Virtual reality has a bright future, but for the present the consumer VR market is puttering along. Rikard Steiber, senior vice president of VR at HTC and president of the Viveport store, is one of the true believers.
He said in a recent talk at the XRDC event that the company continues to invest in the VR ecosystem, from an investment in developer awards to the evolution of the platform to accommodate future hardware improvements. Steiber believes that subscriptions to content in the Viveport store will help developers monetize and encourage the growth of the consumer VR market.
His company also continues to be generous in sharing app store proceeds with developers, and it sees growth in VR happening. Today, the company released a premium update for its Ready Player One: Oasis VR experience.
But HTC faces some stiff competition from Facebook’s Oculus VR division, which is launching the wireless Oculus Quest stand-alone VR headset in the spring of 2019. HTC has to be prepared to improve its platform and provide six-degrees-of-freedom hand controllers with a standalone headset — or risk losing its VR fans to Oculus.
I caught up with Steiber at the XRDC event on VR and AR in San Francisco last week.
Here’s an edited transcript of our interview.
GamesBeat: You announced that you’re doing developer awards?
Rikard Steiber: It’s been a year since we were last here. A few people were asking, what about the momentum? What’s happening in the industry in general? I talked about how, in April of last year, we launched subscription. I showed what our revenues have been. We’ve been trying to make the platform better. We have three times more content now and 100,000 transactions per month. What does that boil down to? I showed a graph where, from April to last month, we’ve had six and a half times the revenue. I showed how subscription is the lion’s share of that.
With so much content now, customers can’t buy everything. Subscription becomes an easy way to try many more things that you probably wouldn’t buy otherwise. That’s where we’ve seen the growth. We’re inviting the developer community to see this as a strategy that can complement their paid download strategy. As you know, if you’re not in the top 100 apps on the leading platforms, you’re not getting a lot of love. As your sales go down, you can put the app in subscription and have a second run. We had the developers of The Wizards try going both inside and outside subscription, and they found that it doesn’t cannibalize. We’ve also seen that subscribers actually spend, at least with us, 15 percent more on paid downloads. It’s very much incremental.
Of course, we’re giving 100 percent rev share for subscription in Q4, which is the most important quarter. In addition, we’ve also said that we’re opening up to Oculus as well, to reach more of the audience. We’re trying to help developers to publish everywhere, but if they publish with us, we’ll help them out and they can keep 100 percent of the rev share.
That’s chapter one. For the developer awards, which we’re super excited about, we’re focusing on entertainment, as well as arts and culture. We’re going to make a comeback on arcade and put in extra effort there. That will be very important. Today we’re reaching hundreds of locations. We have commercial licenses for more than 900 applications, so we can offer them to arcades. But what we want to do, especially for the five or 10 percent of those apps that are truly relevant in an arcade context, is make sure we have unique experiences. There might be an extra level, or a way to use a PP gun or a haptic suit. You have something unique for those locations. We’re looking at how we can make a comeback together with developers to have more unique content, and also make sure that the platform is even better.
The Viveport developer awards will give away up to $500,000, and of course we’ll be giving them preferential treatment as far as equipment, developer videos, marketing. As I told them, it’s not about the money. It’s also about the fame and the glory. [Laughs] Which I think is important, for them to get recognized. Especially if you’re an indie studio, getting some extra attention for your next project.
GamesBeat: When will that take place?
Steiber: We’re starting out in November and it’s going through February. It’s open to both Vive and Oculus Rift titles that are in subscription. We’re pushing hard for subscription. We’re going to announce the winners at GDC. We’re asking people to go to their developer console now, publish if they haven’t done so already, and then sign up next week.
We think that subscription is a good complement to the other established stores for the platforms. We can differentiate on the business model. It helps the developer, but it also helps consumers to discover much more VR, to be much more active than they might otherwise be.
GamesBeat: How is what you do different from typical app store merchandising?
Steiber: What’s exciting is that we promote them. Of course, we have featuring in the store, and in the arcade store. But the other thing we do—did you see the developer stories? Essentially what we do, we write blogs about them and make videos about them. We push them on social. We do paid media. We have a one-to-one relationship with most of our customers. We do one-to-one marketing for them. We try to get them into programs where they get 100 percent rev share.
The other thing that’s very important is we protect their content. If we don’t sell anything, it doesn’t cost anything. We try to make it easy for them to publish – it’s only an incremental effort to publish on one more platform. It should be worth it. Hopefully then, if we’re able to cover the main PC platforms, it will be.
The other thing I think is interesting is the notion of 6DOF. For the all-in-one platform – you may have heard some of this from China – for a truly immersive experience, for both enterprise and developers, you need to have not only a 6DOF headset, but also controllers you can interact with. Most of them are six-three today. On the Wave platform, we have six products that are launched, but another few are coming. Those partners, the developers, want to have six-six capabilities, in the headset and the controllers.
GamesBeat: This is for the wireless solution?
Steiber: Yes, for the Wave partners. So either Vive Focus or Pico or some of the other ones using the Wave platform. We announced today that we’re coming out with a developer kit that works for the Focus. It’s an ultrasonic IMU solution. You have two 6DOF controllers. It’s a little thing you put on your Focus today that enables the ultrasonic part of it. You can apply now. We don’t have a ton of availability, so we’re trying to set reasonable expectations. But as we approach the end of this year and the beginning of next year we’ll start reaching out to developers.
The other thing we announced was—we do believe there are many different solutions to do 6DOF. Ultrasonic could be one, but you could also have visual with cameras. You could have magnetic. You could have IMU using a gyro and accelerometers. We think there will be an ecosystem of different 6DOF controllers. We announced one partnership with Finch. They’ve made a controller for the Focus that’s 3DOF, and they have a 6DOF controller that’s not optical or ultrasonic. It’s an IMU with a kinetic model. It knows where you are. There’s no interruption from breaking line of sight or disruptive audio. You can pre-order now and you’ll get it in January.
If you’re an enterprise doing a training application, maybe you need a certain thing. If you’re doing a game like Beat Saber, you need something else. There will be various solutions for different roles. Enterprise is going to be an important segment for all-in-one. If you’re doing design or collaboration or staff training or selling cars in VR or something, you’ll have different needs, and different solutions will make sense. We’re getting those dev kits out now so that you’ll be able to have more solutions as we move into the next year with the new headsets coming. We the ecosystem developing to a point where there are six-six solutions that are all-in-one.
GamesBeat: That matches what Oculus plans to do with the Quest next spring.
Steiber: Right. There will be a portfolio of all-in-one devices that have 6DoF capabilities. In some training situations maybe you won’t need it, but in others you definitely do. We want to make sure we give that to the market already.
GamesBeat: Do you have a sense yet for where you want your target platform to be? Are the majority of developers targeting one thing? Or are you expecting a variety of developers targeting a variety of devices?
Steiber: It’s almost like a pyramid. You’ll always have this top of the pyramid, high-end PC VR, and then you’ll have middle segments, the early mass market at some point. I’m not too convinced about the low-end mobile market at all. But I do think—our bet is that for the standalones, there will be many different devices coming out. We want to provide all of those headset manufacturers with one platform, and also help developers so that they can publish on one platform and work with multiple headsets. It will be very hard for them to do something that works for each headset with different SDKs and different controllers and so on. That’s what the play with Wave is.
Ideally, if some of the other established platforms—if you create an app for that platform, it should be easy to also compile it for our platform. There shouldn’t be that much incremental extra work. I do think that having the subscription service that we’re going for—we can also help developers to publish on multiple devices and multiple platforms, similar to how Netflix and Spotify are on different hardware. The store is essentially a service. Clearly we can’t be the store on some of the leading platforms, but like we did with Oculus–we launched the subscription service for Oculus titles. We launched the subscription service for Steam users. It’s a way to reach that audience with a differentiated offering.
Having a platform, having some key services—we’re investing in things like VR chat as a social platform, which I think could also reach across applications. In each of these things we want to have the most immersive experience at the high end. We’ll have our own devices like Focus, and potentially new ones. The same goes for PC VR. There will be a couple of platforms. PC is a bit easier because it’s more open by default. We’ll play there, but hopefully we’ll have a platform and services that run across the other hardware and operating systems. That’s our plan.
Some of the things we’ve announced with XRA, and also with Virtual Link—we need to come together as an industry, so that it becomes easier for developers to developer and reach all these different platforms. I don’t think there will be huge fragmentation, but they have to pick their battles a bit. We can help them, help ourselves, help consumers and enterprises. That’s what we need to get this ecosystem going. If it becomes too silo’d, I think everyone loses. The industry will lose momentum.
GamesBeat: Do you foresee having the equivalent of a Quest, or do you think you already have it?
Steiber: I can’t comment on new product launches, but this year we launched the Focus and Vive Pro. I do think that with these dev kits coming out, we’ll see all-in-one on the Wave platform. There will be new things coming out next year. The same goes for PC VR. Every year is going to get better and better.
GamesBeat: It almost seems like the development cycle here—you work on this new technology, put in a cutoff date, and whatever you’ve done at that point goes into the next version. Then there’s more to come later. There are always some trade-offs.
Steiber: There clearly are. I do think that unless you’re making a material improvement, it’s not a new version. It’s just an update. We are very careful about thinking about how we can make sure we have the most immersive experience in each of these different segments. It’s also interesting that we’re seeing enterprise really growing. There’s clear value. Enterprise has very different needs, of course, than the consumer market.
GamesBeat: This show is a little smaller than I’ve seen before, but it does seem like there’s a wider set of applications in more categories this year.
Steiber: Yeah. Also, with GDC, VRDC, XRDC—we’re starting to see this mix of people. They’re also chasing AR a bit. The use cases and the timetables are a little different. Some people are saying it’s easier because you can use it on your mobile phone, but the question is, is it really augmenting your reality? Is it changing your perception? Probably not. It’s an assistant kind of experience. But I do think those experiences where you use some sort of see-through technology are pretty close. It’s early days.
GamesBeat: I caught your comment that you’re embracing this whole space. You’re not necessarily only about VR.
Steiber: Yeah, exactly. The view – what we call Vive Reality – is this kind of continuum. We start here with you and me in the real world, and then together we have an augmented reality to discuss something around a product, or maybe we’re just playing chess. Then we can move in to something fully immersive. We’re experimenting at this stage. We’ve started to see applications where you move seamlessly from something augmented to something fully immersive. There are lots of B-to-B and consumer applications there.
I do think that, as I also mentioned—when you see things like VR chat, it’s becoming a media platform. People are tuning in from outside VR. It’s almost like the esports phenomenon. I’ve run esports businesses in the past, and I can see the heroes in VR broadcasting to the people outside. Hopefully that will also make it more exciting for people to try it out and become that sort of power user.
GamesBeat: With the size of the market, how do you set expectations about where it’s settling or where it’s going?
Steiber: I think what’s happening—on the one hand there’s much more content, many more great experiences. The awareness is slowly growing. You have to experience it to understand it, so it takes longer than some other technologies. The total cost of ownership, the price, compared to the value you get, is falling much more into place. This quarter is going to be an important quarter.
I do think that next year, as we move to all-in-one devices where you don’t need a PC or a phone, the cost of ownership will be much more affordable. You’ll be able to move into the living room and have social experiences, maybe have your friends participate on their phones or the TV. It’s an exciting time. For us, as we look at how to expand from the core gaming audience, I think that lifestyle—if you look at sports, for example, many people feel very passionate about sports. They’d pay anything to follow their favorite teams. Both interactive experiences and live event-based or cinematic experiences are going to be more important as we move into next year.
There’s something around the power of music, how that transmits emotion. I don’t think we’ve figured out what that is in VR yet. But I think we see that in everything from games like Beat Saber or Audioshield, to the way people go in and have musical experiences, to these music creation apps as well. And of course you can go to events and watch your favorite artists. Music and sports are two things where we can increase the pool a bit, and then go beyond the hardcore gamer audience to have more social and lifestyle-oriented content. That’s something we’ll see this holiday and in the beginning of next year.
GamesBeat: The VR arcade experiences, are they still a good way to get people more engaged?
Steiber: What’s fabulous with that is, most people probably have their first VR experience in one of those establishments. That’s why I want to make sure we’re there with the best content, so you have a great experience. If you look at Arizona Sunshine, for example, for them to take the core of the game and make it into something social, something that uses a gun or a haptic suit, something unique—that’s going to be much easier than building something from scratch.
That’s what I want to do. I want to work with some of these key developers to make sure we have unique experiences that are truly mind-blowing, and then help out the arcade operators. This is a tough business, unless you have a lot of free foot traffic. You need something that stands out. These are the people who will evangelize VR and help developers monetize and build their brands. They’ll bring in the next generation of customers. It’s an important strategic part of the ecosystem.
GamesBeat: Do you think people are still longing for that Ready Player One world, where you live in VR? Has that wave of hype helped crystallize where everyone wants to go?
Steiber: The movie is kind of a dark future. At the end, not to spoil too much, they decide that the Oasis won’t be open on certain days, so have to spend some time hanging out in the real world. I do think that in society today, if you look at the amount of time we spend on social media, for example, or looking at a new notification on our phone from Twitter or Facebook or our email—it’s a drug. You become addicted to it. And that’s a very poor experience. It’s not particularly immersive.
One could imagine that if you have a really great experience, an immersive experience, you’d want to spend a lot of time there. I don’t think that we’re there yet. The experiences aren’t there. We’re working on the technology. Clearly we’re on the way, though. It’s not supposed to be until the 2040s, so we have some time to get there.
GamesBeat: I saw that Otoy and Lightfield Labs want to work together to create a real holodeck.
Steiber: Our company is working on this Vive reality. The idea is essentially that AR and VR are an interface with the computer, or with AI. We believe that in order to get there, you need to be connected to the cloud. You need to have these fifth-generation networks, which not only have bandwidth, but also very low latency, so you can move the computing out to the cloud, and thereby make sure that you don’t have all the processing in the device. It can be much lighter. We’re getting to that kind of future. We’re thinking about what are the right kind of experiences and what might be the right timing for the AI and the network and the VR/AR hardware to come together.
GamesBeat: I’ve heard that 5G will help, but it doesn’t necessarily guarantee the latency everyone will want.
Steiber: I’m not an expert there. But you can’t be entirely in the cloud, clearly. There are these solutions where the operator can put some of the computing capabilities on the edge, or you have a cable and a very good network. You’re only as good as your weakest link in those kinds of networks. But I do think that there seems to be some evidence that it’s going to work. As we move toward Mobile World Congress we may see some announcements coming up.
GamesBeat: It seems like we’re still pretty far away from the five-year console type of cycle. There’s more innovation and the cycles are shorter. The technology’s not done yet. Maybe we’ll get to that five-year cycle when things are more settled.
Steiber: We’re starting to see models where–you’re making sure that you have a console or a piece of hardware which is very cost-efficient, which you price very aggressively, and then you have more of a closed system that you price a bit higher on the content side so that the lifetime value of a customer—you don’t make it back on the hardware, but on the content. That business model worked in the console industry, and it could easily happen in the VR industry, if you look at some of the different players. In other cases you might have more of an open platform. I don’t think we have the answer for AR and VR as far as how it’s going to play out, but I think we’ll see both models.
GamesBeat: How do you feel about the state of competition in the ecosystem? In some ways Facebook doesn’t care how much money it loses in the VR space.
Steiber: Now, more than ever, big companies are investing a lot of money in both the technology and the content. They’re driving market awareness and consideration. It’s going to benefit everyone in the ecosystem. This is such an experiential medium. You need a lot of ammunition to raise awareness and educate the market and showcase the content. Taking it to the early mass market is hard, unless you have a very viral product. It’s good that we have some giants that are thinking about this strategically.
Maybe it’s a new interface. Maybe it’s a new computing platform. Maybe it’s a new social platform. Maybe it’s a new platform for enterprise. Maybe we won’t have two screens on our desks anymore. We’ll have something else. Making those investments now is going to help everyone in the ecosystem.
GamesBeat: Do you think Magic Leap has made a good case for what they call spatial computing?
Steiber: I can’t really comment on them. Personally, I’ve tried it. I think they’ve been doing a good job. I’m sure they have the next version coming. But you have to start engaging the developer community to create these experiences. Hopefully the experiences on this platform will be available on other platforms as well, because once you’ve done some of the work, it doesn’t seem impossible to make it work on multiple platforms.
GamesBeat: It seems like there’s at least value in placing things in the real world. But they still have work on things like field of view.
Steiber: There are some challenging problems. That’s why I’ve said about AR—it’s easy to set up on a phone and you can look at a little dinosaur or a stormtrooper or something. But if you’re going to make it so you feel like something is actually in the room with you, that’s very challenging. The smallest glitch breaks the kind of presence that you can more easily have in VR right now.
GamesBeat: Do you still see something like the holodeck as this end goal that might be best done within VR, where you’re closed off from the world?
Steiber: I do think that we’ll probably move seamlessly in between. I don’t think it’s either-or. To be totally immersed, VR is the best experience you can have today. But when you can move between experiences—maybe you want to have a sense of the real world. Maybe you’ll have some augmented experiences there. I think you’ll have a hybrid, this VR continuum. Certain devices will be optimized for certain experiences, but at least on the high-end headsets you’ll be able to experience a bit of both.