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Virtual Reality, Oculus Rift, Business Model
 

Virtual Reality, Oculus Rift, Business Model

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These slides use ideas from my class to develop a business model for Oculus Rift’s headset. This headset creates the perception among users that they are in a different reality as they play video ...

These slides use ideas from my class to develop a business model for Oculus Rift’s headset. This headset creates the perception among users that they are in a different reality as they play video games. It has much higher resolution and faster response time than do previous headsets. Although Oculus hopes to develop its own console, these slides recommend that Oculus partner with a console maker such as Sony, Microsoft, or Nintendo in order to reduce development cost and gain access to existing users and game software. Hopefully it can receive a portion of hardware and game software revenues as its headset enables console makers to increase their market share and charge more for game software.

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    Virtual Reality, Oculus Rift, Business Model Virtual Reality, Oculus Rift, Business Model Presentation Transcript

    • VIRTUAL REALITY GAMING OCULUS RIFT BUSINESS MODEL Chua Ping Shiuan Priscilla Mariani William Suryadiputra Yeo Kiat Hwee
    • AGENDA 1. Introduction to Oculus 2. Gaming ecosystem 3. Value proposition 4. Customer selection 5. Value capture 6. Scope of activities 7. Strategic control 8. Future Possibilities 2/ 42
    • INTRODUCTION TO OCULUS
    • THE TECHNOLOGY: VIRTUAL REALITY Virtual reality  Use of computer modelling and simulation to enable a person to interact with an artificial three-dimensional visual or other sensory environment.  The illusion of being in the created environment (telepresence) is accomplished by motion sensors that pick up user’s movements... usually in real time. INTRODUCTION TO OCULUS 4/ 42
    • CONVENTIONAL GAMING INTRODUCTION TO OCULUS 5/ 42
    • VIRTUAL REALITY GAMING
    • THE PRODUCT: OCULUS RIFT  VR head-mounted display  Fast head tracking  Large Field of View  HD screen and 3D vision  Adjustable focus  Price: 300 USD INTRODUCTION TO OCULUS 7/ 42
    • GAMING ECOSYSTEM
    • GAMING ECOSYSTEM 10 / 42
    • CURRENT ECOSYSTEM Product Oculus Rift End users Revenue Dev. Kit Revenue from Dev. Kit Sales + % Revenue from Game Sales in Oculus Share Games Revenue from Game Sales in Oculus Share Game Developers Game Console Manufacturers (Sony, Nintendo, Microsoft) GAMING ECOSYSTEM 11 / 42
    • MARKET SITUATION  Current Competitors   Sony Playstation   Microsoft Xbox Nintendo Wii Rising competitors  Sony VR Headset  Zeiss Cinemizer OLED GAMING ECOSYSTEM 12 / 42
    • FLAWS IN CURRENT DIRECTION ? ● Difficult to compete No suitable control consoles and the market has stiff competition between three large game console makers (Sony Playstation, Nintendo Wii, Microsoft Xbox) ● Technology can be easily copied Sony is in the process of developing its own VR kit ● Still limited games can be played using Oculus Will get even harder to attract game developers with the existing “incomplete” console GAMING ECOSYSTEM 13 / 42
    • A BETTER ECOSYSTEM? Hardware licensing Product Console Makers Revenue Oculus Rift Sale Revenue % Game Sales Console Development Kit Oculus SDK Game Developers % Game Sales GAMING ECOSYSTEM End users Games Sale Revenue 14 / 42
    • VALUE PROPOSITION
    • VIRTUAL REALITY  Immersive gaming  Allow new possibilities of gaming VALUE PROPOSITION 16 / 42
    • STRATEGY CANVAS PC Gaming Console Gaming Motion Gaming VR Gaming Graphics Number of games VALUE PROPOSITION Intuitiveness Interactivity Immersiveness 17 / 42
    • IMMERSIVE GAMING
    • OCULUS RIFT “The magic that sets the Rift apart is immersive stereoscopic 3D rendering, a massive field of view, and ultra low latency head tracking.” - Palmer Luckey, Founder of Oculus VALUE PROPOSITION 19 / 42
    • OCULUS RIFT
    • THE OCULUS RIFT ADVANTAGE  Better gaming experience whereby visual display is instinctive   Gamers can orientate their perspective base on head motion Create the impression of an immense environment within a small physical space  Large field of view  Oculus offers low latency, fast head-tracking performance  Head movement tracking without motion sickness  Adjustable focus for near- or far-sighted gamers VALUE PROPOSITION 21 / 42
    • FOR CONSOLE MAKERS  Attract more gamers because of more immersive gaming experience  Charge higher price for VR games  Large hype and demand in the market    There is already much hype from developers, media $2,437,429 pledged of $250,000 goal in Kickstarter shows demand Guaranteed reputation    People in the company are experts in their field Oculus as a leader in the VR game industry Save time and money from R&D VALUE PROPOSITION 22 / 42
    • TECHNICAL DISADVANTAGES  Lack of compatible games  Not enough content VALUE PROPOSITION 23 / 42
    • CUSTOMER SELECTION
    • TARGET SEGMENTS  Early adopters of novel game technologies  Have the latest games and consoles  Doesn’t mind lack of support  Age group 20-30 years old  Gamers who frequent gaming conventions  Mostly males  People with willingness and ability to spend on game, consoles and accessories.  Adventurous  Explore new gaming experiences  Loves to explore game worlds CUSTOMER SELECTION 25 / 42
    • TARGET SEGMENTS  Gamers who enjoy first-person games  Racing  Shooting  Horror  Sandbox CUSTOMER SELECTION 26 / 42
    • CONSOLE MAKERS Sony Microsoft  More exclusive games  Game developer itself (Sony Computer Entertainment)  More support for indie game developers  Better online experience –  Complements the motionmore players based games and motion controls  Complements the Kinect motion gaming  Offline multiplayer experience generate more  More first-person games demand of Oculus Rift (Halo, Gears of War – Xbox exclusive)  More interactive games - Developing its own VR Headset Conflict with Sony’s TV business CUSTOMER SELECTION - Less exclusive games Nintendo - Different customer segment 27 / 42
    • CONSOLE MAKERS Sony Microsoft  More exclusive games  Game developer itself (Sony Computer Entertainment)  More support for indie game developers  Better online experience –  Complements the motionmore players based games and motion controls  Complements the Kinect motion gaming  Offline multiplayer experience generate more  More first-person games demand of Oculus Rift (Halo, Gears of War – Xbox exclusive)  More interactive games - Developing its own VR Headset Conflict with Sony’s TV business CUSTOMER SELECTION - Less exclusive games Nintendo - Different customer segment 28 / 42
    • WHY NOT ON THE PC PLATFORM  Native PC controllers are not suitable for VR  Less game developers on PC  Less gamers on PC  Difficult to have exclusive contract in PC market CUSTOMER SELECTION 29 / 42
    • VALUE CAPTURE
    • NEW VALUE CAPTURE Hardware licensing Product Console Makers Revenue Oculus Rift Sale Revenue % Game Sales Console Development Kit Oculus SDK Game Developers % Game Sales VALUE CAPTURE End users Games Sale Revenue 31 / 42
    • VALUE CAPTURE METHODS  Sources of revenue can be through the  Licensing of hardware to other game console makers  Percentage game sales from game developers VALUE CAPTURE 32 / 42
    • SCOPE OF ACTIVITIES
    • SCOPE OF ACTIVITIES  Partnership with console makers   Distribution of Oculus SDK to game developers   Hardware license Provide SDK updates and support R&D In-house VR technology  Hardware  Software SCOPE OF ACTIVITIES 34 / 42
    • PROCESS FLOW Console Makers Hardware License DESIGN PRODUCTION MARKETING SALES DISTRIBUTION END USERS R&D OCULUS Oculus SDK (GAMERS) CONCEPTUALISATION DEVELOPMENT TESTING MARKETING DISTRIBUTION Game Developers SCOPE OF ACTIVITIES 35 / 42
    • STRATEGIC CONTROL
    • STRATEGIC CONTROL  Exclusive contract with game console companies    Don’t allow partnership with other VR-related companies Continued usage of Oculus brand name Intellectual Property Rights  Patent  Trademark STRATEGIC CONTROL 37 / 42
    • STRATEGIC CONTROL  Leverage on network effect    More game developers on Oculus platform ⇔ More Oculus gamers Create more community and online games Continuous in-house R&D   ensure leadership in VR HR management    Non-disclosure agreements (NDA) Non-competition contracts Work with complementary assets  Improving the game experience STRATEGIC CONTROL 38 / 42
    • COMPLEMENTARY ASSETS
    • FUTURE POSSIBILITIES
    • FUTURE POSSIBILITIES  Locked-in to one console manufacturer  Diversify into other markets   Theme parks: interactive cinemas, simulations and digital games  Training camps: military training, olympic training, pilot training, etc.  Schools: immersive learning experience  Property agents and interior designers: immersive design visualization   Cinemas: immersive movie experience Many others Further R&D  Full coverage of human vision span (i.e. peripheral vision) FUTURE POSSIBILITIES 41 / 42
    • CONCLUSION Strategic Control Scope of activities Value Capture Customer selection Value Proposition 42 / 42
    • INDEX  Introduction to Oculus  Customer selection  Console Wars   Target Segments (1)  Revenue Model  Conventional Gaming  Target Segments (2)  Fourth Console  Virtual Reality Gaming <[ ]>  The Product  Console Makers  License Hardware Design   The Technology The Company  Why Not PC?  Acquisition  Microsoft Gaming ecosystem  Value capture  New Value Capture  Exclusive Games  Value Capture Methods  Backup Plan  Why Gaming  Latest Development   Current Situation  Market Situation  Flaws in Current Direction  Activities   Ocean Better Ecosystem  Material Flow Value proposition  Quote  Scope of activities Strategic control Immersive Gaming <[ ]>   Virtual Reality    Strategic Control (1)  Strategic Control (2) Latency Demonstration <[ ]>  Complementary Assets  The Oculus Rift Advantage  Compl. Assets <[ ]>  For Console Makers  Future Possibilities  Technical Disadvantages  Conclusion
    • CONSOLE WARS  Currently at 8th Generation  Infamously led to death of SEGA as console maker   SEGA tried to compete graphics with Sony PS2 Long-time players Nintendo and Sony    Since 1990s after American Video Game Crash 1983 Microsoft is the only successful late entrant Tug-of-war to get Game Developers  Aim to strike exclusive deals with developers Appendix A
    • REVENUE MODEL Profitability Stable Continuous Revenue For Large Game Companies For Independent Developers One-off Subscription % Game Sales Appendix B
    • FOURTH CONSOLE  Sony developing their VR headset   Easily copied technology Competitive console market    Competing for games Timing is utmost importance Difficult to create network effect    Game developers need to learn to develop for a new console Consumer switching cost No suitable control system Appendix C
    • HARDWARE DESIGN LICENSE  Retain operating software  Prevent console maker from imitating the full product Appendix D
    • ACQUISITION NO  Free to penetrate other markets  Can still push for own console  Other markets potentially more profitable  High capital markets – Medical and Military  Large user base – Cinema and Theme Parks Appendix E
    • WHY MICROSOFT NEEDS OCULUS  Competition with Sony   Graphics battle goes to the next level on VR Losing the exclusive games battle to Sony    Oculus Rift will attract game developers to build on VR Microsoft needs to dive into VR earlier than Sony to win Realise the importance of first-mover in gaming industry Appendix F
    • XBOX One Below - Capybara Games Cobalt - Mojang D4: Dark Dreams Don't Die - Access Games Fable Legends - Lionhead Studios Fantasia: Music Evolved Halo 5 - 343 Industries Halo: Spartan Assault - Vanguard Entertainment / 343 Industries Kinect Sports Rivals - Rare LocoCycle Max: The Curse of Brotherhood Peggle 2 Plants vs. Zombies: Garden Warfare Project Spark - Team Dakota Quantum Break - Remedy Entertainment Sunset Overdrive - Insomniac Games Titanfall - Respawn Entertainment Xbox Fitness - Microsoft Studios Zoo Tycoon EXCLUSI VE GAMES XBOX ONE vs PS4 PLAYSTATION 4 Assault Android Cactus - Witch Beam Octodad: Dadliest Catch - Young Horses, Inc Basement Crawl - Bloober Team Onigiri - Cyberstep (free-to-play) Blast 'Em Bunnies - Nnooo Outlast - Red Barrels Studio Cosmic Star Heroine - Zeboyd Games Pavillion - Visiontrick Media CounterSpy - Dynamighty Phantom Breaker: Battle Grounds Overdrive - 5pb Daylight - Zombie Studios PlanetSide 2 - Sony Online Entertainment Deep Down - Capcom Pool Nation Extreme/FX - Cherry Pop Games Divekick - Iron Galaxy Primal Carnage: Genesis - Lukewarm Media Doki-Doki Universe - HumaNature Studios Project Phoenix - Creative Intelligence Arts Don't Starve - Klei Entertainment Project: Heart and Soul - Reach Game Studios Dragon's Prophet - Sony Online Entertainment (free-to-play) Putty Squad - System 3 Dream Club: Host Girls on Stage - Tamsoft QuickDraw - Greenfly Studios DriveClub - Evolution Studios Ray's the Dead - Ragtag Studios DUST 514 - CCP (free-to-play) Rime - Tequila Works Dynasty Warriors 8 w/ Xtreme Legends Bundle - Tecmo Koei Road Not Taken - Spry Fox Earth Defense Force Rocketbirds 2: Evolution - Ratloop Escape Plan - Fun Bits Interactive Rogue Legacy - Cellar Door Games Everquest Next - Sony Online Entertainment (free-to-play) Samurai Gunn - Maxistentialism Everybody's Gone to the Rapture - The Chinese Room / Sony Secret Ponchos - Switchblade Monkeys Santa Monica Fez - Polytron Corporation Shadow of the Beast - Heavy Spectrum Final Fantasy XIV: A Realm Reborn - Square Enix Sherlock Holmes: Crimes and Punishments - Frogwares Final Horizon - Eiconic Games SOMA - Frictional Games flOw - Thatgamecompany Sportsfriends - Die Gute Fabrik Galak-Z: The Dimensional 17-BIT Starbound - Chucklefish GlowTag - Greenfly Studios Super Exploding Zoo - Honeyslug Guns of Icarus Online - Muse Games Switch Galaxy Ultra - Atomicom H-Hour: World's Elite - SOF Studios The Binding of Isaac: Rebirth - Nicalis Helldivers - Arrowhead Studios The Idolm@ster - Namco Bandai Games Hohokum - Honeyslug The Order: 1886 - Ready at Dawn / Sony Santa Monica Hotline Miami 2: Wrong Number - Dennaton Games The Playroom - Sony Hyper Light Drifter - Heart Machine The Witness - Jonathan Blow Joysound Drive 2 - Xing Entertainment Tiny Brains - Spearhead Games Lily Bergamo - Grasshopper Manufacture Tottemo E Mahjong Plus - Arc System Works Mercenary Kings - Tribute Games Transistor - Supergiant Games MLB 14: The Show - Sony San Diego Velocity 2X - FuturLab Mobile Suit Gundam - Namco Bandai Games Volume - Mike Bithell Games N++ - Metanet Software War Thunder - Gaijin Entertainment (free-to-play) Natural Doctrine - Kadokawa Games Wasteland Kings - Vlambeer Nikoli no Puzzle 4: Sudoku - Hamster Yakuza Ishin - Sega Nuclear Throne - Vlambeer Source: http://www.neowin.net/news/list-of-xbox-one-and-playstation-4-exclusive-games Appendix G
    • BACKUP PLAN  Develop own game console  Approach as many game developers as possible    A chance to create a new gaming experience Preferably first-person game developers Strike partnership with vital accessories    Razer Hydra – motion controller perfect for shooter games Virtuix Omni Treadmill Intensive marketing effort Appendix H
    • WHY GAMING  Virtuality is something gamers have been wanting  More adapters of new tech  E.g. motion gaming caught on within less than a year (2011)  Large pool of tech enthusiasts   Large portion of adventurous individuals But, there is a danger of price buyers Appendix H
    • Nov 11, 2013 Source: http://www.techradar.com/news/gaming/oc ulus-rift-creator-xbox-one-and-ps4-are-fartoo-limited-for-what-we-re-planning1198420 LATEST DEVELOPMENT Appendix I
    • Nov 11, 2013 Source: http://www.techradar.com/news/gaming/oc ulus-rift-creator-xbox-one-and-ps4-are-fartoo-limited-for-what-we-re-planning1198420 LATEST DEVELOPMENT "Consoles are too limited for what we want to do," he says. "We're trying to make the best virtual reality device in the world and we want to continue to innovate and upgrade every year - continue making progress internally - and whenever we make big jumps we want to push that to the public.” - Palmer Luckey, founder of Oculus Appendix I
    • WHY OCULUS IS PUSHING  Dislikes the long life cycle of consoles    Prevent them from continuously improving Graphical performance bound by graphics processors (hardware) Eager to disrupt the video game business    Shorter life cycle of consoles Full-fledged VR gaming On the lookout for Valve  Steam Box and SteamOS Appendix I