What a month Facebook has been having with Oculus Rift. Just as a recap:
- Facebook paid nearly $3 billion for Oculus, nearly $1 billion more than initial announcement
- Oculus Rift just got $500 million more expensive for Facebook
I wrote previously that
This now means in addition to whatever other costs that are associated with Oculus aside, that the starting price for Facebook entering VR now sits at $3.5 billion. I’m not sure what Facebook has in store for Oculus but at this point, short of VR becoming the next great frontier, recouping that money just become a lot harder.
As Alex Heath reports for Business Insider, things aren’t getting any better.
Facebook is closing around 200 of its 500 Oculus virtual reality demo stations at Best Buy locations across the US, Business Insider has learned.
The scaling back of Facebook’s first big retail push for VR comes after workers from multiple Best Buy pop-ups told BI that it was common for them to go days without giving a single demonstration. An internal memo seen by BI and sent to affected employees by a third-party contractor said the closings were because of “store performance.”
I will reiterate what I wrote when the true price tag of the Oculus acquisition was revealed:
I almost feel like I can also copy my above sentiment again on being unsure how Facebook plans to recuperate any form of ROI on Oculus and just leave it at that. It’s worth pointing out that I’m bullish on the future of AR/VR, but my qualm with what Facebook has attempted to do with Oculus is that they have tried to buy their way into success in a market that’s clearly in its infancy.
In contrast, Sony has been extremely smart about entry into VR by not dumping billions into R&D while at the same time still releasing the best-selling VR headset at a fraction of the cost their competitors. This not only means they aren’t burning money they don’t have like Facebook (which does have money to burn), but that they grow as the VR industry grows. As/if consumer interest increases in VR, Sony will release more powerful versions with better specs and likely lower prices – and if the market doesn’t go anywhere, becoming the next 3D, Sony can easily wipe its hands clean and move out without a huge debt or writeoff. At the rate Facebook is going, by the time there is any form of mass market for VR, the price tag of Oculus might be well north of $15 or $20 billion.
Even better, with Sony starting their scope small while all the same time leveraging the brand prowess of PlayStation, they have ensured that as the market matures, they will have carved themselves a leading position with an engaged user base that’s ready for the “what’s next” from them.
Multiple “Oculus Ambassador” workers BI spoke with said that, at most, they would sell a few Oculus headsets per week during the holiday season, and that foot traffic to their pop-ups decreased drastically after Christmas.
“There’d be some days where I wouldn’t give a demo at all because people didn’t want to,” said one worker at a Best Buy in Texas who asked to remain anonymous. Another worker from California said that Oculus software bugs would often render his demo headsets unusable.
Fun fact, PlayStation VR is already profitable, albeit in an extremely minute way.
Zuckerberg recently said he plans to spend billions more on developing and marketing virtual reality over the next decade, and that Oculus “won’t be profitable for awhile.”
Yea, no kidding. Do you think Facebook is chasing a fool’s dream with the amount they’re spending on Oculus Rift and that Sony is better handling VR?