And Palmer Luckey said they didn’t make money by selling it for $599.
Wait… Hold on! I clearly remember the part where Palmer Luckey mentioned that. Here is a part of a message from Palmer Luckey that I copy-paste from Reddit :
To be perfectly clear, we don’t make money on the Rift. The Xbox controller costs us almost nothing to bundle, and people can easily resell it for profit. A lot of people wish we would sell a bundle without “useless extras” like high-end audio, a carrying case, the bundled games, etc, but those just don’t significantly impact the cost. The core technology in the Rift is the main driver – two built-for-VR OLED displays with very high refresh rate and pixel density, a very precise tracking system, mechanical adjustment systems that must be lightweight, durable, and precise, and cutting-edge optics that are more complex to manufacture than many high end DSLR lenses. It is expensive, but for the $599 you spend, you get a lot more than spending $599 on pretty much any other consumer electronics devices – phones that cost $599 cost a fraction of that to make, same with mid-range TVs that cost $599. There are a lot of mainstream devices in that price-range, so as you have said, our failing was in communication, not just price.
Selling something that cost around $200 at $599 and saying that you don’t make money from it to be perfectly clear? Oh come on Mister. This is not something that you could say “perfectly” clear. Dammit Palmer Luckey, your choice of words is bad… You might be not lying, but people might get it wrong.
Okay. The Rift’s total bill-of-materials (BOM) cost is $206.10, which is close to a third of Oculus Rift suggested retail price at $599. Is it “perfectly” clear how you cannot make money from that amount of profit margin? There is no way it is “perfectly” clear.
But let’s read the message first. Luckey mentioned the core technology of the rift. And that is Virtual Reality! There is no (consumer) device that offer this kind of excitement before the Rift. The concept itself is amazing and the amount of resource and money to turn the concept into reality is no cheap sure. How many hours they spend to develop the concept of the Rift? From DK1, DK2, and later the final product. It took a few years to make the product real. And I simply can’t imagine the effort that Oculus team has done. In the end, they made a great final product but the cost is also too high for most people. I can’t really blame them because the development costs quite a lot of money. Not sure how much but I am sure it is a lot. It will take quite sometime until they get into Break-even Point. And before that time, what Palmer Luckey said is true, but not perfectly clear.
For $599, it is expensive, just like what Palmer Luckey said. But get a lot more, in this case, a product that will let you taste a new technology developed from an amazing concept. There aren’t any option to play VR in your PC other than Oculus Rift and HTC Vive. And Vive already costs $200 more than the Rift, which leaves you with no cheaper option. PS VR costs $399 but you need PS4. I don’t think Sony will make PS VR compatible with PC because they want to sell PS4 even more too.
The original post about Oculus Rift Bill-of-Materials is from IHS Blog. You can head over there to check the details.