With the news that Oculus is discounting Rift and Touch kits by $200 combined, the rift is now the cheapest high end PC VR hardware solution. Stephanie Llamas, Vice President of Research and Product Strategy at SuperData Research, and Mike Bloxham, Senior Vice President of TV and Video at Magid Associates work out what it means for Oculus and its standing among the industry.
Oculus's public image and sales are undoubtedly hurting. On the dev side, they’re going to have difficulty getting studios onboard - particularly with exclusives - since there is now a perceived risk in aligning with them. They will need to fund as much of the development on the platform as possible to attract the best content; more so than before.
They are trailing their main competitor, Vive, almost two to one in terms of sales, and almost four to one with PS VR. This has to do with the incremental releases of hardware and technology for the device rather than a full and robust experience upfront. And they had much greater supply constraints than any other manufacturer, so they’re still hurting from that. This is a reason for their decision to reduce the price of their hardware but, in the end, this is not good for them.
The price drop implies something is going wrong.Stephanie Llamas
The price drop implies something is going wrong. And the people who can purchase a high-end VR device aren't going to be swayed by a hundred dollars, particularly because the addressable audience doesn't change with a price reduction. Only about 20M consumers have a VR-compatible PC, and those PCs are expensive. So it is more beneficial for a consumer to invest in the highest-quality experience possible with the best reputation and access to content. That's something Vive and PlayStation already have on their side so Oculus now is just running to catch up.
It's neither surprising nor alarming to see Oculus reducing its price at this early stage in the game. Much like other emerging technologies, the VR market is following a well-worn path as it finds its way to a mass market. We've seen prices of other new technologies come down, especially at the upper end of the price range, as markets have developed and VR is no different. It's such a common practice that while enthusiasts buy early, many consumers who are keen to buy actually hold off waiting for such a price drop.
It's such a common practice that many consumers hold off for such a price drop.Mike Bloxham
We also shouldn't lose sight of the fact that it isn't just Oculus that is cutting its price while investing more in content. Google has recently done the same on a smaller scale with the Daydream at the other end of the price spectrum. The bottom line is that this is all part of a push to get devices into homes. Every market that emerges is different and the likes of Google, Oculus - which of course is owned by Facebook - Sony, Samsung and others are in VR for the long haul.
And working out pricing strategies is something that can only be done to a certain extent pre-launch. It's not until a product gets into the market that things like price and content bundling settle down.
The bigger challenge can be managing the sometimes over-exuberant expectations of Wall Street.