Facebook, Occulus, and the War for Virtual Reality

     Jim Sterling is the creator of the Jimquisition, a popular game consumer advocacy video series. He acts as a critic for the game industry, talking about complex issues facing the industry while taking on his signature persona. The Jimquisition puts out a new video weekly and is widely regarded as a significantly influential voice for consumer advocacy.

     Several weeks ago, he did a video in which he discussed the stunning acquisition of Occulus by Facebook for $2 billion. The reaction from many gamers was sharply negative. Many users mistrust Facebook and were upset that Occulus, which got its start from a crowd-funded Kickstarter campaign, would sell out and in so doing turn its back on the gamer grassroots that supported it in the first place. Jim, however, takes a more considered look at the issue and made some excellent points. I've embedded the video below:

     Overall, Jim isn't upset at the buyout and makes the point that Facebook has a much better track record for not destroying or mistreating the companies that it buys than the largest players in the gaming industry does. If Occulus had to be bought, Jim argues, then Facebook is far from the worst buyer to be found.

     While I agree with Jim's point about Facebook, I don't think he goes far enough. The fact of the matter is, Occulus did have to be bought at some point. Occulus raised ~$2.5 million on their initial kickstarter, $16 million from Series A, and $75 million in venture capital. While this is certainly an impressive figure, developing new hardware is extremely expensive to begin with, and Occulus has also been running an impressive outreach and marketing campaign to build up interest in the technology. Continuing the process is going to be even more expensive. Occulus quite simply was going to need another cash infusion at some point.

     The timing is also an important factor, as the week before the acquisition Sony unveiled its own Virtual Reality headset, the Morpheus. Sony represents a large, well-funded competitor entering what is essentially a speculative market. For all the hype Occulus has managed to generate, nobody really knows for certain how successful the headset is going to be or how many users will decide to buy. Its even less certain whether the market will have room for 2 competitors.

     Faced with that reality, the longer Occulus waited the less of a good bet they would look like. If Facebook is sincere about allowing Occulus to continue to manage itself, then this deal is purely a gain for Occulus - they gain the financial backing necessary to compete with Sony and make Virtual Reality a reality.