VR hype soars as Facebook buys Oculus | 10 Years Ago This Month

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The games industry moves pretty fast, and there's a tendency for all involved to look constantly to what's next without so much worrying about what came before. That said, even an industry so entrenched in the now can learn from its past. So to refresh our collective memory and perhaps offer some perspective on our field's history, GamesIndustry.biz runs this monthly feature highlighting happenings in gaming from exactly a decade ago.

The modern era of virtual reality as we know it started around June of 2012, when John Carmack brought the Oculus Rift to the Electronic Entertainment Expo and showed it off to attendees with Doom 3 BFG Edition.

It ramped up quickly that August with the launch of the Oculus Rift Kickstarter campaign, which featured testimonials from industry legends like Carmack, Valve's Gabe Newell and Michael Abrash, Epic's Cliff Bleszinski, Unity's David Helgason, and David Helgason's popped collar. That campaign started with a $250,000 goal, and ended its run with more than $2.4 million from backers.

VR continued to build hype in the intervening years, but mostly in the background. There was still no commercial product on shelves by March of 2014, and between the exploding (in a good way) mobile market, the exploding (in a bad way) dedicated handheld and Facebook social gaming markets, and the longest-awaited new generation of consoles commanding many of the headlines, there were plenty of other happenings in the market that seemed to take precedence.

In March of 2014, it transitioned from the background of the industry to the foreground as it reached a critical mass of events that nudged it from a far-flung future tech to something that could be just around the corner.

VR dominated the discourse around the Game Developers Conference that year, and EA CEO Andrew Wilson was marshalling the publisher's resources to assure investors the company would keep up with this hot trend (or even the one after it).

"When I look at any of the VR devices, I look at that not in terms of 'What is that device going to deliver?' but a desire for gamers to have a different type of modality - the 'Get In' type of modality, right?" Wilson said in a panel at that month's SXSW Gaming conference. "That might be delivered to you through a headset, or through some hologram that evolves out of your living room floor."

Also at GDC, Sony announced it was getting into the market with the PSVR headset, unveiling its Project Morpheus VR headset at the Game Developers Conference and giving demos on the show floor. It wouldn't launch for two more years, but Sony was the biggest name to yet make a full-throated commitment to VR.

That designation didn't last long, as just a week later Facebook (now Meta) announced that it was acquiring Oculus for $2 billion.

The news was shocking, not least of all because Oculus' Palmer Luckey had told us in an interview published earlier that month that he had no interest in selling the company.

"We don't want to be assimilated into someone who's going to have us working on their own... vision of VRPalmer Luckey, three weeks before Oculus sold to Facebook

"We want to do things our way," Luckey said. "There are certainly people who are interested... but we have a vision for our consumer product and we know that we're going to be able to pull it off. We don't want to be assimilated into someone who's going to have us working on their own product or their own vision of VR - we want to be able to deliver our own vision of what VR is."

He acknowledged that it would be possible some big company would just name a price so high he would take the money, "But I don't think there's a reasonable number that would make me say, 'You know I was going to change the world with VR and try to change humanity forever but here's a number.' It really is about making sure that we get to deliver our vision of consumer virtual reality."

We weren't the only ones shocked by the news. Carmack, who had since left Id Software to take a full-time role as CTO of Oculus, said he was not involved in negotiations and unaware the deal was happening.

One reason the deal was so surprising is that it was practically an impulse purchase by corporate standards. Oculus CEO Brendan Iribe said the company took just three days to negotiate the sale.

At that point, Facebook was seen in the games industry primarily as the platform that enabled the most obnoxious embodiments of free-to-play gaming, and one that was (rightly or wrongly) perceived as a passed fad.

Still, there was optimism. Virtue LLC CFO Asif A. Khan predicted that the $2 billion price tag "will appear cheap five years from now."

VR hadn't really exploded to the point where $2 billion looked cheap in 2019. And while it still hasn't, the initial purchase price of Oculus absolutely looks cheap today when compared to the $4 billion or so Meta is losing every quarter from its Reality Labs division as it continues to try and make its original Oculus investment pay off.

In a GamesIndustry.biz staff roundtable, our former writer Steve Peterson had a particularly clear-eyed view of the sale, saying, "However you look at it, this is a moonshot for Facebook. Maybe there are diamonds on the moon, but we won't see them for sale any time soon. If I was a Facebook investor, I don't think this would change my thoughts on the stock - except that they're going to have less cash handy."

A decade down the line, VR is in much the same place. It remains Meta's moonshot, a drain on its cash reserves that does not seem to be offering diamonds for sale in the near future.

Unlike the trends of stereoscopic 3D or blockchain, virtual reality is proven to have actual utility. What it hasn't done is actually pay off the hype commercially.

The Oculus Rift saw its commercial debut in March of 2016, and actually launched directly into the trough of disillusionment.

Two months before the Rift launched, market research firm Superdata was all-in on the VR segment, projecting an installed base of 38.9 million headsets and revenues of $5.1 billion by the end of the year. It cut that revenue projection by 30% around the headset's arrival in March, and another 22% in April.

By the time November rolled around, Superdata called VR "the biggest loser" of the holiday season, with total headset sales for the year clocking in just over 4.1 million.

VR wasn't exactly dead on arrival, but it was absolutely over-hyped, a cool novelty with intriguing potential for the future, but a litany of hurdles standing between it and widespread consumer adoption.

In a March 2014 interview with us, Oculus' Nate Mitchell said the big sticking point would be VR getting its own Wii Sports, meaning a system-selling product that properly explains the value of VR to the masses.

"Once you have the content and people experience it, they get it," Mitchell said. "Right now, we're in this very cloudy phase. You really need those experiences to help people understand - most people just can't suspend disbelief."

That was a chicken-and-egg problem, because it was tough to justify spending the big bucks on a really polished VR game when there wasn't an installed base to sell it to, but it was tough to have an installed base when you didn't have a bunch of high-quality games to justify people investing in a VR headset.

But it's 2024 now and we've got great VR games. We have Half-Life: Alyx, Beat Saber, Horizon: Call of the Mountain, Moss, and a slew of traditional games that happen to play nicely with VR, like Tetris Effect, Resident Evil Village, and No Man's Sky. There's no one headset that runs all of those games, unfortunately, but at least being a hardcore technophile is no longer a prerequisite to VR adoption.

As for the other hurdles, we've seen them all addressed at least partially as VR (and AR) technology evolved with the HTC Vive, Windows Mixed Reality headsets, Magic Leap, PSVR 1 and 2, the Valve Index, and the Apple Vision Pro. We have better interfaces and motion tracking. We have gesture controls. We have easier set-ups. We have better framerates and resolutions, lighter headsets, all-in-one solutions so players don't have to be tethered to a powerful computer. We have cheaper headsets (at least outside of the questionable strap-a-phone-to-your-face paradigm). We have checked off just about every box that people told us was standing in the way of the VR revolution really taking off.

That's all great, but the problem in my eyes is that we've made all this progress thanks to companies willing to invest in the field, and at least on the hardware side, those investments don't appear to have been paying off. Sony, Meta, and Apple are big enough players that the three of them could keep VR a fruitful and growing space, but honestly, Sony and Apple have shown questionable commitment to the cause. Despite launching two VR headsets, Sony has not shown a tremendous appetite for supporting them with marketing or software. And while Apple has only just recently taken its VR efforts public, the sky-high price point and almost complete lack of gaming applications suggest it won't be the Chosen One to take VR gaming mainstream either.

That leaves Meta, which has almost inarguably done more for VR than any other company over the past decade, but I honestly don't know how much longer a publicly traded company can be expected to lose more than $1 billion a month chasing a metaverse vision that has largely fallen out of fashion and is only becoming a bigger and bigger joke the longer it continues to not happen.

It doesn't look likely to turn the corner anytime soon, as Meta said in its latest quarterly earnings, "For Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and our investments to further scale our ecosystem."

The need to change that isn't as urgent as you might expect considering Meta still reported more than $39 billion in profits last year despite the Reality Labs losses, but shareholders aren't known for their patience when it comes to prolonged boondoggles, and I worry the VR gaming market as it exists today hinges entirely on Mark Zuckerberg never reading up on this "sunk cost fallacy" people in the office keep whispering about.

Oops! All Reactionaries

While many VR proponents were happy to have the legitimacy (and deep pockets) of a massive tech company like Facebook signalling a bright and lucrative future for the field, there was also a subset of developers and Oculus backers unhappy with the decision, including Minecraft creator (and early Oculus investor) Markus 'Notch' Persson.

"Facebook is not a company of grass-roots tech enthusiasts," Persson said in a blog post. "Facebook is not a game tech company. Facebook has a history of caring about building user numbers, and nothing but building user numbers. People have made games for Facebook platforms before, and while it worked great for a while, they were stuck in a very unfortunate position when Facebook eventually changed the platform to better fit the social experience they were trying to build."

Those criticisms might sound odd coming from a developer who sold his company to Microsoft, against which you could levy plenty of similar criticisms (and indeed, Persson already had). But that sale wouldn't happen until later in 2014, so the Minecraft developer had the ethical higher ground for at least a little bit.

"I definitely want to be a part of VR, but I will not work with Facebook"Marcus 'Notch' Persson

"I definitely want to be a part of VR, but I will not work with Facebook," Persson said. "Their motives are too unclear and shifting, and they haven't historically been a stable platform. There's nothing about their history that makes me trust them, and that makes them seem creepy to me. And I did not chip in ten grand to seed a first investment round to build value for a Facebook acquisition."

The weirdest part of this isn't that Persson didn't like the direction Oculus was taking with Facebook, or that he was going public with his complaints. Both of those were very much in keeping with his public persona at the time, which was largely positive. But so was Luckey's.

And that's the weird bit, looking at it in 2024. Just a decade ago, Persson and Luckey were counted among the friendly faces of the industry, influential creators who were widely celebrated by peers and press alike.

After all, Persson vocally supported indies and spread his wealth among the Mojang team more widely than he was contractually obligated to.

As for Luckey, he certainly sparked a renewed interest in VR, but beyond that, uh, I guess he smiled a lot, was really enthusiastic about VR, and his story of a teenager cobbling together headsets in his parents' garage is the sort of Silicon Valley mythologizing that people used to love buying into.

(Look, when it comes to the prerequisites for public praise beyond making a popular game or being financially successful, we haven't set the bar terribly high in this field, folks.)

Both would achieve the triple crown of wealthy beyond belief, empowered to pursue virtually any professional or personal goal, and with glowingly positive reputations to boot. But that trifecta is apparently every bit as hard to hold on to as it is to attain in the first place.

We were just five years away from Persson embracing enough toxic views around transgender people, race, feminism, and other subjects that Microsoft all but excommunicated the creator of its biggest gaming franchise. He chipped away at his reputation one Bad Tweet at a time until there wasn't much left but an absurd mansion with a $200,000 candy wall that he insists is not rotten.

Notch chipped away at his reputation one Bad Tweet at a time... Luckey's reputational downturn was not so drawn out

Luckey's reputational downturn was not so drawn out. Just two years after the Oculus sale, Luckey was revealed as the money man behind a Trump-backing "shitposting" organization, a revelation which prompted a swath of developers to swear off working with Oculus and saw Luckey disappear from the limelight for a handful of months before leaving Facebook entirely. (Luckey would later say he was fired.)

Luckey quickly moved on to his next start-up in a field where his political views were not so disqualifying, a defense contractor using technology to crack down on illegal immigrants at the US-Mexico border. (There was no word on whether he got Mexico to pay for it.) And if that wasn't fascist nerd vice-signalling enough, Luckey named that company Anduril after the sword Aragorn carries in The Lord of the Rings, which means "Flame of the West" in one of Tolkien's fantasy languages.

In a Financial Times feature on Anduril published just this morning, Luckey blows the white supremacist dog whistle a little louder, saying, "The first page of our first pitch deck said that Anduril will save western civilisation and save taxpayers hundreds of billions of dollars a year as we make tens and tens of billions of dollars a year."

That dual pitch of subjugating foreigners and making obscene amounts of money apparently proved appealing to billionaire Peter Thiel, an early supporter of Anduril who has backed it to the tune of $400 million through his Founders Fund firm.

Luckey's shift to arms dealing was a surprising turn for many, but looking back, there were always some signs that the friendly face of VR wasn't exactly as it seemed. In that interview we did with Luckey where he talked about not selling the company even had him foreshadowing the possibility of a fall from grace. (And if not "grace," exactly, then whatever you want to call the point where you get a Time Magazine cover, but people joke that it single-handedly killed VR.)

"VR has come back now where it's captured the public interest, and people are really interested in VR again," Luckey told us. "It's impossible that it's going to die almost whatever I do. I could have a crazy meltdown and go beat it on the streets of San Diego [and VR would move forward]."

First off, that's a certifiable Good Call right there. In some ways that hypothetical San Diego scenario would have been preferable to what he actually did, yet the VR industry has indeed continued to move forward, thanks in large part to Meta spending obscene amounts of money to make a reality out of the metaverses that captured people's imagination in Neuromancer and Snow Crash (or the one that nostalgically cataloged and regurgitated imagination in Ready Player One).

Luckey's willingness to offer a horrifying mental image unprompted shows an eyebrow-raising disregard for social norms, but there's only so much criticism we can direct his way on that one. After all, we were complicit in subjecting our audience to that particularly cursed payload a decade ago, and have apparently not reformed our ways considering we just brought it up again two paragraphs ago.

Later in the interview, Luckey also talked about the real moment of truth for VR, a Minority Report-like gesture tracking system with haptic feedback.

He rightfully pointed to the standard game controller and its hodge-podge of sticks and buttons as an intimidating barrier for many non-gamers to overcome, and envisioned a world where VR opens up the industry to brand new audiences… who in his mind actually want the same old experiences.

"You could give any grandma a VR headset and give her a virtual gun and she could shoot it"Luckey on VR bringing the joy of games to new audiences

"The key thing to remember is some types of interactions are absolutely impossible to do with a game pad," Luckey said, adding, "People spend their whole lives learning how to look around the world and interact with their world. You could give any grandma a VR headset and give her a virtual gun and she could shoot it. You give her a 360 game pad... it's just not going to happen."

And here I always thought nana was horrified watching me play my favorite games because they mostly centered around the callous violence of taking another life, but the real problem was just the interface! Luckey and my sweet ol' nana both knew the murder of a human being shouldn't be abstracted into a simple button push; it needs to be more visceral. I had to really get my hands in there with haptics that let me feel a spinal column snap, followed by the faintest flutter that might have been my victim's soul leaving its body, or perhaps just my own quivering ecstasy from the kill. That's the future of VR right there!

I've been writing this column for over eight years now, and it's pretty common to run into news stories of people like Luckey and Persson, people whose reputations have changed drastically in the intervening years. Sometimes those stories show clear indicators of what is to come, and other times much less so.

Having seen who Luckey is today, we can search through the mountains of public interviews he gave at the time for hints of that future. I've seen a fair bit of stuff worth raising an eyebrow to, and things that certainly fit with what we know now. But to be fair, I don't think there's enough there – at least from what I've seen – for someone to have been able to definitively identify Luckey as a xenophobic-fascist-in-waiting based solely on his press clippings and public comments.

And I think that's probably saying less about Luckey than it does about the games industry of the time, when a person in a professional setting casually describing themselves engaging in public masturbation was not considered a matter to be referred to human resources so much as a bit of personality suitable for the face of an emerging technology with mainstream aspirations.

In retrospect, it should not be that surprising that the games industry and the culture surrounding it would produce people with the politics of Luckey and Persson. If anything, maybe we should be surprised such outcomes aren't more common.

What Else Happened in March of 2014

● In a shocking (OK, maybe not so shocking) turn for the "Won't somebody think of the children?" crowd, California State Senator Leland Yee was arrested on public corruption and arms trafficking charges. In 2005, Yee introduced state legislation requiring violent games to be labelled and banning their sale to minors, a law that would be contested and wind up before the US Supreme Court, leading to a ruling that games qualify for First Amendment protections on free speech. Yee was sentenced to five years in prison.

● Epic converted Unreal Engine's business model from a one-time license fee to a subscription service with revenue sharing. It would only have that setup for a year before it dropped the subscription part of the deal in favor of a purely royalty-driven model.

● Phil Spencer took over as Microsoft's head of Xbox. At this point, he's been running the show over there longer than anyone in the brand's history.

How has he done with it? On the one hand, the Xbox division is turning a profit, which has been far from a given over the past quarter century, and it controls an impressive catalog featuring many of the industry's biggest franchises. On the other hand, that catalog represents Microsoft's penchant for acquisitions more than its ability to make hits. And Xbox is also in third place of the big three console makers and in an awkward middle ground as a platform holder that is legally and logistically prevented from going fully exclusive, but also too concerned about fanbase backlash to go fully multiplatform.

● It may seem weird now, but in 2014, Sony's subscription service (PlayStation Plus) was the one known for featuring big new releases while Microsoft's service (Games with Gold) generally relied on reheated leftovers from years past. Spencer said he was working to change that, and with Game Pass, I suppose he did.

● Meanwhile, PlayStation was seeing a rash of high-profile departures as Jack Tretton stepped down as CEO of SCEA, Amy Hennig left Naughty Dog, and Stig Asmussen left Sony Santa Monica.

● GameStop shut down its cloud streaming division Spawn Labs three years after acquiring it, saying "the gaming consumer has not yet demonstrated that it is ready to adopt this type of service to the level that a sustainable business can be created around it." It instead invested in its Technology Brands and cell phone retailer business, which it would also give up on four years later.

● Electronic Arts' reign atop The Consumerist's Worst Company in America poll ended with a first-round loss to Time Warner. EA had won the entire bracket the previous two years, but without a Sim City always-online debacle or a Mass Effect 3 ending uproar fresh in voters' memory, it just couldn't pull off the threepeat.

Good Call, Bad Call

BAD CALL: Longtime free-to-play advocate Ben Cousins gave a GDC talk in which he presented an analytical model for determining how ethical a game's business model is.

We're already at the Bad Call point when you're trying to assign a numerical value to the ethical qualities of a type of game, particularly when we arrive at that number through a series of yes/no questions that add or subtract one point to a total ethical scorecard.

But it gets even less serious when you see that Cousins' questions are not "Is the game designed like a Skinner box to foster life-consuming habits and extract the most amount of money from the relative handful of the population that proves most vulnerable to that design?" but instead are more along the lines of "Can the consumer play the game before spending?" and "Is the minimum purchase size under $20?"

GOOD CALL: In a GDC talk, National Endowment for the Humanities senior program officer Jason Rhody implored developers to archive the documents surrounding the creative process behind their games, centering his talk on a 1607 journal manuscript depicting cats and birds with primitive jetpacks attached to their backs, with the idea that they would be used to infiltrate and burn villages and castles.

"The lesson of rocket cat is that you don't know what hidden easter egg, what manuscript, what material trace will cause a future scholar's heart to swell with joy when they find it," he said.

And if developers today need a more financially rewarding reason, they can look at the praise retro specialist Digital Eclipse has received for Llamasoft: The Jeff Minter Story, The Making of Karateka, and Atari 50: The Anniversary Celebration, all of which use that sort of archival material as a key selling point.

BAD CALL: In talking about Epic's new subscription/royalty-based model for the Unreal Engine, Tim Sweeney pointed to Id Software's commendable decision to release the Doom and Quake source code to the community as a normal thing that would happen and not an extreme outlier.

"The nice thing in that area is with this royalty model, eventually the game is given away because the developer decides the sales have trailed off and now they're just going to open it up to the world to have for fun, as id Software and other companies have done in the past," Sweeney said. "And 5%t of zero is zero. So there's no accounting required or royalties required."

On the one hand, you could try to argue Sweeney brute forced this into a Good Call by setting up the Epic Games Store and giving away old games for free for years now. On the other hand, it's definitely a Bad Call because publishers in the business of selling games aren't going to be giving them away in any significant numbers, and even the Epic Games Store promotions aren't free so much as Epic is paying millions for the games instead of consumers.

BAD CALL: This GDC talk serves as a reminder of the dark times when the entirety of gaming culture decided to have a round of "Does [name of game] even count as a game?" discourse. I imagine at the time it sounded preferable to having another argument over game genres, but it was not, and that was a Bad Call.

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