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These slides use ideas from my class to develop a business model for Oculus Rift’s headset. This headset creates the perception among users that they are in a different reality as they play video games. It has much higher resolution and faster response time than do previous headsets. Although Oculus hopes to develop its own console, these slides recommend that Oculus partner with a console maker such as Sony, Microsoft, or Nintendo in order to reduce development cost and gain access to existing users and game software. Hopefully it can receive a portion of hardware and game software revenues as its headset enables console makers to increase their market share and charge more for game software.
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VIRTUAL REALITY GAMING OCULUS RIFT
BUSINESS MODEL
Chua Ping Shiuan
Priscilla Mariani
William Suryadiputra
Yeo Kiat Hwee
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AGENDA
1. Introduction to Oculus
2. Gaming ecosystem
3. Value proposition
4. Customer selection
5. Value capture
6. Scope of activities
7. Strategic control
8. Future Possibilities
2
INTRODUCTION TO OCULUS
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THE TECHNOLOGY:
VIRTUAL REALITY
Virtual reality
Use of computer modelling and simulation to enable a person
to interact with an artificial three-dimensional visual or
other sensory environment.
The illusion of being in the created environment
(telepresence) is accomplished by motion sensors that pick
up user’s movements... usually in real time.
INTRODUCTION TO OCULUS 4
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CONVENTIONAL GAMING
INTRODUCTION TO OCULUS 5
VIRTUAL REALITY GAMING
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THE PRODUCT: OCULUS RIFT
VR head-mounted display
Fast head tracking
Large Field of View
HD screen and 3D vision
Adjustable focus
Price: 300 USD
INTRODUCTION TO OCULUS 7
GAMING ECOSYSTEM
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GAMING ECOSYSTEM 10
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CURRENT ECOSYSTEM
GAMING ECOSYSTEM 11
Revenue from
Dev. Kit Sales
+ % Revenue
from Game
Sales in
Oculus Share
Dev. Kit
Revenue from
Game Sales in
Oculus Share
Games
Product
Revenue
Oculus Rift
Game Developers
End users
Game Console Manufacturers (Sony, Nintendo,
Microsoft)
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MARKET SITUATION
Current Competitors
Microsoft Xbox
Sony Playstation
Nintendo Wii
Rising competitors
Sony VR Headset
Zeiss Cinemizer OLED
GAMING ECOSYSTEM 12
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FLAWS IN CURRENT DIRECTION ?
● Difficult to compete No suitable control consoles and the market has stiff competition
between three large game console makers (Sony Playstation,
Nintendo Wii, Microsoft Xbox)
● Technology can be easily copied Sony is in the process of developing its own VR kit
● Still limited games can be played using Oculus Will get even harder to attract game developers with the existing
“incomplete” console
GAMING ECOSYSTEM 13
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A BETTER ECOSYSTEM?
GAMING ECOSYSTEM 14
Product
Sale Revenue Revenue
Hardware
licensing
Games
Sale Revenue
Console
Development
Kit
% Game
Sales
Oculus SDK
% Game
Sales
Oculus Rift
End users
Console Makers
Game Developers
VALUE PROPOSITION
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VIRTUAL REALITY
Immersive gaming
Allow new possibilities of gaming
VALUE PROPOSITION 16
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STRATEGY CANVAS
17 VALUE PROPOSITION
Graphics Number of games Intuitiveness Interactivity Immersiveness
PC Gaming
Console Gaming
Motion Gaming
VR Gaming
IMMERSIVE GAMING
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OCULUS RIFT
“The magic that sets the Rift apart is
immersive stereoscopic 3D rendering, a
massive field of view, and ultra low
latency head tracking.”
- Palmer Luckey, Founder of Oculus
VALUE PROPOSITION 19
OCULUS RIFT
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THE OCULUS RIFT
ADVANTAGE
Better gaming experience whereby visual display is
instinctive
Gamers can orientate their perspective base on head motion
Create the impression of an immense environment
within a small physical space
Large field of view
Oculus offers low latency, fast head-tracking
performance
Head movement tracking without motion sickness
Adjustable focus for near- or far-sighted gamers
VALUE PROPOSITION 21
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FOR CONSOLE MAKERS
Attract more gamers because of more immersive gaming
experience
Charge higher price for VR games
Large hype and demand in the market
There is already much hype from developers, media
$2,437,429 pledged of $250,000 goal in Kickstarter shows
demand
Guaranteed reputation
People in the company are experts in their field
Oculus as a leader in the VR game industry
Save time and money from R&D
VALUE PROPOSITION 22
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TECHNICAL
DISADVANTAGES
Lack of compatible games
Not enough content
VALUE PROPOSITION 23
CUSTOMER SELECTION
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TARGET SEGMENTS
Early adopters of novel game technologies
Have the latest games and consoles
Doesn’t mind lack of support
Age group 20-30 years old
Gamers who frequent gaming conventions
Mostly males
People with willingness and ability to spend on game, consoles and
accessories.
Adventurous
Explore new gaming experiences
Loves to explore game worlds
CUSTOMER SELECTION 25
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TARGET SEGMENTS
Gamers who enjoy first-person games
Racing
Shooting
Horror
Sandbox
CUSTOMER SELECTION 26
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CONSOLE MAKERS
CUSTOMER SELECTION 27
Sony Microsoft Nintendo
More exclusive games
Game developer itself (Sony Computer Entertainment)
More support for indie game developers
- Developing its own VR Headset
- Conflict with Sony’s TV business
Better online experience – more players
Complements the Kinect motion gaming
More first-person games (Halo, Gears of War – Xbox exclusive)
- Less exclusive games
Complements the motion-based games and motion controls
Offline multiplayer experience generate more demand of Oculus Rift
More interactive games
- Different customer
segment
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CONSOLE MAKERS
CUSTOMER SELECTION 28
Sony Microsoft Nintendo
More exclusive games
Game developer itself (Sony Computer Entertainment)
More support for indie game developers
- Developing its own VR Headset
- Conflict with Sony’s TV business
Better online experience – more players
Complements the Kinect motion gaming
More first-person games (Halo, Gears of War – Xbox exclusive)
- Less exclusive games
Complements the motion-based games and motion controls
Offline multiplayer experience generate more demand of Oculus Rift
More interactive games
- Different customer
segment
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WHY NOT ON THE PC
PLATFORM
Native PC controllers are not suitable for VR
Less game developers on PC
Less gamers on PC
Difficult to have exclusive contract in PC
market
CUSTOMER SELECTION 29
VALUE CAPTURE
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NEW VALUE CAPTURE
VALUE CAPTURE 31
Product
Sale Revenue Revenue
Hardware
licensing
Games
Sale Revenue
Console
Development
Kit
% Game
Sales
Oculus SDK
% Game
Sales
Oculus Rift
End users
Console Makers
Game Developers
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VALUE CAPTURE
METHODS
Sources of revenue can be through the
Licensing of hardware to other game
console makers
Percentage game sales from game
developers
VALUE CAPTURE 32
SCOPE OF ACTIVITIES
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SCOPE OF ACTIVITIES
Partnership with console makers
Hardware license
Distribution of Oculus SDK to game developers
Provide SDK updates and support
R&D In-house VR technology
Hardware
Software
SCOPE OF ACTIVITIES 34
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PROCESS FLOW
SCOPE OF ACTIVITIES 35
DESIGN PRODUCTION MARKETING SALES DISTRIBUTION
CONCEPTUALISATION DEVELOPMENT TESTING MARKETING DISTRIBUTION
END USERS
(GAMERS)
OCULUS
Oculus SDK
Hardware License
Game Developers
Console Makers
R&D
STRATEGIC CONTROL
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STRATEGIC CONTROL
Exclusive contract with game console
companies
Don’t allow partnership with other VR-related
companies
Continued usage of Oculus brand name
Intellectual Property Rights
Patent
Trademark
STRATEGIC CONTROL 37
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STRATEGIC CONTROL
Leverage on network effect
More game developers on Oculus platform ⇔ More Oculus gamers
Create more community and online games
Continuous in-house R&D
ensure leadership in VR
HR management
Non-disclosure agreements (NDA)
Non-competition contracts
Work with complementary assets
Improving the game experience
STRATEGIC CONTROL 38
COMPLEMENTARY ASSETS
FUTURE POSSIBILITIES
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FUTURE POSSIBILITIES
Locked-in to one console manufacturer
Diversify into other markets
Cinemas: immersive movie experience
Theme parks: interactive cinemas, simulations and digital games
Training camps: military training, olympic training, pilot training, etc.
Schools: immersive learning experience
Property agents and interior designers: immersive design visualization
Many others
Further R&D
Full coverage of human vision span (i.e. peripheral vision)
FUTURE POSSIBILITIES 41
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CONCLUSION
42
Value Proposition
Customer selection
Value Capture
Scope of activities
Strategic Control
INDEX Introduction to Oculus
The Technology
Conventional Gaming
Virtual Reality Gaming <[ ]>
The Product
The Company
Gaming ecosystem
Ocean
Current Situation
Market Situation
Flaws in Current Direction
Better Ecosystem
Value proposition
Virtual Reality
Immersive Gaming <[ ]>
Quote
Latency Demonstration <[ ]>
The Oculus Rift Advantage
For Console Makers
Technical Disadvantages
Customer selection
Target Segments (1)
Target Segments (2)
Console Makers
Why Not PC?
Value capture
New Value Capture
Value Capture Methods
Scope of activities
Activities
Material Flow
Strategic control
Strategic Control (1)
Strategic Control (2)
Complementary Assets
Compl. Assets <[ ]>
Future Possibilities
Conclusion
Console Wars
Revenue Model
Fourth Console
License Hardware Design
Acquisition
Microsoft
Exclusive Games
Backup Plan
Why Gaming
Latest Development
CONSOLE WARS Currently at 8th Generation
Infamously led to death of SEGA as console maker
SEGA tried to compete graphics with Sony PS2
Long-time players Nintendo and Sony
Since 1990s after American Video Game Crash 1983
Microsoft is the only successful late entrant
Tug-of-war to get Game Developers
Aim to strike exclusive deals with developers
Appendix A
REVENUE MODEL
Profitability Stable Continuous
Revenue
For Large Game Companies
For Independent Developers
One-off
Subscription
% Game Sales
Appendix B
FOURTH CONSOLE
Sony developing their VR headset
Easily copied technology
Competitive console market
Competing for games
Timing is utmost importance
Difficult to create network effect
Game developers need to learn to develop for a new
console
Consumer switching cost
No suitable control system
Appendix C
HARDWARE DESIGN
LICENSE
Retain operating software
Prevent console maker from imitating the
full product
Appendix D
ACQUISITION
NO Free to penetrate other markets
Can still push for own console
Other markets potentially more profitable
High capital markets – Medical and Military
Large user base – Cinema and Theme Parks
Appendix E
WHY MICROSOFT NEEDS
OCULUS
Competition with Sony
Graphics battle goes to the next level on VR
Losing the exclusive games battle to Sony
Oculus Rift will attract game developers to build on VR
Microsoft needs to dive into VR earlier than Sony to win
Realise the importance of first-mover in gaming industry
Appendix F
PLAYSTATION 4 Assault Android Cactus - Witch Beam Octodad: Dadliest Catch - Young Horses, Inc
Basement Crawl - Bloober Team Onigiri - Cyberstep (free-to-play)
Blast 'Em Bunnies - Nnooo Outlast - Red Barrels Studio Cosmic Star Heroine - Zeboyd Games Pavillion - Visiontrick Media
CounterSpy - Dynamighty Phantom Breaker: Battle Grounds Overdrive - 5pb Daylight - Zombie Studios PlanetSide 2 - Sony Online Entertainment
Deep Down - Capcom Pool Nation Extreme/FX - Cherry Pop Games Divekick - Iron Galaxy Primal Carnage: Genesis - Lukewarm Media
Doki-Doki Universe - HumaNature Studios Project Phoenix - Creative Intelligence Arts
Don't Starve - Klei Entertainment Project: Heart and Soul - Reach Game Studios Dragon's Prophet - Sony Online Entertainment (free-to-play) Putty Squad - System 3
Dream Club: Host Girls on Stage - Tamsoft QuickDraw - Greenfly Studios DriveClub - Evolution Studios Ray's the Dead - Ragtag Studios
DUST 514 - CCP (free-to-play) Rime - Tequila Works Dynasty Warriors 8 w/ Xtreme Legends Bundle - Tecmo Koei Road Not Taken - Spry Fox
Earth Defense Force Rocketbirds 2: Evolution - Ratloop Escape Plan - Fun Bits Interactive Rogue Legacy - Cellar Door Games
Everquest Next - Sony Online Entertainment (free-to-play) Samurai Gunn - Maxistentialism
Everybody's Gone to the Rapture - The Chinese Room / Sony Santa Monica
Secret Ponchos - Switchblade Monkeys
Fez - Polytron Corporation Shadow of the Beast - Heavy Spectrum
Final Fantasy XIV: A Realm Reborn - Square Enix Sherlock Holmes: Crimes and Punishments - Frogwares Final Horizon - Eiconic Games SOMA - Frictional Games
flOw - Thatgamecompany Sportsfriends - Die Gute Fabrik Galak-Z: The Dimensional 17-BIT Starbound - Chucklefish
GlowTag - Greenfly Studios Super Exploding Zoo - Honeyslug Guns of Icarus Online - Muse Games Switch Galaxy Ultra - Atomicom H-Hour: World's Elite - SOF Studios The Binding of Isaac: Rebirth - Nicalis
Helldivers - Arrowhead Studios The Idolm@ster - Namco Bandai Games
Hohokum - Honeyslug The Order: 1886 - Ready at Dawn / Sony Santa Monica Hotline Miami 2: Wrong Number - Dennaton Games The Playroom - Sony
Hyper Light Drifter - Heart Machine The Witness - Jonathan Blow Joysound Drive 2 - Xing Entertainment Tiny Brains - Spearhead Games
Lily Bergamo - Grasshopper Manufacture Tottemo E Mahjong Plus - Arc System Works Mercenary Kings - Tribute Games Transistor - Supergiant Games
MLB 14: The Show - Sony San Diego Velocity 2X - FuturLab
Mobile Suit Gundam - Namco Bandai Games Volume - Mike Bithell Games N++ - Metanet Software War Thunder - Gaijin Entertainment (free-to-play)
Natural Doctrine - Kadokawa Games Wasteland Kings - Vlambeer Nikoli no Puzzle 4: Sudoku - Hamster Yakuza Ishin - Sega
Nuclear Throne - Vlambeer
XBOX One Below - Capybara Games
Cobalt - Mojang D4: Dark Dreams Don't Die - Access Games
Fable Legends - Lionhead Studios Fantasia: Music Evolved Halo 5 - 343 Industries
Halo: Spartan Assault - Vanguard Entertainment / 343 Industries
Kinect Sports Rivals - Rare LocoCycle
Max: The Curse of Brotherhood Peggle 2
Plants vs. Zombies: Garden Warfare Project Spark - Team Dakota
Quantum Break - Remedy Entertainment Sunset Overdrive - Insomniac Games
Titanfall - Respawn Entertainment Xbox Fitness - Microsoft Studios
Zoo Tycoon EXCLUSI
VE
GAMES
XBOX
ONE
vs PS4
Source: http://www.neowin.net/news/list-of-xbox-one-and-playstation-4-exclusive-games Appendix G
BACKUP PLAN
Develop own game console
Approach as many game developers as possible
A chance to create a new gaming experience
Preferably first-person game developers
Strike partnership with vital accessories
Razer Hydra – motion controller perfect for shooter games
Virtuix Omni Treadmill
Intensive marketing effort
Appendix H
WHY GAMING
Virtuality is something gamers have been wanting
More adapters of new tech
E.g. motion gaming caught on within less than a year
(2011)
Large pool of tech enthusiasts
Large portion of adventurous individuals
But, there is a danger of price buyers
Appendix H
LATEST DEVELOPMENT Nov 11, 2013
Source: http://www.techradar.com/news/gaming/oc
ulus-rift-creator-xbox-one-and-ps4-are-far-too-limited-for-what-we-re-planning-
1198420
Appendix I
LATEST DEVELOPMENT Nov 11, 2013
Source: http://www.techradar.com/news/gaming/oc
ulus-rift-creator-xbox-one-and-ps4-are-far-too-limited-for-what-we-re-planning-
1198420
"Consoles are too limited for what we want to do," he says. "We're
trying to make the best virtual reality device in the world and we want to
continue to innovate and upgrade every year - continue making
progress internally - and whenever we make big jumps we want to push
that to the public.”
- Palmer Luckey, founder of Oculus
Appendix I
WHY OCULUS IS PUSHING
Dislikes the long life cycle of consoles
Prevent them from continuously improving
Graphical performance bound by graphics processors
(hardware)
Eager to disrupt the video game business
Shorter life cycle of consoles
Full-fledged VR gaming
On the lookout for Valve
Steam Box and SteamOS
Appendix I
