Free isn’t Cheap Enough

Cost-cutting can only take you so far.

What if I told you of a new entrant to the VR market that allows you to truly experience anything, anywhere?  What if I told you they provide a full-dive virtual reality experience that is absolutely indistinguishable from the most thrilling lucid dream or the most mundane real-world experience, all in a lightweight visor that costs only $99 USD?

Quite a few people would jump to purchase as soon as they heard, and the rest of humanity would follow as soon as they have reason to believe – as The Matrix told us in 1999, no one can be told what the matrix is. You have to see it for yourself.  

More importantly, though, they would use it.  Oh, would they use it!  Network effects kick in, users buy and subscribe to deep libraries of content to keep themselves occupied, content developers make piles of money, and they use that money to develop better and broader content ad infinitum.  In the end, hardware sales are a meaningless metric for the success of VR.  They matter only as a means to an end, a foundation to enable the one thing that truly matters: Engagement.  Engagement is all that matters.  Engagement is Everything!

This is just as true in the present day.  Hardware sales get a lot of attention and speculation from analysts and consumers alike, but the real name of the game revolves around the number of people logging in and spending money each week, the life force that makes everything actually go.  Recent market experiments with cheap VR hardware have shown that there are millions of people willing to buy said hardware, but very few among them continue to use the hardware or invest in the software ecosystem for very long.  This is true even when people get the hardware for free – the millions of cardboard boxes fulfilling their ultimate destiny on the back shelf of a closet don’t do much for the VR industry.  Why the lack of use?  Quality of experience.  If the free hardware was as good as the visor described in the first paragraph and paired with good content, a mass-market VR revolution would occur practically overnight.

“Gamers are not known to be the most affluent population of people. If something’s even $600, it doesn’t matter how good it is, how great of an experience it is — if they just can’t afford it, then it really might as well not exist.”

“You know, I’m going to be perfectly honest with you. We’re roughly in that [$350] ballpark… but it’s going to cost more than that.”

And what if that visor cost $999 instead of $99?  Price is certainly a relevant factor in the rate of VR adoption, but not a dominant one – as someone who has had to eat my hat multiple times in pursuit of keeping costs low, I feel like I intimately understand what it must have felt like to deal with the response to the E3 2006 Playstation 3 price announcement.  Five hundred and ninety nine US dollars?!  The hypothetical visor provides quite a bit more for your money, though – it may not sell billions of units, but it would certainly sell by the hundreds of millions.  Lower pricing for existing VR technology can help expand the size of the active and engaged userbase, but not to nearly the degree many people would expect.  I want to take this a step further and make a bold claim: No existing or imminent VR hardware is good enough to go truly mainstream, even at a price of $0.00.  You could give a Rift+PC to every single person in the developed world for free, and the vast majority would cease to use it in a matter of weeks or months.  I know this from seeing the results of large scale real-world market testing, not just my own imagination – hardcore gamers and technology enthusiasts are entranced by the VR of today, as am I, but stickiness drops off steeply outside of that core demographic.  Free is still not cheap enough for most people, because cost is not what holds them back actively or passively.  I hope and pray I am wrong, but most people are not like you or me.   If I had to make a concrete bet, I would put a hypothetical ultimate ceiling for VR in the next two years at perhaps 50 million active users, and that could only happen with an unreasonable amount of investment that would be better spent on other parts of the problem.  That is okay!  That is fine!  That is great, even!  That is more than enough for a healthy VR ecosystem, especially given the high spending potential for engaged VR users, but well short of the ultimate potential.

Virtual Reality is reasonable candidate for most important technology of the century.  It is hard to prove with current technology and adoption, of course, but the argument is trivially easy if you assume even moderate technological advancement compounded over decades.  The real debate should be over the timeline for adoption and how many boom/bust cycles VR will see between inception in the 1960s and eventual, inevitable dominance as the final platform (yes, AR is also cool).

We can minimize and perhaps eliminate those cycles with better hardware, broader content, and a deep understanding of how to best interface with a human perceptual system that varies significantly across age, gender, and race.  Every dollar that goes into making those things better now will pay huge dividends down the road, especially when compared with forced marketing to segments of the world that are not yet ready to embrace VR.  This is an opinion shared by most True Believers I know, especially the ones who see themselves personally working on VR across the rest of their lives – they know we have come a long way, and know we have a long way to go.  The number of True Believers continues to grow in the wake of the 2012 re-vitalization, despite dilution by people who see VR as a fashionable stepping-stone to their next adventure.  True Believers are the reason we have the VR of today, and they are the best chance we have for the VR of tomorrow.

I can’t wait to see what they do next.