Oculus Subscriptions Indicate Critical Inflection Point for VR Ecosystem

J.C. Kuang, Analyst J.C. Kuang, Analyst Insight Articles

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Executive leadership at Facebook and Oculus announced on Thursday they would begin offering VR developers the opportunity to implement subscription-based models for games and services available on its Quest store. In addition, several established properties such as VSpatial, FitXR, and Rec Room (which notably closed its largest funding round to date [$100M] in March of 2021).

Oculus emphasized in its announcement that consumers would get access to additional content in subscription-based titles on Oculus Quest. Examples of such content include "premium tools and features" in experiential titles such as mindfulness app TRIPP, as well as more traditional rewards like the cosmetic unlocks typically found in other live service games such as Fortnite or League of Legends.

Our Analysis

Over the last two years, major technology leaders such as Apple and Google have aggressively pursued subscription-based content services such as Stadia and Arcade, in keeping with a greater overall supertrend of providing live service entertainment to reap the benefits of stable recurring revenue. However, Facebook's decision to explore this new subscription-based model carries much more significance than making consistent revenue in an established gaming platform.

Oculus and Facebook's aggressive hardware strategy has paid dividends, establishing them as market share leaders in a challenging consumer market that has proven reluctant to widely adopt PC-based VR. The arrival of subscription models to the Quest store further reinforces the notion that Facebook intends to focus exclusively on standalone VR in the future.

More compellingly, however, the significant install base afforded to Oculus by way of the Quest platform forms the basis of CEO Mark Zuckerberg's stated vision for VR. In order to establish a "self-sustaining ecosystem", one which is capable of organic growth without the aid of Facebook's significant capital expenditure, Zuckerberg has previously quoted a target figure of 10 million users in VR. The opening of subscription models will invariably attract new developers and new concepts for Quest titles that were not viable under a single-purchase model. The timing of the decision by the company may well indicate an internal milestone for install base or developer revenue, and the inclusion of subscription-based content in the Oculus store represents the next major actionable boost the company can provide to its ecosystem.