It's been a rocky start for virtual reality manufacturers in general. But Oculus — the company that made people believe in VR again — may be having the hardest time of all. It's been a year of sluggish sales, PR nightmares and a one big time defeat in court. Now, Best Buy is pulling hundreds of demo stations from its sales floors in the US.
Back in 2014, Facebook convinced the world that this VR thing was for real when it placed a massive bet by snatching up Oculus for what it said at the time was $US2 billion ($2.6 billion). Established tech giants like Sony and HTC quickly jumped in to cut off Oculus before it could corner the market on the next big boom.
At the time, its founder, Palmer Luckey, was a 22-year-old kid that was more obsessed with bringing the "experience" of VR to life than selling units. Luckey hit the jackpot when he was able to bring in John Carmack to legitimise his business. As for professionalising the company with big money backing, Luckey told Smithsonian Magazine, "It wasn't like I was handing off my baby to someone. It's more like I was handing off changing the diapers to someone, and I still get the baby."
Yesterday's disclosure that Best Buy will remove approximately 200 of its 500 sales floor demo stations isn't exactly apocalyptic for Oculus but the details aren't good. Business Insider reports that it obtained an internal memo that attributes the nixing of Rift demos to "store performance". Specifically, no one's trying to use the thing. According to the report:
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.
We reached out to Facebook for comment and an Oculus spokesperson informed us that this was part of some "seasonal changes" and that the company is "prioritising demos at hundreds of Best Buy locations in larger markets." It's odd that demo stations for successful devices like the PlayStation 4 never seem to go out of season.
Facebook CEO Mark Zuckerberg showed off the company's experiments with social virtual reality experiences that allow you to chat with your friends using avatars in headsets like Oculus's Rift. It was really weird. The demo app allows you to chat with avatars of your friends, travel to places like Mars or Facebook's Headquarters, and take virtual reality selfies to share to Facebook.
Aside from the signal that Oculus sales aren't great, the loss of demo opportunities is a major blow because the company spokesperson even acknowledges live demos are "the best way to learn about VR". That's not good. I can tell you from personal experience that standing around in public, strapping a unit to your face and looking like a fool is not pleasant.
What exactly are those sales numbers anyway? We don't really know. According to a Superdata research report from November, Oculus was expected to finish out the year with just 355,088 units sold. Compare that to PlayStation VR, which was estimated to sell 2,602,307 units in 2016, and it seems safe to say the Rift is lagging behind its competition. And if you want to use Mark Zuckerberg's metrics, he said Oculus will need to sell 50-100 million units to be considered an "important platform". That was two years ago and he hedged at the time that those kinds of figures will take "a bunch of years".
Until last month, we didn't even know the real price that Facebook had paid for Oculus. Zuckerberg revealed in a Texas courtroom that initial $US2 billion ($2.6 billion) number was actually closer to $US3 billion ($3.9 billion). The CEO was on the stand battling an intellectual property lawsuit brought by John Carmack's former employer Zenimax. The court ruled in Zenimax's favour and ordered a $US500 million ($655 million) judgement.
Facebook CEO Mark Zuckerberg has said he wants to escape the Silicon Valley bubble and travel to different parts of America as part of his 2017 New Year's resolution. It looks like the first stop on his journey will be a Northern District of Texas Federal courtroom.
With no killer app, a steep entry fee for early adopters, nothing to do but play video games, the ongoing problem of making people sick and now fewer opportunities to show itself off, it's starting to look like Facebook's big bet won't be paying off. At least not for "a bunch of years".