Unity Technologies has armed more than 2 million developers with the tools to make video games. And those developers have shown a lot of enthusiasm for gaming’s newest platform, virtual reality. So much so that we could see a flood of systems, games, and startups during the next year.

John Riccitiello, chief executive of Unity, said in a fireside chat with me at the VRX conference this week that he’s really excited about VR, too. But he worries that we’ll have a wave of disappointment next year as the actual sales of VR systems fall short of the wildest hopes. He thinks the market will take two to four years to develop. And that means startups and game developers should plan accordingly for a long road to riches.

We talked about the VR hype and Unity’s role in game development. Here’s an edited transcript of our interview.

GamesBeat: What’s new at Unity?

John Riccitiello of Unity says he's impressed with the creativity of VR apps.

Above: John Riccitiello of Unity says he’s impressed with the creativity of VR apps.

Image Credit: Dean Takahashi

John Riccitiello: For those of you that don’t know, Unity has been around about 10 years. We built a product, the Unity engine, that a huge portion of PC and console and mobile games are built on, especially mobile and PC. And PlayStation Network and Xbox Live, and many other platforms. It’s a tool set that enables the creation of games.

The numbers are pretty big. Last month 1.2 billion games built on Unity were downloaded. Looking at that, it’s probably a network of 300 or 400 million daily active users. That’s a very big reach. It’s a function of the fact that, on a platform like Android, more than 30 percent of the games are built on Unity. There are lots of reasons for that.

A lot of the work was done before I got there, so I can’t take much credit for the particular achievement, that huge democratization if you will. But what’s new at Unity, and pretty exciting—This company has achieved something huge on behalf of developers. Developers can get ahead if you give them tools that let them spend more time on design. In the last year we’ve hired a couple hundred engineers on top of what we had before, and we’re investing to make the most beautiful games possible. We’re thinking about VR and AR. The ambitions are enormously high.

We’re also investing so our developer partners can do better on the business side. We’re enabling them to monetize with both in-app purchases and advertising. We’re building that into the platform because it’s one thing to build a game, but it’s really irritating to build a great game and then you can’t find an audience for it. We think the current model of just putting it out there is too difficult. We’re working at solving problems that need solving in the industry.

We’re doing what Unity has been known for a long time, but a lot more ambitious. It’s built on the foundation of cool stuff done by guys who were there before me.

GamesBeat: What’s your take on AR and VR?

Riccitiello: I’m nervous that conferences like this exist at all. It seems like we all expect to see a brand new head-mounted display under every Christmas tree. There’s this notion that it’s all here now. My honest expectation is that there won’t be a consumer market for AR and VR for two years, probably, if not four.

We haven’t gotten the kit together where it’s a powerful enough compute box. AR and VR require enormous compute power. The creative challenges around what a game is, what a movie is, what some of the other applications are – even just basic chatting – aren’t figured out. Content creation in this space is not figured out.

Within 10 years, or probably six or seven, a billion people will be wearing a head-mounted display and it’ll be the most incredible thing you’ve ever seen. It’s going to be big, and I’ve been through many platform transitions and platform creations. I see the earmarks here. I’m quite certain of it.

What I’m also quite certain of is that the party might feel like it’s over before it’s started. A number of folks in the industry want to say it’s not a big deal, and in 2016 they’ll probably be right. We’ll go through a gigantic wave of hype, and then it’ll break when people aren’t that excited about what they can get. Either the kit isn’t going to be that good or the content experience isn’t going to be as awesome as they wanted. That’s to be expected.

For me, 2016 is going to be the pro-sumer environment. If you’re used to alpha hardware and alpha software, that’s going to be what it feels like. It’s just the early innings of the biggest game in history.

The Unity booth on the GDC 2015 show floor.

Above: The Unity booth on the GDC 2015 show floor.

Image Credit: Gavin Greene/GamesBeat

GamesBeat: You guys get to see everything that’s getting created. People are using Unity to create VR experiences. From what you see, what are you excited about?

Riccitiello: I’ve seen so many people talking about what’s going to work for games, what’s going to work for chat software, for platform applications, for movies, for entertainment. I’ve seen thousands of apps. I have every hardware system imaginable geared up in my office. So I have access. It’s fun. It’s an entertaining space to show my friends. And I’m not going to tell you what’s going to work, because most of what I’ve seen so far isn’t going to work.

Some of these things are. I don’t think you’re going to take the current Call of Duty or Battlefield and translate that to VR expecting anything but a bucket full of nausea. We’re going to have to reinvent a lot of things. I’ve seen smart companies forming the beginnings of that reinvention. Quietly, I’m confident that they’re going to build something with VR. But what I really believe is that it’s going to take off a little slow.

All of you that are content creators, you should creatively experiment a lot and don’t rush. It’s not a consumer market. You’re not gonna make any money in 2016 on dollars per unit or units per dollar. It’s going to be slow next year. Take your time to build something so cool that it has a chance to be the beginning of something when you iterate a second or third time.

When it comes to games, I don’t think it’s going to be another Candy Crush. I don’t think it’s going to be another Battlefield. It’s going to be stuff we haven’t seen before. Maybe Telltale is a good example of what’s going to work. I’ve seen a bunch of others. But I’d ignore everybody’s recipe. Screw around with it a lot. Move the camera. Move the point of view. Move the direction it’s coming from. Speed it up. Slow it down. Add content. Reduce content. Figure out what feels right.

The language of VR, the words we use to describe it—We all know what those words are for games and movies. We don’t know what the words are with VR and AR yet. If we put this up, what do we call the thing right behind it? What about spatial sound and how that affects things? How do you attract people’s attention with something that’s not right in front of them? The clues aren’t all there. It’s irritating to have some of the up-front head-mounted screen providing data, because that interrupts your sense of immersion. We have a lot of work to do to get this right.

John Riccitiello, CEO of Unity Technologies, loves VR but worries about the hype.

Above: John Riccitiello, CEO of Unity Technologies, loves VR but worries about the hype.

Image Credit: Dean Takahashi

GamesBeat: If people are going to have a lot of time, maybe they should create their own 3D game engine? [Laughter]

Riccitiello: First off, if I had to give people a bit of advice, I’d tell them to use a good 3D engine. There are thousands, maybe hundreds of thousands of man-months built into Unity to make this stuff work. VR needs a 3D engine. There are a couple of things you can do in 2D, but the reality is that a 3D engine is in fact native to what VR and AR are — what’s around you and in front of you and behind you. We’re using a stereoscopic 3D image with a fixed point of view. That comes naturally.

Earlier I was suggesting that people get creative early. You can spend all the money some $400 billion conglomerate is giving you to screw around with figuring out how to make paint brushes, or you can pick them up off the desktop and start iterating right now. It’s not about building tools. It’s figuring out what you’re going to do with those tools.

Start with a 3D engine and get in as much experimentation as you can. Try to create blue ocean. Try to create something we haven’t seen before. By the way, chat in VR is blue ocean. Messaging in VR is blue ocean. Tic tac toe in VR is blue ocean. I don’t think that’s a game design that’s going to be big, but there’s a lot of blue ocean out there. Figure out where it is and what’s different and what’s your take and why it’s better in VR.

What Brendan from Oculus likes to say is, “It makes you feel like you’re going someplace else.” Achieve that. Achieve something special. You can build tools with whatever your conglomerate has given you, but my advice is to move ahead. Do it quickly. Iterate a lot.

GamesBeat: There are other tools out there — Epic with the Unreal engine, MaxPlay with its new engine. They talked about the need to create a modern cloud-based game engine. Can you talk about how you guys are distinguishing Unity from these other companies?

Riccitiello: There’s a reason, or a lot of reasons, why the vast majority of developers in VR and AR are picking Unity. Other companies and other platforms can talk about hundreds of games in development on their platforms. We can talk about many thousands of games on our platform. There were 160,000 games on our platform last quarter. I don’t know what portion of those are VR, but it’s many thousands. There are many thousands of companies building their entire company on the basis of Unity. It works really well to do a lot of things.

We saw, a few minutes ago, a guy up here from Rothenberg Ventures. They’re a couple of blocks away from my office in San Francisco. They invited me down for the day, and I had the pleasure of meeting eight or nine of the 25 or so companies they invested in. The vast majority of them, the entire company is built on Unity.

One of them had an unbelievable content creation layer that sits on top of Unity. Another was a VR chat company. I felt like I was really talking to someone for the first time ever. You probably all know Altspace, but it gives you presence in an environment that you can share with your friends on the internet in VR. There are many, many more.

Now let me explain why they’re choosing Unity. First, it’s by far the fastest platform to iterate on. I’m not a current technologist and I never was, but I can throw something together in an afternoon that looks reasonable. A team can iterate through something pretty amazing very quickly.

Unity 5 graphics

Above: Unity 5 graphics shows it’s easier than ever to make games look good.

Image Credit: Unity

We cover more platforms. I know and appreciate all the major platforms out there, but these things don’t always turn out the way you expect. There are at least 50 more hardware platforms out there that you haven’t heard of yet. If we include China, there are probably 5,000. Staring down a proliferation of hardware platforms, and we’re going to get there first. We always do. It may turn out to be the secret of where your revenue lies, and it may be that it doesn’t matter. But we’ll get you on more platforms.

There are five million people in the world currently using and creating on Unity. They’re trained. Who doesn’t have a problem with building a team of people who can get together and actually create on day one to build your content? You have this huge work force ready, trained, skilled, and value-adding.

The last thing I’d say as far as Unity investing in VR — today, we have 465 engineers making a better 3D engine every day. I don’t think anybody in the world has anything close to that. A huge and increasing portion of that is focused exclusively on VR content creation, and also just on building higher performance. We’re recruiting some of the most talented folks from the most specialized, high-end game companies in the world to make Unity better.

You asked if we’re scared of our competition. In one regard, there’s another company out there with a reputation for doing very high-end work. We’re rapidly closing whatever was remaining of that gap, and then that’s that. Beyond that we’re investing more than the others can afford in VR at the high end, as well as extensively in other platforms.

You talked about companies that have this cloud connection. While I think collaboration in game development is a big deal — Unity launched its own cloud platform not long ago and there are literally tens of thousands of games built on that platform — having said that, we’re coming out with our own answer. We have tools out there and a lot more coming. But the notion that a game is like a Google Doc is a bad notion. It’s not something one-dimensional, where you’re just typing and you might share a collaborative portion of the typing.

Sinjin Bain, CEO of Maxplay

Above: Sinjin Bain, the CEO of Maxplay

Image Credit: Maxplay

GamesBeat: Sounds like a reference to MaxPlay.

In our centered world, I don’t know that 10 people with paintbrushes on the same canvas at the same time is the idea that I would push. Unity is built on the idea that if you want five people putting in art or five people working on one thing for a period of time, they can be brought in for that. It’s the tool that I think professionals need to use, because they recognize that sometimes they’re working alone and sometimes they’re working in a team, a collaborative team. But I don’t know that the notion of always sharing everything is a particularly good one.

GamesBeat: Do you have an idea of what business model is going to work the best in VR? It doesn’t look like the banner ad is going to be the way to monetize.

Riccitiello: From the beginning of time, all content has been monetized one of two ways. People pay for it directly — in-app purchases or premium or other ways of paying – or through advertising. In other words, their presence creates enough of an audience.

I don’t see enough hardware or enough usage for advertising to become a business model in AR or VR for four to five years. That leaves you singularly, for those of you who want enough revenue to pay the rent, having to deal with premium.

Personally, I think the notion of presence, of being immersed in a space — it may seem a little harder to imagine the notion of in-app purchases being a way to make that go. Also, in-app purchases work in a world where 95 or 97 percent of the users don’t pay, but you’re dealing with such a mass market that the three percent makes enough money for some companies, or the few companies at the top of the pyramid.

Earlier I said that we’re not going to see mass market adoption in 2016 or 2017. By process of elimination—Ads will work someday, but not in the next couple of years at a scale that will let anybody pay the bills. In-app purchases aren’t going to find an audience to pay the bills. That leaves you in something like the console model around the early ‘90s, and I bet the business models follow suit.

Dean Takahashi of GamesBeat and John Riccitiello of Unity at VRX event.

Above: Dean Takahashi of GamesBeat and John Riccitiello of Unity at VRX event.

Image Credit: Dean Takahashi

GamesBeat: There’s something like 250 VR companies already. People are talking about seed rounds for VR, as well as getting started. We know there’s going to be a lot more, even by the time the first units start shipping. What do you think the outcome of this is going to be?

Riccitiello: Earlier I mentioned that 2016 and 2017 have that risk of disappointment setting in. We may well see so much hardware and so much choice out there, and a lot of it will be crap. We’ll see a lot of software and a lot of that will be similarly flavored. There’s a risk of some disappointment.

Having said that, I am completely confident that someone in this audience, among others, is going to create a special experience. They’re likely to be making fairly straightforward things initially — chat apps, travel, basic games, basic linear storytelling. You mentioned some content creation being built on top of Unity. We’re building our own to augment that as well. But I do think that you’re going to need a bit of fortitude to get through 2016 with the same confidence that you can come in with now, without so much in the marketplace, at the end of 2015.

I am as big an enthusiast as you can be for VR, and also for AR. I was an early participant in helping build Oculus into the platform it is today. This is the future. It is a very big deal. It’s just getting shot out of a cannon in a ready-fire-aim sort of way, as opposed to ready-aim-fire. Because of that there’s going to be some fodder for less than favorable reviews of some things that are being launched. That’s going to be a competing notion in 2016 with those of us who have all the enthusiasm.

Question: I hear a lot of talk about the PC business right now – obviously they’ll be customers for a while – and a lot of people talking about B2B business. Can you talk a little about B2D business for developers? Unity is in a great spot where you can sell tools and assets on the asset store. That’s been a real help, and it seems like there’s an opportunity for companies to build VR tools that help get everything ready in the short term.

Riccitiello: B2C is 95 percent of the industry in gaming. Or it’s certainly more than 90. It’s obviously not 100, because we exist and there are competitors for us out there on the B2B side. VR’s going to be the same. Let’s be realistic. You have to build a consumer app for this to be good.

On the B2B side, I would say that for those of you who think that this early in the cycle you have to build it before you can play it, let me remind you of the standard business model for B2B in an industry where we sell products. It’s free. You have to build for the long term to build your business. So I don’t think B2B represents a business answer. But there is no question that there are going to be some B2B tools.

Realistically, people are going to want to be able to communicate with each other in VR in a multiplayer environment, and there will be some level of chat or interaction. That’s important to people. They want that. Every game company isn’t going to build that. There’s all sorts of people working on things like spatial sound, how to get your attention and find ways to do that better in one way versus another. Those are going to be complicated technologies. There’s a good system within Unity, but if there are more advanced systems that someone can create and plug in to that, sure.

PlayStation VR demo.

Above: PlayStation VR demo.

Image Credit: Dean Takahashi

Question: You mentioned that the model that Telltale uses for storytelling could work in a VR environment. Given the new challenges that VR presents, what do you think could work for telling stories in the medium?

Riccitiello: The reason I mentioned Telltale Games is that you’re moving through a space in a measured way. You’re not rushing through a space. Some of the issues around speed of locomotion and comfort really help them out.

The second issue is, I believe you’re going to need some bit of interaction to tell a linear story, because you’re going to need to draw the player’s attention to something. You need to know that they actually grok the point you’re trying to make before they move to the next step. A film director has the chance to put everything right in front of you and assuming you don’t just hit the pause button, they know they’re getting your attention.

It’s very possible for something salient to the production to be taking place over there when you’re looking over here, and you completely miss it. There are other solutions to this problem. I’m not saying Telltale’s way is the only way of doing it. But it’s a particularly good model for one way to go about it.