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New powerful consoles from
Microsoft
and
Sony
have become once-a-decade type events for investors. This fall’s new designs have garnered a lot of attention – including in this magazine – and they are sold across the country.
But a new console launch, the Quest 2 from
Facebookof
The virtual reality unit (ticker: FB) has been overlooked, although it has received more critical acclaim than Sony’s PlayStation 5 (ticker: SNE) or Microsoft’s new Xbox (MSFT).
It’s no secret why. We’ve been talking about virtual reality for decades, but it’s hardly going anywhere. Despite all our technological advances, virtual reality has not been able to substantially connect the physical and digital realms.
It’s not for lack of trying. In 2014, Facebook paid $ 2 billion for Oculus VR, the maker of a promising headset that has rekindled hopes for a virtual future.
Facebook’s VR efforts seem insignificant compared to its $ 82 billion in ad sales forecast this year, and it’s easy to dismiss Oculus as an interesting but unimportant side project. This misses the point.
Facebook is not a diverse company, and its hardware efforts are one of the ways the company is looking to innovate and break out of the advertising industry it is so good at.
Facebook CFO Dave Wehner said sales of Quest and Quest 2 have contributed significantly to the revenue compartment they are allocated to. This is the aptly named “Other” segment, and it’s not a particularly high bar. “Other” represented exactly 1.5% of Facebook’s revenue last year.
Outside of the spotlight, however, Facebook’s virtual reality efforts are making progress. Facebook’s latest Quest 2 headset, which sells for $ 299, is a generational leap from competing VR systems which are more expensive and lack elegance and simplicity.
Most importantly, the Quest 2 is a standalone unit that doesn’t need to be hooked up to an expensive gaming PC like the original Oculus products.
The Quest 2 gives gamers a full range of motion without the need to mount sensors in the room. The latest model can also track hand movements without the need for portable controllers. Virtual reality still has a way to go, but the Quest 2 is the most accessible device yet.
As always, however, the hardware doesn’t go any further and VR content is still in the early stages of development. Chris Pruett, who heads the content ecosystem for Oculus, says a common language is forming around the platform. For now, says Pruett, VR game developers are still finding the formula for success.
“Three or four years ago, we wouldn’t have told you that our prediction for the popular virtual reality software was going to be a musical block-cutting game,” he told me last week, Referring to Beat Saber, a VR title for Oculus that looks like a more immersive version of Guitar Hero, which took the video game world by storm 15 years ago.
Defeat Saber It’s funny but it didn’t grab my attention for more than a few minutes. I asked Pruett what kind of game could possibly help virtual reality break through to the masses.
“I guess it would be something very immersive, which involves active movement of your body, and I would add a third element,” he says. “It will probably be something that you play with other people or that you can share with other people.”
His final point aligns with Facebook’s “building a community” mission. The good news for Oculus is that Facebook already has billions of potential users. For VR developers, it’s a wide open market.
Pruett says Facebook is working to help these developers make money and defines Oculus’ success on that metric – for now. “I need this to be an ecosystem capable of producing a platform for stable businesses,” he says. “From this point of view, virtual reality is still small, but we are developing it very quickly.”
As consumers and critics debate their preference for the PlayStation 5 or Xbox Series X, investors have no choice. We argued that the new consoles would be a bullish event for video game publishers, who are creating titles for both platforms.
The argument takes time to play out. Actions of
Take-Two interactive software
(TTWO),
Activision Blizzard
(ATVI), Electronic Arts (EA) and
Ubisoft
(UBI.France) have all followed the market since our story in early October.
Now the good news is starting to come. Gamers are motivated by the new consoles and being stuck at home.
Last week, Ubisoft said Assassin’s Creed Valhalla The game sold more units in its first week than any previous entry in the Assassin Creed franchise. “ACV keeps its promise to get the most out of the new hardware, ”the company said in a press release.
Paris-listed Ubisoft shares rose 2.3% on the news. This reaction could be a glimpse of things to come for other video game publishers as they announce their own game sales and their next round of quarterly results.
“Obviously, this is a testament to the quality of the game and the momentum the franchise has over recent iterations,” KeyBanc Capital Markets analyst Tyler Parker wrote last week. “But we also see this as a positive reading of the underlying strength of the premium games market over the holidays.”
December will be a tough month for much of the country, but players and investors will at least have a way out.
Write to Max A. Cherney at [email protected]
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