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Innovation

Is Oculus Rift's $600 Price Too High For Virtual Reality To Succeed?

Peijun Guo wears the Oculus Rift VR headset at the Oculus booth at CES International, Wednesday, Jan. 6, 2016, in Las Vegas John Locher/AP hide caption

toggle caption John Locher/AP

Peijun Guo wears the Oculus Rift VR headset at the Oculus booth at CES International, Wednesday, Jan. 6, 2016, in Las Vegas

John Locher/AP

When I met up with Palmer Luckey this week at CES, the consumer electronics show in Las Vegas, the founder of virtual reality company Oculus VR had some explaining to do. Oculus had just announced the price of its highly anticipated consumer model of the virtual reality headset Rift: $599.

It sparked outrage from many fans who thought Luckey had promised them virtual reality for the masses, and at that price, the masses would have to skip car payments to afford it. Plus, the Rift requires a high-end computer that would run around $900, making the cost closer to $1,500.

About three years ago, Luckey's introduction of the Rift he had created sparked a generation of people who had dreamed of immersive 3-D reality to believe it had finally arrived. Here was a prototype for an affordable version of a product, whose prohibitive cost had confined it to government and university researchers.

"It is expensive," admitted Luckey, 23. "The Rift was designed to prioritize quality over cost. We wanted to make the Rift something that everybody would want before we make it something that everyone can afford."

And according to Luckey, Oculus (which is owned by Facebook) is not making money on Rift hardware. In a tweet, he even called the Rift "obscenely cheap for what it is."

Luckey argues, people who want a cheaper VR experience can buy a Samsung Gear for $99. Though it requires a Samsung phone to work, it uses Oculus software. To Luckey, the Gear gives a sort of starter VR experience that he hopes will get people excited about the new medium.

But will the Rift price tag doom the headset and perhaps even the much-hyped but yet-to-materialize virtual reality revolution? If virtual reality is going to take off, the audience will have to be a lot bigger than the people who can afford to drop $1500 on an entertainment device.

In defense of Luckey and Oculus, this is far from the first time a new class of computing technology started out with a high price tag. The original iPhone was $599 with a two-year contract. The first Kindle was $400. Over time, the prices decline. The latest iPhone still costs upward of $600, but you can get a brand-new older model for a lot less. A new Kindle can now be had for as little as $79.99.

Still, it is possible to undermine a new product by charging too much. The 3DO Interactive Multiplayer, Panasonic's high-end game console, came out in 1993 with a price tag of $699. Time magazine named it "1993 Product Of The Year." Never heard of it? There's a reason: its high price doomed it to failure.

For his part, Luckey prefers to compare the Rift to PalmPilot, the personal digital assistant of the late 1990s.

"It was a very expensive device for most people," he says. "And most people couldn't justify the cost of that device in their everyday life. But, everyone knew about it."

In its time, the PalmPilot was a success. And as Luckey sees it, the Palm marked the beginning of the mobile computing revolution that led to the iPhone and other smartphones in the same way that the Rift is the beginning of another revolution in computer communications.

"I don't think Oculus will fail. But we have to have proper expectations," says J.P. Gownder, an analyst with Forrester. He doesn't think that 2016 is the year that virtual reality will go mainstream, but perhaps the year that modern VR "was born."

The Rift is also not the only VR device scheduled to hit the market. Later this year, HTC will begin selling its Vive headset. It hasn't announced a price, but some analysts think it may cost more than the Rift. Sony PlayStation VR is also hitting stores this year.

Gownder believes Sony's headset is likely to do best because it has the advantage of millions of PlayStation owners who are primed to be interested in games in virtual reality.

Of course, no one knows for sure if consumers will take to virtual reality. Television makers spent a fortune developing and promoting 3-D TVs and those never took off.

But Luckey rightly points out that virtual reality — unlike the 3-D TV experiment — came from the bottom up. The Oculus Rift was built with money from a hugely successful Kickstarter campaign. (The company is now promising free Rifts to its Kickstarter backers.)

"There were a ton of people willing to back a company with no track record, no history and one game because they really wanted to play virtual reality," says Luckey. And there are also thousands of developers creating game, travel, music and educational experiences for VR.

Though Luckey might want to think about comparing the Rift to the PalmPilot. Millions of people now own its descendants from the iPhone to the Galaxy Note. But Palm, the maker, is out of business.

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