’s future plans? You don’t think this means they’re in any way…

11:07 S1: I would say that if they’re going for a mass market appeal, the evidence of their plans is clear. They’re not trying to make a bunch of money on hardware sales, they’re clearly trying to use this as the ad unit of the future, The VR Ad Unit. Which requires that their device be ubiquitous in every household. They could probably give it away, and get better value for what they’re trying to do.

11:26 S2: And that’s where I was headed with this, I think, to some extent. I think Facebook being the Goliath that it is, this is a land grab for intellectual space, essentially.

11:38 S1: Have we seen other technological land grabs in the past?

11:40 S2: Yes.

11:41 S1: What would you describe those as?

11:42 S2: I would say, you could look at Samsung in phones, which… Galaxies were basically free.

11:50 S1: Yeah. They did that for a while. I mean, they’re definitely charging for ’em now. My wallet is still hurting from the last…

11:55 S2: If you’re buying a Note 8 or the top of the line…

11:58 S1: The Galaxy.

12:00 S2: They’re trying to compete in the premium market. But then they have all these other phones, and then there’s all these other companies that make phones that are essentially free. And it’s interesting because it points to the limits of that strategy. You could have a free phone right now if you want it, and I’m still waiting to buy an iPhone 8. So it’s like…

12:19 S1: Now that I think about it, we were talking about Facebook just giving away units in order to get land grab stuff. Samsung’s doing that right now, you’ve just referenced Samsung’s phone.

12:27 S2: Oh, yeah.

12:29 S1: The fact of the matter is, they’re also giving away Gear VR units along with S7’s and Notes. They were only, originally, gonna give away 300,000 and they ended up giving up, I think, twice that, if I’m not mistaken. Maybe we are in the land grab phase of the industry.

12:45 S2: A couple of things about Samsung and the Gear VR. First of all, they have the best advertising thus far that made me…

12:52 S1: You mean any?

12:53 S2: Well, no. I mean, there’s Oculus ads and stuff. You never see them, but… Sure.

12:56 S1: Yeah, but who knows. You never see them ’cause they’re not anywhere.

13:00 S2: Samsung did Yeomans work in trying to present virtual reality as a social experience…

13:06 S1: Are you talking about the ostrich video?

13:08 S2: No. I’m talking about the older guy on the street.

13:11 S1: Oh, that’s a good one.

13:11 S2: The city street. And there was a holiday one where everybody’s sitting around, and they’re laughing, and they’re crying with their Gear VR’s.

13:16 S1: By the way folks, there’s gonna be a collection of links to cool Samsung Gear VR videos along side this.

13:21 S2: Yes. We’ll include that, sure.

13:24 S1: Yeah. Note.

13:25 S2: And so my point was that for this first generation of VR, the actual lesson may have been, less was more. You didn’t need to go for the moon shot. You needed to present something that worked, even if it wasn’t fantastic.

13:38 S1: That dovetails with The Verge’s article title about PSVR, and their title is, basically, a story about when good is great. Good enough is great. And I think you’re probably looking at that right now.

13:51 S2: Yeah. Because at the bottom, the tech wasn’t quite there yet. Everybody knew this stuff was possible, but actually building it was gonna take a little time. And so I’m happy these companies all went out and went out on a limb, and I can’t wait to see what they build next. I want to see another Vive, another Rift, another HoloLens. Because I think they’re gonna be more than twice as good, and does that change the calculus?

[music]

14:19 S1: How do we save this line that I wrote? I don’t remember.

14:21 S2: Oh, yeah. What was it originally?

14:23 S1: I don’t know. It’s like, “Hey kid. What do I gotta do to get you into an Oculus Rift?”

14:28 S2: Yeah.

14:29 S1: Hey kid. You wanna buy a boat?

14:31 S2: No. Once we get through this.

14:32 S1: Can we quit this and do our web comic about golfing now?

[laughter]

14:37 S2: Do we have a web comic about…

14:38 S1: It’s called “Bogey shots.”

14:39 S2: Oh, bogey shots.

14:40 S1: Yeah.

14:41 S2: Not Mulligan?

14:43 S1: Well, it could be both. That’s what we’re gonna do when all this is done. When all this falls apart, we’re gonna do a golf web comic. I’ll do all the art, and you can make all the terrible jokes.

14:51 S2: That’s fine. That’s sounds good. Actually, I’d like to do a detective comic about golfers who solve golf course mysteries called, “Mulligan and Mulligan.” That would be what I would do. Constantly taking shit back. Anyway this is not an answer to your question.

15:07 S1: This might make it to the end of the show.

15:08 S2: I know.

15:09 S1: The part where I’m like, “When this is all falling apart, we’re gonna do bogey shots. We have to fit something about slicing in there because I’m a terrible, terrible player. You just gotta make it work. You’re the writer…

15:21 S2: I got it. Nevermind. Hold on. Lost balls.

[laughter]

15:26 S1: Alright, later on “In Reality After Dark… ”

[laughter]

15:30 S2: Oh man.

15:30 S1: I don’t have a good segway for that. So in reality, I’m Joe Johnson.

15:34 S2: And I’m Joe Bardi.

15:35 S1: And we’ll probably see see you next week if we’re not cancelled. Have a good one folks.

[music]

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