Can Oculus Survive Its $600 Price Tag?

For innovators with entirely new products to sell, nailing down a tangible price point can be a little like walking on water – when few consumers have had the exposure necessary to form impressions of something like the Oculus Rift virtual reality headset, it’s difficult to find a dollar amount that can both cover initial costs while not turning potential early adopters off from sticker shock. Oculus had to plant their flag on a number at some point, though, and CEO Palmer Luckey took the stage at CES 2016 to stick a price tag on the future.

With that kind of sales pitch, the Rift’s $599 price might actually sound a little bit more in line with expectations.

The reality Luckey and Oculus find themselves in is much different. CNET explained how the backlash to the Rift’s premium price point has been fast and swift online, to the point that Luckey had to go into public relations damage control mode with a Reddit AMA on Thursday (Jan. 7). Reactions to consumers have varied from outrage and indignation to resignation and claims to never buy Oculus products again. While Luckey contended on Reddit that his messaging that centered around a $350 area leading up to the announcement was misguided and should be the center of any consumer frustration, there’s no denying that many techies are jumping off the Oculus bandwagon at the same alarming rate they originally jumped on.

A quick Twitter search will reveal dozens of people reacting the pricey news by claiming they’d canceled preorders or would be dropping plans to buy a Rift in the future. However, losing the support of a few hundred diehards was never going to lose Luckey any sleep in the first place. Rather, the real danger of a $599 price tag to Oculus is the next echelon of consumers — not quite the early adopter crowd, but those interested in picking up new toys if they can afford them. It’s this demographic that can help Oculus grow virtual reality beyond a niche crowd, and it’s this same demographic that a high initial cost is most likely to turn off.

It’s not out of the question to see a $600 virtual reality headset being a special purchase, akin to a new TV or the new standard biannual smartphone, but PC World explained that there’s more than meets the eye when it comes to the Rift’s price. The headset itself is just one part of the whole rig — shoppers will also need to either have or buy a high-end gaming computer capable of running Oculus games, and that comes with the added cost of at least $900 for the low-end of the processing power spectrum. For $1,500 total, the future of at-home virtual reality certainly will not come cheap.

Could this be feeding into the outrage over the Rift’s newly announced device-only price? Luckey himself said so.

“Many people were confused enough to think the Rift was a standalone device,” Luckey responded to a question on Reddit. “For that vast majority of people, $1,500 is the all-in cost of owning Rift. The biggest portion of their cost is the PC, not the Rift itself.”

To his credit, Luckey has navigate the choppy waters of bad press well since the announcement, apologizing in stride for the shock to consumers while maintaining the Rift’s price point for a variety of reasons. If there’s any consolation for Oculus, it’s that they’re not exactly alone when it comes to high entry costs for products that redefine markets — and sometimes create their own. In an interview with NPR, Luckey noted that the Palm Pilot of the ’90s was also once said to be so prohibitively expensive that it could never take off.

“It was a very expensive device for most people,” Luckey said. “And most people couldn’t justify the cost of that device in their everyday life. But, everyone knew about it.”