GamesBeat: If you’re setting up an ecosystem and you want developers to come into it, what do you have to entice them?
Fallah: We have a couple of things going for us. One of them is access. We’re the number one phone manufacturer in the world. Many people don’t know, but we’re also the largest chipmaker in the world, the largest TV maker in the world, the largest chipset manufacturer in the world. I once went to a map and tried to find places where we don’t have an office. I could only pick out two countries: North Korea and Syria. The Syria office got bombed. We’re still paying all the staff while we wait to open up again. North Korea, well, if there’s peace, maybe one day?
We have people on the ground and we can give global access. That’s part of what we offer. Second to that is ad support. Also, I have many engineers on my team. We fly them all over the place. Whatever engine you’re working on, whether it’s Unity or Unreal or something bespoke, these guys to the code level in people’s games and optimize them, make them work better, make them bug-free. We help deliver better graphics and optimization.
I’m sure you’ve seen our high-end Odyssey headset. We’re partnering with Microsoft on the MR store for that. Our mobile solutions are working with Oculus. We’re hoping that can cover the gaps we have on the content side.
GamesBeat: If you had the choice of Magic Leap, with $2,295 glasses that the developer can buy in order to develop their games or application, or you have money being given to you by Oculus–it’s an interesting set of choices.
Allison: It depends on the content you want to do. Is it built for city planning? Then it’s probably better to work with an AR application. But for gaming, I don’t see a lot of AR excitement there right now. Especially if you’re not going to have support from the hardware providers to give you that oomph to go and do it. For me, it just depends on what type of product or experience you want to create. But if Oculus is going to give me a headset and send me to boot camp, that seems obvious, what an indie dev would choose.
GamesBeat: This week, Sixense was in the news. As far back as 2013 they were doing 6DOF controls for VR. They raised $600,000 on Kickstarter and started working, but never shipped it. But they did go to work with Penumbra, a health care company, to develop tech for that market. Now they’ve sold a $20 million stake in that joint venture and they’re taking that money to pay back their Kickstarter backers. So they started out with this fantasy of the consumer market, but they ended up with enterprise as the model that gets them money for development to reach their next product. It’s an interesting story of how the market has driven people to pivot.
Fallah: We were involved in that a bit as well. Right now, the one area of VR that’s doing very well monetization-wise is enterprise VR solutions. We have massive contracts with large companies that are using it, including the military in the U.S. and Europe. That’s why we know this isn’t going away. They’re spending so much money investing in it.
Part of that was us. When I was at Unity, I used to argue with Palmer Luckey and the guys at Oculus all the time, that their EULA was too restrictive. We felt there was one line in the EULA that killed any money that devs could make, which was the one that said it has to be for entertainment only. It limited devs to making entertainment, and it kept them from doing work on the side that they might actually get paid for.
We still have limitations. I have enterprise solutions that come along all the time that I can’t put on the Oculus store. You have to find a way to download it and use it. We tend to do custom solutions for these customers on the side through our VR browser, which is very popular. It’s not really the optimal way of doing it. We hope more platforms will open it up, not limiting themselves to one type of app or another. Let the devs go out there and get some business going. Enterprise is paying very well right now.
GamesBeat: Skydance is all about entertainment, right?
Allison: They are, but I also have my personal feelings. I have a very special place in my heart for what we call serious games, using the technology in fields like the military or health care. It’s not the first time that games have been used for military purposes, and then those military purposes turn back into games. For example, the Viewmaster, the little plastic thing, used to be a tool to teach fighter pilots how close they had to be to a target in order to keep from wasting their ammunition. It ended up being a very popular commercial toy after that.
That exchange doesn’t surprise me. A lot of the time you get some very good funding out of it, like you said, and it’s beneficial for everyone. I’m a big fan of that model. It’s great if companies can be agile enough to do that kind of thing. I’m glad Sixense was able to finally refund their backers.
GamesBeat: It seems like Microsoft, with HoloLens, is really targeting enterprise. If this thing is going to cost $3,000 it’s not for consumers. There was an interesting hospital application, a VR app created for a children’s hospital in Los Angeles. They were teaching medical students how to react to angry parents. That kind of training for the hospital, they said, was saving $450,000 a year. So they’re willing to pay for this kind of development.
Fallah: A lot of companies are that way. Airline companies that used to be flying their staff to hubs for training are using our headsets now. The cost-cutting is in the millions of dollars. The military are creating a lot of training applications as well. Our internal numbers, having done quite a lot of research–we’re actually doing biometric research in VR, with more than 10,000 people in one study. Our numbers tell us that the retention of information when you’re in VR is 2.4 times what it is when you’re not in VR. That’s a very high number for the people who’ve been in this game a long time, who’ve studied advertising retention and that sort of thing.
It’s great for training, but it’s also great for developers. There are all kinds of models that haven’t been explored yet. Product placement has great potential inside of gaming and other things. A lot of areas are going to open up.
Allison: A couple of my friends have jobs specifically about going out to find independent devs who are working on their fun projects, and then they augment them with these other projects that may need to be incredibly complicated, but they can do that work to support their staff and learn new things. I feel like it’s important for the ecosystem as a whole to have those partnerships.
GamesBeat: Closer to the entertainment space, Alexis mentioned VR arcades and location-based entertainment. That seems to be a bit more realistic as a place to pivot for game companies. Is that attractive to you?
Allison: It is. Right now the return is around six to twelve cents a minute, depending on the type of experience, that comes back to developers. A lot of the other costs they go to are just renting the building, that kind of thing. What arcades are charging is still varying a good deal, though. It’s come down a lot, because they’ve realized that people aren’t willing to pay as much. Or there are sliding scales where it’s cheaper on the weekdays versus the weekend.
GamesBeat: Can that add up to enough real dollars, that it’s something you’re excited about?
Allison: It’s money coming in the door. [laughs] It’s a $200 check here, $100 check there. It’s not a whole bunch, but at least it’s a little something. You know it will end up growing. And now we’re thinking about how we can do more to support LBEs. Perhaps we can do some point of purchase stuff that brings people into the arcade. Some arcades aren’t as attractive as the Two-Bit Circus, which is incredibly elaborate. There could be more there.
I do feel like LBEs will eventually go the way of the internet cafe, along a 10-15 year timeline. But we’re finding those optimal moments to pounce on opportunities and make sure that when people do go into the LBEs, your game is the one that they select and play. Or you can do what’s really tricky like us and make a multiplayer game, so four booths are all playing your game at once. [laughs]
Fallah: Just to add to that, gaming started this way to begin with. When I was a kid you couldn’t afford, unless you were a rich kid, your own game machine at your house. You took a quarter and you went to the arcade and put it in and played your game. Until I was a teenager, in the late ‘80s–I actually worked in a Haagen-Dazs shop for six months to save enough money to buy my Nintendo. [laughs]
This is the same thing that’s happened before, over and over again in tech. When new technology comes out it’s too expensive for the mortal man. It’s a coastal thing. A bunch of rich middle-aged guys play it until it becomes cheaper and moves on down. If, 10 years ago, I told any of you that you wouldn’t be able to get away from your phone for 10 minutes now, you would have looked at me like I was crazy. But here we are. In 10 years we’ll have those kinds of conversations about VR and AR. It’ll be a natural part of life. Every one of us will have it.
Allison: A big part of that will be the ability to socialize with it, when there’s more people there. When you can do things together in VR, unlike now–today you only have one headset per house, things like that.
Fallah: A big part of why we haven’t gotten to that critical mass is the total cost of the system. Everyone worries about how much the HMD costs, or Gear versus Oculus. That’s not the total price to us at Samsung. The total price is everything you have to have to play, everything down to your internet connection and the cost of your content. That’s not there yet. A $500 headset isn’t so bad until you add a $3,000 computer to it.
Allison: The Oculus Quest is looking pretty good at $400.
Fallah: It’s looking good, but by the time it comes out it’s already yesterday’s technology. The SDC, our developer conference, is in three weeks. We have two games showing there that have such a high polygon count that you can only play them on Odyssey. One is from a big triple-A studio that you all know. We want more of that, that high-end quality. 835 chips are not going to do it.
I’ll be honest. We’re running 855s right now and it can barely run the kind of things that we like. We have amazing screens. We have patterns that take the SD effect out of it. We can run 4K by 4K screens inside the headset and keep that under $500 right now. There’s no point in bringing it up. The rest of the infrastructure isn’t there. The front side of it is one thing, too. You need the back side as well. We’re all waiting for 5G to take off. In fact, we’re bringing 5G generators to the Moscone Center, just so everyone can experience what actual 5G is like. It’s going to be a game-changer for VR and AR.
There are certain things in the background that need to happen, infrastructure things, that will probably happen in some countries before others. But it will go over that side in the next two or three years. If you look at it globally, a lot of the countries that were stuck on 2G or 3G systems are now upgrading to 4G. The 4G guys are upgrading to 5G over the next two or three years. That’s very exciting.
I was recently asked about what I’m most excited about that’s happened in the last six months, and I said, “Not a hell of a lot.” But I’m really excited about what’s happening in the next 12-18 months. Ourselves and some of our competitors, we have some exciting products waiting in the wings. We’ll show our AR products in three weeks at SDC. This stuff is not as far away as you think. We actually have hardware made for the next two or three years already. It’s amazing stuff. You’re going to be excited in the next 18 months, seeing some of the things that are coming out.