5 Conclusions From John Riccitiello VRLA 2017 Keynote on VR

John Riccitiello is the CEO of Unity Technologies, one of the world’s leading game engines (valued at $1.5 billion). Prior to heading up Unity, he acted as CEO of gaming pioneer, Electronic Arts. It is safe to say that, when John Riccitiello speaks about the future of AR and VR, people listen.

I certainly do.

So when John appeared as keynote speaker for VRLA 2017, I hung on every word. While volumes could be written anytime Riccitiello gives a speech, I chose to focus on what I believe were the top five points he made. This article is about those five points, and the five conclusions I took away from them.

Point #1:

“The world of AR and VR is ultimately going to be as big as the Internet, but we are not there yet.”

As the leading development IDE for AR and VR 3D, with full cross-platform support, Unity enjoys a unique perspective on the market, including future projections for device sales and what headset vendors need to do to help the market mature to the point of profitability.

Riccitiello’s view of the market is an optimistic one:

“What I’m not here to do today is to convince you that AR and VR is going to be a big thing. I am going to assume we agree on that. What I want to talk with you about is when it is going to happen, how it is going to happen, and what the ingredients are.”

And according to Riccitiello, the ingredients to make it happen are already here. Among those ingredients is the technology needed to create a tetherless, mobile technology. Second, price points are dropping under the $1,000 threshold Riccitiello cites as necessary for mass sales. He also mentions haptic and other technologies that involve the senses in the VR experience as being crucial to market maturitization.

Conclusion #1:

John Riccitiello’s message is not exactly what we would like to hear. He did not say the future of VR is now. He did not say 2017 will be the year the market matures. He did not even say that he agrees with market forecasters who see exponential growth in the next two or three years — because he does not agree; his forecast reflects a slower curve. However, he did say that while we are not there yet, he envisions the world of AR and VR to ultimately be as big as the Internet. And that is encouraging.

Point #2:

“Pricing and content is absolutely necessary for [the market] to reach some level of maturity.”

According to Riccitiello, the largest investors will not invest heavily in content until there are enough units in the field on which that content can be played. Quite simply, investors are looking for ROI, not an opportunity to grow the market. It is the old problem of which came first, the chicken or the egg? In Riccitiello’s view, there needs to be at least 100 million units in the market before before content investment flourishes. Of course, hardware vendors cannot be expected to sell 100 million units until more content is available, but Riccitiello is confident that it will all work out — just not as soon as some predict.

Conclusion #2:

I agree with this argument. Price drives sales to the extent that price is all that matters. Until the price points drop, the CEO of the world’s most used game development platform does not see content as the driver of market maturity. But, as we will see later, he has a plan for content creation to provide opportunity.

Point #3:

“When you’re putting resources into this marketplace, when you’re investing your time and hard-earned money — when can can expect a return on investment and what that might look like?”

Riccitiello’s question reflects the sentiment of every investor and developer who may be eyeing the AR/VR market. He goes on to say that it is important that the industry not get too far ahead of itself, where cash may run out and bankruptcies occur before the industry really gets started.

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Conclusion #3:

There’s no money (yet) in VR for developers. And it looks like big players will wait at least 2 years to join VR market. Riccitiello directed this part of his message to small indie developers who struggle for funding while mega investors sit on the sidelines counting units in the field.

Point #4:

“My sense is we’re going to see [growth and adoption of VR] in full flower in 2019, and we’re going to see the beginnings of that shape in 2018.”

Conclusion #4:

Riccitiello expects to see a growth in VR sales and adoption in 2019. I not only agree, but I also believe Unity Technologies will see IPO within this timeframe.

Point #5:

[Industry leaders] will create the opportunity, you will create the industry.

Conclusion #5:

Riccitiello’s final and most important point is this: the paradox between investor funding of content development and the number of units in the field will be resolved by indie developers. He is confident that new companies will create the new wave of VR content that will drive sales and ultimately investment. He cites companies such as King and Supercell who faced a similar market in the early days of mobile games.

A Final Word

John Riccitiello speaks about the need for small developers to calculate their moves. While this is true, I have a suggestion for Mr. Riccitiello.

Why not adjust the Unity license pricing model to help small developers to afford the essential tool for their industry?

Why not, I propose, making Plus and Pro versions free until the product revenue exceeds a certain threshold? In other words, remove the $200K revenue cap for the Plus version and only charge a fee per seat when $200K in sales has been reached? The Pro version does not have a revenue cap, but the same principle could apply.

It’s just a thought, but one I think Mr. Riccitiello would do well to consider.

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