Oculus Continues To Cause Doubt About VR

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Oculus Continues To Cause Doubt About VR
March 6, 2017

Summary

 

  • Oculus slashed pricing for its gear and it may not be a good sign.
  • With the virtual reality market estimated to be $30B by 2020 the last thing I’d expect a company to do is slash prices when the pie is still growing.
  • This could just be the normal product cycle that almost every technology product experiences where the price is kept high at the onset for the early adopters.

 

When Facebook (NASDAQ:FB) made the purchase of Oculus a couple years back it certainly seemed like virtual reality was going to be the next big thing in technology. Much like 3D tv virtual reality hasn't really gained much traction but that's okay when it comes to Facebook's consolidated financial statements because Oculus is still a dark horse. Facebook is still "just an ad company" and will continue to be while it finds a way to monetize virtual reality.

 

But when Oculus slashes pricing for its gear it may not be a good sign. There are multiple reasons why a company would slash their prices, but typically you want the highest price you can fetch for your product. Apple (NASDAQ:AAPL) has been magnificent at keeping their iPhone prices high because it is a product that everyone wants (I can only recall one price cut when the 5C was introduced). With the virtual reality market estimated to be $30B by 2020 the last thing I'd expect a company to do is slash prices when the pie is still growing.

 

But this action was made primarily to increase the user base, which isn't a bad idea right now. As the technology has now been around for a couple of years it certainly has become cheaper to produce and slashing the prices makes it more affordable to the consumer. The Rift was originally selling at $599 while the Touch motion controllers were being sold at $199 and Oculus has slashed them by $100 each.

 

One school of thought is that the price is intended to bring in more customers to make up for the $500M lost in the lawsuit Facebook/Oculus lost to Zenimax just a little bit ago. Though Facebook is going to appeal the decision the $500M judgment will be divided into a $200M parcel which executives will pay and a $300M parcel which will come out of shareholders' pockets. By reducing the price of the headset and handsets more customers will adopt the technology and the lawsuit is paid for.

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