Investors have moved on from virtual reality to other cool categories like crypto and blockchain and esports. But some of the established companies still see long-term potential in the VR market, particularly as it merges with the emerging markets of augmented reality and mixed reality.
Skydance Interactive and Samsung are among the companies that are believers. There isn’t much of a consumer market now, but they’re encouraged at the growth of enterprise applications and they look forward to new versions of VR hardware coming in the near future.
At the recent Greenlight Insights Virtual Reality Strategies conference in San Francisco, I talked with Amy Allison, head of community at Skydance Interactive, maker of the Archangel virtual reality mech game, and Farshid “Farsh” Fallah, director of developer relations for XR and Gaming at Samsung Electronics America.
We took a deep dive into strategies for monetization and survival in a market where the growth isn’t quite where everyone wants it to be. It was interesting to see the views of monetization from a developer and a platform owner at the same time.
Here’s an edited transcript of our session.
Farsh Fallah: If you look at games, you need to get a certain amount of products out to have that critical mass where the platform is viable. That hasn’t happened in VR yet. It’s going to happen. The technology is too promising. Companies like ourselves have been losing money for years on it. We’ll continue to lose money, and we don’t mind. We’ll keep investing. We know that five years from now, the phone won’t be the same thing that’s in your pocket right now. If we want to stay at number one for consumers, we’re going to have to evolve.
The technology we have right now for VR and AR is way too promising to let go. Soon VR and AR will merge together, too, which will make it even better. At some point they got separated because of hardware realities. Those hardware realities are going away.
GamesBeat: This will happen years from now, though, right?
Fallah: We don’t think it’s that many years away. To be honest, my personal feeling, probably the second half of 2020 you’ll see the critical mass, where the number cross the point to make things viable. You have the diversity and the number of people you need to make the content business work properly. Right now VR is demographically very limited. It’s very white, very male, 25-49, very coastal. That affects the content that comes out and the business models you can use.
Once we get more diversity, more of the countries in the world involved – India, China, South America other places – we’ll see a different business model and different content. More mature content, more widespread.
Amy Allison: From the developer side, the content side, we have to look at our business models, too, about really extending the marketing tails for our titles. You have a new wave of VR users almost every day. It’s not just people who are used to having new games come out because they’ve had a console for three years. Everyone’s a new consumer as soon as they buy the headset. We’re having to look at our marketing tails, keep them longer, incorporate things like tournaments and other competitions.
We tried something a little different. Our original game, Archangel, was a single-player, on-rails experience. A year later we released a multiplayer aspect to it, two on two. It was a $20 price point at first, and eventually we got to a point where we were proud of the game, we knew it was strong, but we just didn’t have enough players, so we opened it up to be a free-to-play game. We’re looking to see how those learnings will pan out. It’s working a bit, but with our games it’s hard to tell. It’s a steep learning curve. It’s a very intense game, aimed at that 18-24 male shoot-em-up kind of audience.
We’re setting out examples of scenarios to test, but we haven’t seen the data come back yet to be able to say that this was the right move, or this is the way we should have gone. We know that it’s a loss leader situation right now. We want to establish ourselves as leaders in the space. We want to provide people with entertainment that they can’t get somewhere else. Five years from now, we hope to still be a part of the game. We limit our development cycles to one year, one and a half years, because beyond that point there’s no way to ever recoup, or even keep the costs manageable.
GamesBeat: Switching business models like that seems to have been very common in the fledgling VR industry.
Fallah: It’s so new that nobody really knows what works well. Because our demographic is limited, what works for this demographic may not work once we expand outward. So yes, we see a lot of switching going on. On the platform side we try to make available any business model, most of the business models that people are thinking about. We like to see new business models and make our platforms available for that type of thing.
One thing we’ve seen coming up lately, and we’re bettering it as we speak right now – we’ll probably launch it by the end of this year – is trying to get advertisers to pay for VR games. The idea is to have some type of playable ad where, if the consumer agrees to watch it – they’re not forced to – then you get a certain amount of money for each ad to put toward the purchase of the game, and that goes to the devs. We were hoping the market would do this already, but it hasn’t happened yet. I think Samsung got tired of waiting. We’ve started coding it ourselves and we’ll probably just put it out there.
Another thing we’re hoping to see soon is the platform sides working together. I’ve proposed this to our competitors, to open our servers up and connect all the players together. It didn’t go over too well. I’m hoping in a few years we can talk again. Cross play is the way of the future. You have to allow people to play with each other. We’re still friendly enough where we can talk about it, so hopefully soon.
GamesBeat: It seems like the earliest business model for everyone was to go to the platform companies that wanted good content and ask them to fund it. This has lasted quite a long time. If you look at Facebook, they talked about putting $250 million into content, and then $250 million more promised. From a developer point of view, that’s interesting, but I guess you can’t count on it forever.
Fallah: We don’t operate our own store, so we count on our partners to put up content funding. We fund the hardware. But we’re hoping that will come to an end soon. We want devs to be able to have their own ecosystem, make their own money, and have projects without any kind of ceiling. It’s taking longer than anyone wanted, but this is the same way gaming got started when I was a kid. When Nintendo came out, at first they developed most of the games for their own console. So did most of the big consoles. Even phone developers – at Apple we used to do that any time we had new products coming out. You have to jumpstart things.
Eventually you want the platform guys to pull back and let the devs take over. We’re waiting for that critical mass to happen.
GamesBeat: Looking at it from the developer point of view, there are some interesting choices out there. Oculus has been aggressive with its money. Samsung hasn’t. Vive has an accelerator program. What kind of options for platform money does that present?
Allison: It’s not necessarily just development money. It’s the support you get after that. Oculus is really trying to work with you if you’re going to go and do demos, because that’s a partnership position, really going around and figuring out how to do our best. They’ll work with you to make sure you have the hardware on hand. It goes beyond just development dollars. We don’t get that kind of support from other partners as much. It really does make you start establishing priorities as far as who you focus on, because they’re so kind with their marketing support as well as their development dollars. The store pages, whether it’s Steam or Oculus or Viveport, those are also really a factor in how much money you can bring back for your title — whether they’re helping you bundle stuff or not, and so on.