What Does the Oculus Rift Price Cut Mean?

If you haven’t heard the collective nerdgasm from the hordes of cash-strapped tech geeks yet, you may be interested to hear that Facebook has slashed the price of the Oculus Rift + Touch bundle to an unprecedented $399. That’s about $200 off the usual asking price and is a deal almost too good to be true.

It should be foregrounded that this sale is only set to last for a “limited time only”, which is reportedly for 6 weeks.

Slice and Dice

This is the second big price cut the bundle has received this year. Back in March the Oculus Rift + Touch bundle was slashed permanently from almost $800 to just under $600. The high price of premium VR technology is often cited as a key reason for the slow adoption of the medium by the mainstream public.

Oculus has been working hard to rectify this and they’ve already managed to reduce the high computer requirements with some software magic. Now the actual hardware is cheaper too.

Loss Leaders

At $600 it’s not likely that Facebook is actually making much on each unit sold and at $400 they are almost certainly taking a severe loss on each unit. It’s that same chicken and egg scenario that game consoles face.

People are driven by the content available on a given platform, but without a significant install base content providers are not going to invest in creating anything. First-party content is one way to get the ball rolling, but although Oculus has provided some great stuff there hasn’t been a killer application yet.

So that means the other way of getting people to buy your platform is to make it cheap enough so that it’s not an obstacle. Sure you lose money on the hardware, but the advertising and software licensing revenue will put you in the black over the long term. At least that’s the idea.

It’s a strategy that game console makers have been using for ages. Consoles like the PS3 and PS4 sell to the public for less than they cost Sony to make. But every game includes a licence fee, which is one of the reasons PC video games are cheaper.

Slashing the Oculus bundle to this price point opens the potential for the Oculus Rift to be a profitable loss leader in the long run.

Sony Blues

Speaking of Sony, there’s a good chance that this massive sale from Oculus is spurred in no small part by the success of the PSVR. In June this year Sony broke the million unit mark and so one in 60 PS4s have a PSVR to go with it. That sort of rapid sales success must surely make Facebook nervous. The PSVR is cheaper than the other premium contenders and a PS4 can be had for as little as $250 or less for the slimline model depending on sales.

That means under normal circumstances consumers can buy an entire VR experience for less than the Oculus bundle alone. If you already have a PS4 it’s even more attractive, whereas it’s likely your current PC will need a pricey upgrade to handle the Oculus.

The final nail in the coffin may be the great VR games that Sony is letting onto its market-leading console. Resident Evil 7 VR is a flagship title that provides enough motivation for Sony fans to flash the needed cash and buy a PSVR.

In the end, this means that this “temporary” sale may become a permanent fixture sooner rather than later.