In a press release, Oculus VR announced its acquisition by Facebook Inc (NASDAQ:FB) in a cash and shares deal worth around $2 billion. The acquisition positions Facebook to accelerate Oculus’ growth in gaming, communications and new social experiences.
MENLO PARK, CALIF. – March 25, 2014 – Facebook today announced that it has reached a definitive agreement to acquire Oculus VR, Inc., the leader in immersive virtual reality technology, for a total of approximately $2 billion. This includes $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion based on the average closing price of the 20 trading days preceding March 21, 2014 of $69.35 per share). The agreement also provides for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.
Oculus VP Product Nate Mitchell introduces the Oculus VR Development Kit 2 during an interview with Tested at the Game Developer's Conference 2014 in San Francisco on March 19, 2014.
Oculus is the leader in immersive virtual reality technology and has already built strong interest among developers, having received more than 75,000 orders for development kits for the company’s virtual reality headset, the Oculus Rift.
While the applications for virtual reality technology beyond gaming are in their nascent stages, several industries are already experimenting with the technology, and Facebook plans to extend Oculus’ existing advantage in gaming to new verticals, including communications, media and entertainment, education and other areas. Given these broad potential applications, virtual reality technology is a strong candidate to emerge as the next social and communications platform.
Facebook founder and CEO, Mark Zuckerberg said.
“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow. Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.”
Brendan Iribe, co-founder and CEO of Oculus VR said.
“We are excited to work with Mark and the Facebook team to deliver the very best virtual reality platform in the world. We believe virtual reality will be heavily defined by social experiences that connect people in magical, new ways. It is a transformative and disruptive technology, that enables the world to experience the impossible, and it’s only just the beginning.”
Oculus will maintain its headquarters in Irvine, CA, and will continue development of the Oculus Rift, its ground-breaking virtual reality platform.
The transaction is expected to close in the second quarter of 2014.
In the following YouTube video, Dan from The Diamond Minecart uses Oculus VR's Rift virtuality headset with Minecraft, a VR game, to demonstrate Rift's VR capabilities. Judging from Dan's overall enthusiasm and joy using Rift, and fun riding Harold the Pig (an animal character in Minecraft), it appears that Rift is going to be a runaway best seller. 75,000 Oculus VR development kits 2 have been presold as a testatment.
In acquiring Oculus VR, Facebook is banking that games, communications and social media apps will go VR in a big way, and we will all be wearing these VR goggles in the same way we watch videos and our friends via two-way videoconferences.
Webcast and Conference Call Information
Facebook will host a 30-minute conference call to discuss the acquisition at 3:15 P.M. PDT / 6:15 P.M. EDT today. The dial-in number for the call is (866) 751-3284 (toll free) and (973) 935-8772 (international); participants will be connected by an operator. The live webcast of the call can be accessed at the Facebook Investor Relations website at investor.fb.com. Facebook uses the website http://investor.fb.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
Following the call, a replay will be available at the same website. A telephonic replay will be available for one week following the conference call at (855) 859-2056 or (404) 537-3406, conference ID 18971947.
COMMENTARY: The virtual reality headset, the gizmo that was supposed to seamlessly transport wearers to three-dimensional virtual worlds, has made a remarkable return at this year's Game Developers Conference, an annual gathering of video game makers in San Francisco.
After drumming up hype over the past year and banking $2.4 million from crowdfunding, the Irvine, Calif.-based company Oculus VR captured the conference's attention this week with the Oculus Rift, its VR headset that's more like a pair of ski goggles than those bulky gaming helmets of the 1990s that usually left users with headaches.
Oculus VR founder Palmer Luckey said.
"Developers who start working on VR games now are going to be able to do cool things. This is the first time when the technology, software, community and rendering power is all really there."
While VR technology has successfully been employed in recent years for military and medical training purposes, it's been too expensive, clunky or just plain bad for most at-home gamers. Oculus VR's headset is armed with stereoscopic 3-D, low-latency head tracking and a 110-degree field of view, and the company expects it to cost just a few hundred bucks.
A line at the conference snaked around the expo floor with attendees waiting for a chance to plop the glasses on their head and play a few minutes of "Hawken," an upcoming first-person shooter that puts players inside levitating war machines.
Attendance was also at capacity for a Thursday talk called "Virtual Reality: The Holy Grail of Gaming" led by Luckey. When he asked the crowd who'd ordered development prototypes of the technology, dozens of hands shot into the air.
Simon Carless, executive vice president at UBM Tech Game Network, which organizes the Game Developers Conference said.
"There's been a lot of promise over several decades with the VR helmet idea, but I think a lot of us feel like Oculus and other devices like it are starting to get it right. We may have a competitive and interesting-to-use device, which you could strap to your head and have really immersive gaming as a result."
Sony Corp. and Microsoft Corp. are reportedly working on similar peripherals, as are other companies. Luckey contends that the innovations Nintendo Co. made with its Wii U, Sony is planning with its upcoming PlayStation 4, and Microsoft is likely tinkering with for its successor to the Xbox 360 don't seem like enough.
"We're seeing better graphics and social networks, but those aren't things that are going to fundamentally change the kind of experiences that gamers can have."
A growing list of high-profile game makers have sung the device's praises, including Atari founder Nolan Bushnell, "Minecraft" mastermind Markus Persson, id Software's John Carmack, "Gears of War" chief Cliff Bleszinski and Valve boss Gabe Newell.
Valve is planning to release a VR version of its first-person shooter "Team Fortress 2" for the Rift, but Luckey is hoping that designers in attendance at this week's conference begin creating games especially for the doodad.
"The doors are already open. People are already telling us things they want to do with the Rift that they can't do with traditional games."
Luckey said prototype versions of the technology are being distributed to developers now, and he anticipates releasing a version for consumers by next year.
Forecast: 200,000 Virtual Reality Headset Units Sold by End of 2014, $60 Million Market Size
Announcements made at GDC last week by Sony and Oculus have helped to firm-up the state of the consumer virtual reality market in 2014. For those of you who didn’t catch the GDC news…..
- Oculus confirmed that the second iteration of the developer kit (DK2) will be shipping in July 2014.
- Sony showcased Project Morpheus, their VR headset. However, this will not be shipping in 2014 and instead is rumoured to be available early 2015.
Back in January KZero Worldwide released its State of the Market report and accompanying market sizing analysis. In its market sizing assessment Kzero forecasted a total of 200,000 VR headset units sold in 2014, yielding a market value of $60 million (at an average sales price of $300). It looks like KZero's forecast was pretty accurate for the following reasons:
- Oculus has sold 60,000 DK1 units to date (with sales now suspended for this version). Of this 60,000, circa 20,000 were sold in 2014 (Kzero estimated).
- Kzero expects the vast majority of DK1 buyers to purchase at least one DK2, meaning circa 60,000 – 80,000 repeat unit sales from these existing customers.
- With interest in VR and Oculus continuing to grow through 2014, Kzero forecasts at least 100,000 new sales (from new buyers) in 2014 once DK2 is released.
Kzero's five year unit sales forecast is shown below. Post 2014, its forecast is based on the following assumptions:
- In 2014 Oculus is the only company selling a virtual reality headset. So, its 2014 forecast numbers for the market is essentially a forecast for Oculus.
- Sony enters the market Q1 2015 with a consumer version of Project Morpheus.
- Oculus also launches their consumer version (CV1) in Q1 2015.
- Microsoft and potentially three other major companies enter the market towards the end 2015. Kzero anticipates Samsung, Apple, Google and LG to be in the mix.
- Other hardware start-ups launch consumer VR headsets throughout 2015 and 2016.
- Hardcore gamers and Innovators drive initial sales (these are the people purchasing DK1 and 2).
- Early adopters and light gamers boost sales supported by the Early Majority and the Teen market from 2015, ramping up from 2016 onwards.
Total unit sales in 2015 is forecasted at 5.7 million, rising to 10.9 million in 2016 with the VR market establishing itself as a serious contender in the global gaming and entertainment marketplaces. Over the full five year period of 2014 to 2018, Kzero forecasts total cumulative unit sales of 56.8 million.
Kzero's Slideshare presentation containing more detailed market forecasts for consumer virtual reality is shown below. For more insight into the Virtual Reality market you can order our State of the Market report for free here.