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Sharks Out of Their Depth, Fail to Byte VR Gaming
by Neil Schneider on 12/09/13 12:35:00 am   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

Last Friday, I watched Shark Tank on ABC, and with all the billions of dollars made in video games to date, with all the multinationals and hundreds of thousands of worldwide jobs owed to the video game market, it's heartbreaking to see just how poorly understood we gamers truly are.

Jan Goetgeluk, CEO of Virtuix

A colleague of mine, Jan Goetgeluk (pictured above), is the Founder of Virtuix - makers of the Virtuix Omni, which was on that episode of Shark Tank. The Omni is a low friction treadmill without moving parts.  Treadmill is a poor analogy; it's a physical platform that safely makes your legs and body part of the game without the limitations of space.  You can walk, run, jump and crouch - all without the clumsiness of a small room and being limited by a fixed camera or sensor range.

The hardware works with nearly all modern PC video games, and its only requirement is to have a display connected to the user's face.  The remaining interactivity is all seamlessly converted from the Omni to something the game's existing inputs will understandwith little to no latency.

While the Shark Tank investors danced around the valuation of the company by arguing that their $2 million dollars for 10% stake was way too high, they didn't see the forest through the trees and make a counter offer.  Why?

Here were their core arguments:

  1. Gamers are lazy.  The actual quote was "usually they (gamers) have a side job as a plus-sized model" according to Daymond John.  We are just too content to sit on our butt all day to buy a product like this.  We have no interest in products that will add physical activity to our video game enjoyment.
  2. According to Barbara Corcoran, "if my husband brought this home, I would divorce him immediately".  Our wives won't approve because the required gear makes us too ugly to be marketable.
  3. Virtuix Omni is locked to the Oculus Rift, and where the Rift goes, Virtuix Omni goes.
  4. There isn't enough retail space; it's too expensive to exhibit in a retail environment.
  5. Virtuix is up against every other peripheral out there, and it's too competitive a space.
  6. The Virtuix Omni is too much money.

There is so much wrong with all these arguments, I just couldn't take them sitting down.  So here we go:

Gamers Are FAT and Lazy

According to ESRB, as much as 67% of adults play video games in US households.  The Shark Tank literally told more than two thirds of the adult population that they are too fat and too lazy to exercise.  In other words, it is completely out of our scope and wherewithal to stand up from our couch...and walk - not even for the fun of it.  It's a wonder that by January, 2012, Nintendo's Wii Balance Board sold over 32 million units, and there are several exercise games readily available on multiple consoles.

However, this in itself is a terrible counterpoint.  Virtuix Omni was never about the willingness of gamers to exercise.  Exercise is the by-product.  The big question is this: are gamers willing to immerse themselves in the game, and do so physically?  The answer is yes.  With just a series of promotional videos (and some community help!), Virtuix managed to raise over $1.1 million from gamers with thousands of presold units.  If you think about it, running and jumping is just an extension of moving about with our Kinect and PlayStation Move controllers - and we all know those products have sold very well.

Barbara Corcoran

Our Wives Won't Approve

Barbara Corcoran (pictured aboved) had the most frustrating feedback of them all.  She was so concerned about the gamer's physical appearance and what wives would think, she failed to see the opportunity that parents want.  Instead of fighting our kids to get off their gaming systems, an activity which is becoming a very important part of family life, we are looking at a real opportunity for games to help fight obesity by having our kids voluntarily do what we are otherwise begging them to do.  What warm blooded parent would miss out on this?!?

"50% of the population is married, and they are going to have to deal with their wives on this one" - Barbara Corcoran

I really don't know who should feel more insulted by this statement: the gamers, the women...the nearly 50% of women playing video games...you tell me.

"Where the Rift Goes, Virtuix Omni Goes"

The statement that Virtuix Omni is somehow locked down to the Oculus Rift is completely false as well.  Backed with $16 million in private funding plus $2.5 million in Kickstarter funds, Oculus VR has an exciting future ahead.  However, what the Sharks failed to consider is that Sony PlayStation is also developing a competitive HMD, new VR prototypes are popping up in the news on a regular basis, and VR doesn't begin and end with any one company - including Oculus VR.  It was a terrible investment mistake to not see the positive direction this market is taking and not think one or two steps ahead.

 

It's Too Expensive to Exhibit in a Retail Environment

Setting aside the concern about expensive floor space for a moment, the Virtuix Omni is the perfect exhibit for retailers.  It's visually interesting, people will line up to try it, and it will bring regular foot traffic for gamers to buy complementary products like games and VR add-ons.  The real expense is figuring out how to handle all these potential customers which the store didn't have to deal with before.

The argument that retail space is too limited for something like this is also false and out of date.  We live in an online world now.  Brick and mortar retail game sales are diminishing compared to digital sales.  Even Best Buy is getting killed by "show boating" where people buy products, try them, return them, and buy the real thing online.  This is the world we live in now.  If retail is that important, all they need to do is have a unit on standby for show, and have the order completed and delivered through online sales channels.  Even though I liked the fridge and stove set I saw at the store, I still had to wait for delivery.  This is the same thing.

 

The Peripheral Market is Too Competitive

There is no disputing that the peripheral business is a challenged one because there are a lot of players out there.  In my opinion, the biggest issue is compatibility.  If your product requires native game support or patches from the game maker, it's a very difficult battle.  The Virtuix Omni is designed for the PC space; the early adopter market.  As I understand it, native Omni support is optional, NOT a requirement.  They are also offering a unique experience compared to the blurring count of headphones, joysticks, and vibrating chairs being offered in the peripheral space.  I just don't see this as being in the same category at all.

The Virtuix Omni is Too Much Money (DURING CHRISTMAS?!?)

At $499 the Virtuix Omni is too much money when combined with other required elements...or is it?  In the PC gaming world, people buy SLI and CrossFire GPU systems, triple monitor setups, surround sound systems...there is no limit, really.  Sell enough, and prices go down like everything else.  Or, maybe the knowledge of having a long term product that will keep your family entertained and exercising for a few hours a week is well worth making an investment you wouldn't have otherwise.  Time will tell.

 

So What Set Neil Off?!?

It's not like me to step out and defend a single product like this.  I have no vested interests in it, though I'm very proud that Jan got his start by posting his ideas in the MTBS forums and things grew from there - very much like the Oculus Rift and other independents that have since launched.  VR is very much a gamer driven space which is an advantage other new technologies haven't really benefited from.  VR has been a bottom-up market rather than a top-down industry invention.

I would have completely understood if the Sharks treated Jan's valuation as way off base and fair negotiation was impossible.  In all honesty, Jan's appearance may have been very premature because the most important complementary products aren't even on the market yet.  It's just that I honestly felt insulted by the way the Sharks discounted gamers and the lifestyles we lead.  They spent too much time insulting and dismissing the huge gaming market, when they should have been judging what the user actually experiences and what the positive ramifications of this are.

Worst of all was Barbara Corcoran.  We know that nearly 50% of women play video games.  Maybe they aren't the same games, maybe they aren't on the same platform even - but they are a valued part of the market.  I think it was a disservice and a poor investment strategy to assume that women would be against such a purchase.  If anything, with the right game and the right motivation, there isn't anything preventing women from benefitting from this product too.  Why wouldn't they?!?  Honestly, instead of resorting to divorce, if Barbara wasn't interested in the Omni and the Oculus Rift (or Corcoran pronounced "Ocleus Rift"), she could have at least benefited by sending her husband down to the basement for awhile so she could watch Mob Wives in peace.

On that note, maybe Jan's goal was just to get some publicity on national television before he was prepared to negotiate an investment deal for real.  I'm sure fellow gamers got it when they saw the Omni in action.  Yet similar to the way that video game physical activity is a by-product of the Omni, the by-product of Shark Tank was to highlight the clichéd gaming market opinions held by the purported movers and shakers of the investment world.  Outside of seeing Jan's product in action, that episode was a really sad state of affairs when it comes to how gamers are perceived - not just as consumers, but as people as well.

I am hopeful that the arthritic and out of date opinions of Shark Tank don't dissuade profit hunting investors from chasing down exciting opportunities like this which will help build a new and exciting class of game and entertainment development.  It's a very exciting market, and much of it is already 100% gamer backed with hard earned consumer dollars.

Good luck, Jan!  The investments will come.


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Comments


Kyle Johnsen
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I don't know why they did not talk about the big issue: it does not offer a gamer a competitive advantage over someone using a keyboard/mouse or even a gamepad. Indeed, it's almost certainly a huge disadvantage. So, existing games' difficulty levels will have to be reduced, and new games will need to make separate multiplayer arenas for those using the omni or those using them will stand no chance at winning. I can see custom patches for existing games to support the omni's limitations, but will single player be enough to drive people to purchase it? The rift has similar problems I suppose, but I can actually see it being an advantage for at least some games, such as vehicle simulators. Of course, the omni isn't useful for those.

So the sharks were partially right. The Rift can be successful without the Omni (or any variant of the concept), but not vice-versa. If the HMD-based gaming fails, the Omni fails as well.

Also, most Americans are at overweight and a pretty large percentage are obese. It was wrong to falsely call out gamers like that, but I doubt that many exercise games are used for vigorous exercise consistently. That can't be what it stands on, and I doubt it will be very comfortable to use for prolonged periods of time.

Lastly, Barbara's comment, while incredibly sexist, was not without partial truth. The Omni will occupy substantial real-estate in the home. It'll be an eyesore, just like an exercise bike. It'll have to go somewhere other than the living room. Neither myself nor my wife would like it there. Frankly, we'd have nowhere to put it other than the garage.

I do think it could have a future in serious games though. I also think it will make money, particularly from the VR/Gaming research labs and wealthy gamers, just not the sort of money that Billionaires are interested in risking their money to get.

Benjamin Quintero
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Kyle, they aren't deep enough into gaming to see it that way. You have to look at it surface deep. And yes, this would probably be the ultimate Gone Home simulator but competitive tournament play is probably out of the question.

Kevin Baker
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While I agree that I don't see it being used in competive tournament play, unless there are dedicated leagues, I don't think you need to go nearly as indy as Gone Home to find a game it'd work well with. It'd be amazing with, say, Skyrim.

Benjamin Quintero
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Don't take it too personal. The Sharks rarely take gambles, and if they do it is often small business stuff like < $100k. They are like many investors, looking for a product/service that fits their portfolio; something that plays to their strengths in a way that doesn't feel like you are just giving a stranger money on his word and good looks alone. You can't blame them. It's easy to give money away. The hard part is getting it back.

Neil Schneider
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It wasn't that at all. There are always more no doors than yes doors - and the valuation was probably way off at this stage in the game. It's just the majority of their argument was based on putting down the consumer base rather than the product.

The video is at the beginning of the article (linked).

Regards,
Neil

Benjamin Quintero
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Yeah.. I agree it's frustrating to watch people who don't "get it" when you are on the inside but...

I'm sure there are some who are younger than us both who would have the same lack of enthusiasm over Elvis or the Beatles. We will probably think of them as ungrateful little millennial brats. Those same people probably won't know or care who popularized the first-person shooter, or how the internet came to be. Not "getting it" kind of goes both ways; future people and past people..

Revision3 has an interesting series called "Bringing Up Nick" where he watches old classics he's never seen like Aliens and gives his take on them. He came out of that movie, the movie that influenced just about every science fiction game ever, with a meh attitude of "I feel like I've played this game before."

I'm sure there is a future where everyone is jacked into the web and our buff genetically enhanced physiques need little more than a dose of Brawndo to survive the day. And our race will look back at 2013 and wonder how we could have survived on childish things like display devices and physical input devices... We will think it, and it will happen. Our surrogate robot bodies will go to work for us to avoid the plague. And who ever is there to witness it will shake their fist in the air and talk about how in their day they used to drive fast cars and drink real liquor; non of that synthetic crap that is supposed to be better for your liver or inhibit cancer cells. Those people will think of us all as stupid for accepting the change...

Today is not that day.

The technology and the people who use them have an understanding. The people who do not, do not understand; the technology nor the people who use them... Trying to MAKE them understand is like forcing an addict to get clean. If they don't want it for themselves it will likely end the way it was destined to happen.

Old people eventually die, and so does their way of life; for better or worse.

Gerald Terveen
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I am a Virtual Reality enthusiast. I love the idea of moving in a game. I could use the extra movement for sure and I am not too lazy for it. Will I buy a Virtuix? Hell no - that thing is still far too expensive and I want to see how the market will develop first. And I want to see how well it actually works - I want to hear from people that have used it to play a full game, not a 5 minute demo.
Otherwise I will have a $500 piece of equipment standing around that takes up a lot of space and I might want to exchange against the newer model before I even really used it (the consumer Rift is still has no release date - how about we wait for that first).

They give pretty decent feedback on the problems that the company will face and their main argument for not investing is that the evaluation is off. They were waiting for an explanation (a solid one!!!) for why the company is worth that much NOW. Not why they might be worth that much if there will be no competition by the time the produce will become viable.

And of course it is deeply entangled with the other VR equipment. If the VR revolution fails or is not taking over mankind next year, then they will have a niche product in a niche market they have to position against the competition. And there is already competition even though there is no market yet!

"Backed with $16 million in private funding plus $2.5 million in Kickstarter funds, Oculus VR has an exciting future ahead."

Yeah ... do you know the Leap Motion? Look up how much funding they got and how well their pre release sales went. And then have a look at the current situation!
The tech is truely awesome - I even made a game for it (with Oculus Rift support on top) and I can only say that tech is full of potential. But did it become a great hit? Naaaa ... the available software is pretty much limited to 2D touchscreen adaptations and almost no title really makes use of the 3D interface.
And looking at the new titles that came in the past months there is no change.

Money, good technology and optimism is not enough - you also need good software. I believe that Oculus knows that and does everything to attack that problem, but so far I am still waiting for the big announcements. Here and there a title yes - but most bigger studios are still in "wait and see" mode.
I love my Rift and I have no doubt that the product will install a big enough userbase to become a viable product. But I am not yet convinced that 5 years from now all hardcore gamers will have switched - my guess is that CoD 10 will still be played on a normal 2D screen 90% of the time.

A W
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"Gamers are lazy. The actual quote was "usually they (gamers) have a side job as a plus-sized model" according to Daymond John. We are just too content to sit on our butt all day to buy a product like this. We have no interest in products that will add physical activity to our video game enjoyment."

-Google: "My Wii Collects Dust"

David Paris
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I'd say that it is merely a symptom of the past, and will fade quickly. Her views reflect a lack of understanding of the gaming market.

However, not all investors suffer from this. Specifically, there's an age breakpoint at which gaming became very mainstream. When you talk to educated people who are in their 40s these days, they very often game to some degree. Every year that age just moves forward another year.

I've worked with investors who were game savvy to their point where they played, critiqued, and harbored secret fantasies of someday having their own game ideas made. Gaming wasn't what they did professionally, rather they gamed for fun on the side, and as such, were quite well informed about the whats and wherefors of the gaming market. And mind you, I'm not talking small time guys, but rather serious heavy hitters. One of the fellows showed up in America's richest 40 under 40 for several years for example (though he's over 40 now).

That will only become more the norm, not less.

Times are changing. This show merely depicts a throwback.

Sterling Reames
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The Omni seems like it could be an amazing arcade attraction. It's really a shame arcades are dead, because I'd like to try it a few times, but not have it in my house or drop $500 on one.

Nooh Ha
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I think there are elements of truth to all 6 objections. Each point may only apply to a portion of the potential player base but add them up and you have a subset of a subset of a subset etc. Clearly this is true of all consumer demand but in this case the addressable market is going to be pretty niche and with the risks involved and valuation expectations of the pitchers, I am not surprised a group of non specialist investors declined to invest.

Michael Pianta
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I often feel like the sharks have good instincts and intuition even if they express it poorly. The examples you're bringing up are badly worded, but is the essential insight wrong? Are gamer's too fat and lazy for VR? Those probably aren't the right words, but we know that many (it would appear most) traditional gamer's do not want to give up traditional controllers. The reasons vary - some people feel movement based controls are too imprecise or unresponsive, others just want to relax on the couch like they've always done (not that they're lazy exactly they've just been working all day). And then maybe some people really are fat and lazy. But the essential observation is that a consumer base used to sitting down to play isn't necessarily anxious to jump up and start walking instead, and that's obviously true as the reaction to the Wii and Kinect shows.

Then regarding Barbara's comments, again, badly worded but is she wrong really? I mean the Wii-U game pad causes me all sorts of grief. I want to leave it set up in its docking cradle so it will be charged. Someone else wants it put totally out of sight. I happen to think the game pad is sleek and cool looking, and so it seems fine to leave it on the table, but some people can only see techno junk. I have no idea what would happen if I brought this home. But it would definitely be some kind of point of contention, and imagine this could be an issue for anyone that doesn't live alone.

Anyway not to say that the tech isn't cool. It's just a very niche product right now. Too expensive, too bulky, too unproven to be interesting to the sharks. They seem to play it pretty safe, usually.

Eric Finlay
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I agree. Even though it's easy to find fault with the exact wording, the sentiment rings true on a lot of levels. I can only imagine the clusterfuck that would result from someone deconstructing this article in the exact same way (and this article is vulnerable on many fronts).

Basically, the Omni makes sense to people who understand a subset of core gamers. To the mainstream it's an ugly and expensive waste of space.

One last thing - one of the arguments used on the show by the entrepreneur was "if we capture 5% of the market..." (I think it was 5%). That is a massive red flag and usually results in a blood bath.

Lance Thornblad
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The only argument I completely agree with is that $2 million for a 10% stake is indeed too high.

SD Marlow
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Way back in the day (think Nintendo Power Glove) a friend of mine and I got excited over the idea of "wheelchair VR." You have the head mounted display, and are playing a game, but your also on a stationary bike, rowing machine, or even just a treadmill. You're moving, but stationary. Exercising, but playing a game. How could that NOT work!

Yes, the sharks said some stupid things, but the idea that they WOULD have invested if they just understood the market isn't really true. When Star Citizen is out of beta, I have no doubt that people will be spending money on flight sticks, just as they have in the past for other "flight" sims. People have and will buy a game system just to play that ONE game (I've done it 3 times: Playstation for Oddworld, N64 for Pod Racing, and Xbox for Halo). VR, for now, is still the tail, not the dog. It's the thing you buy to go with something else, and I think the Omni is something you buy to go with that (flee on a dogs tail?).

10% share IS small. It says, "we want your money, but not your input."

Lag free? Without drivers that games directly support?

SAFETY. The elephant in the room. I look at that and have two thoughts: "dam* that's cool" and liability insurance. Is it durable and sturdy enough to "contain" a 6'4", 280lb guy running for cover in Battlefield 5? Even if jumping works (as a sensor input and not being held in place by the belt area), landing puts a lot of wear and tear on the base station. Building it stronger will cost more, plus now it costs more to ship with the added weight, and yeah, what isle of the store does it belong in (or in front of.. not that this an end-cap item Wal-Mart will let kids just climb onto and use).

VR is fun for those working on it. This is fun for people working on it. Robotics if fun for people working on it. But at the end of the day, if it isn't a product you can add to your Amazon wish list, it's just a very expensive hobby that requires millions in outside donations to support.

Jeremy Alessi
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The sharks probably made the right call on this one. It's cool but how big is the market really.

John Ardussi
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The guy who was demoing it slipped and fell. The investor guy slipped and fell. And they had people there spotting for them. I would not have anyone at my house spotting for me. This is a lawsuit waiting to happen.

There are way too many reasons to pass on this one.

Kris Steele
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As a gamer, I think it's a neat concept but not one I'd spend $500 on and not one I have room to setup in my office or living room. I'd be all over this if I saw one in an arcade though that I could play for a few shillings.


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