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Palmer Luckey Says Oculus May Lose Money on Virtual Reality, and That’s Ok

by Will Mason • March 24th, 2016

With hundreds of millions of dollars invested in the industry over the last couple years, the virtual reality market appears poised to take off but the founder of one of the companies leading the charge doesn’t see profits in the immediate future.

On Monday, an unannounced number of people will receive their Oculus Rift preorders signaling the dawn of consumer virtual reality’s first generation. Yet, the question still remains: just how many people will be up early enough to see the virtual sun rise?

The answer? Likely not enough for Oculus to turn a profit.

Speaking with UploadVR, Oculus Founder Palmer Luckey said that he doesn’t “expect to recoup all of our costs off [Oculus’] business model right now because right now it is a pretty limited audience.”

Business, however, is “not [Oculus’] number one priority.”

When Facebook purchased Oculus in 2014, it gave the company a lot of flexibility. The resources Facebook provided Oculus, he says, allow them “to focus on the right thing for the long term rather than the short… we don’t have to focus on trying to make back all of our costs right now.”

But in the near term, the focus remains on getting people into VR in the first place. With a high initial price tag (especially for those without a powerful enough PC) and a need to be seen to be believed, VR faces some tough battles ahead that have analysts conservatively adjusting their projections.

Oculus believes, however, that by doubling down on content it will help to spark the growth of the industry. “The reason we’re making VR games,” Luckey states, “is because we want virtual reality to take off.”

By investing in content, Oculus hopes to seed the market with things that people will actually want to do with their hardware, which will lead to them using it more. “People using virtual reality,” is more important to Luckey “than near term profits.”

Chronos is one of the many titles that Oculus Studios helped fund.

Right now the market cannot support a big AAA level title, “you’re not going to be able to invest 10s of millions of dollars into a VR game and get a reliable return,” he says – the risk is simply too high and user base too small.

Oculus is being careful with their content bets, trying to push both the chicken and the egg of virtual reality, creating content so that people will buy headsets and use VR and, in tune with Carmack’s sentiments, share that experience with others. Rooted in Kickstarter, Oculus’ path to mainstream success will ultimately pass through the grassroots.

According to a recent research report from Touchstone Research – 81% of people who try VR will end up telling their friends, and 79% will seek to try it out again. That gives the medium a rather ludicrously high attachment rate, boding well for its future beyond the initial generation – especially if the content is good enough to keep early adopters engaged.

Ultimately for Luckey, “the business is a means to accomplish [his] end,” which is to create “perfect virtual reality.”

That ‘perfect virtual reality’ is something that he views as slightly “aspirational.” Perfect virtual reality, he says is “technology that allows us to simulate any real world experience and a whole set of impossible experiences in a way that feels as real as the real world in every possible way.” That level of experiences won’t likely be possible in our lifetime but it is the goal that Luckey and Oculus are striving for – profits be damned.