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Are exclusivity deals good for the VR game industry?

Are exclusivity deals good for the VR game industry?

June 30, 2016 | By Alex Wawro

June 30, 2016 | By Alex Wawro
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More: VR, Business/Marketing



What’s the harm in a little exclusivity between friends?

That’s the core question of an ongoing kerfuffle among virtual reality enthusiasts over whether exclusivity deals are good for the nascent VR industry.

It’s an especially familiar question for many VR game makers, since people started asking it after Oculus VR began talking publicly about attaching exclusivity clauses to some of its developer deals.

Now developers are caught in the middle of a very public argument over whether or not it’s a good idea for VR headset manufacturers to act as traditional video game platform holders by asking for games they support to be temporarily or permanently exclusive to their ecosystem.

That argument got a bit more heated around E3 earlier this month, and some VR devs caught flak after Oculus announced a fresh slate of exclusive games for its Rift headset -- some of which had previously been expected to release on the HTC Vive alongside the Rift.

So now that two major PC VR headsets are on the market we thought we’d check in to see how folks in the game industry feel about how exclusivity deals will affect the nascent VR market.

Oculus says yes, Valve says no

 
"We look at an exclusivity deal as a short-term ‘take the money and run’ opportunity for developers."

On one side, Oculus is all for it. The company is acting very much like a traditional platform holder, having now launched a retail version of its Rift PC VR headset that’s designed to run games and other entertainment purchased through Oculus’ own proprietary storefront, Oculus Home.

Oculus has also been fully funding development of games, like Insomniac’s Edge of Nowhere, that are exclusive to Oculus. Others, like Other Ocean's upcoming Giant Cop, were developed with some support from Oculus and will be exclusive to the Oculus platform for a limited time. These deals are made, according to Oculus founder Palmer Luckey, because Oculus wants to create a VR market where VR hardware companies are competing to fund the best games for their headset.

Insomniac's recently-released Edge of Nowhere is an Oculus exclusive funded through Oculus Studios

"The short‑term pain that some people feel, and I totally understand, is I want to play this game and I'm not able to right now," Luckey said in a recent interview with TechCrunch, noting that exclusivity deals drive competition in the market and move the industry forward. "The reality is, I can see where that’s painful for some people, but that doesn’t mean that it's bad for the VR industry, or that it’s fragmenting it, or in the long run, it’s not the right way for the ecosystem to work."

And it's important to note that Oculus has made a public show of not taking ownership of the intellectual property rights for games that are exclusive to its platform on either a timed or permanent basis, which means developers could take funding from Oculus for an Oculus-exclusive game and then release a sequel on anything and everything. The same can not be said of console-exclusive franchises like Halo or Uncharted.

On the other hand, competitor Valve has taken the opposite stance. Cofounder Gabe Newell noted earlier this month that Valve is funding VR developers without requiring them to make their work exclusive to SteamVR because exclusivity “isn’t a good idea for customers or developers.”  

When contacted by Gamasutra, a Valve representative confirmed that the company has been providing advances against royalties to some VR game developers without asking for exclusivity in return.

“Since we first started working with developers to publish via Steam, we have encouraged them to ship through every channel and on every platform that makes sense for the product,” a Valve representative told Gamasutra via email. “At the end of the day, that is what's best for customers and developers. We came to this belief after shipping our own games on various platforms, and it has been reinforced over the past decade through our collaboration with partners on Steam. “

From Valve’s perspective, exclusivity deals are a bad thing for developers to agree to since it limits their ability to release games into a market that’s still very small. While a good number of VR headsets are seeing commercial releases this year (GameStop expects to stock at least five different kinds this holiday), at least one market analyst has forecast less than 2 million PC/console VR headsets will be sold by the end of 2016.

That’s not nothing, but it’s not much compared to the install base of the PC or any major game console. At E3 this month Oculus developer relations chief Anna Sweet acknowledged that the VR market is still young, and told Gamasutra Oculus plans to continue funding VR devs “as long as we need to” to “in order to help the market grow.

“The reason we're investing in content and developers, is we want them to be able to take those risks now while the market is still new and while we're all still getting hardware out into the world,” Sweet said. “We think that's a very important way to jumpstart the ecosystem, and to jumpstart VR as an industry.”

Like Valve, Oculus wants to help fund developers making VR experiences and cushion them against the risks of selling into a nascent market. Unlike Valve, Oculus thinks tying some of those experiences to a single platform is good for the VR market at large. So who's right? And forget about the market -- are exclusivity deals good or bad for VR developers?

It's different for every developer

The answer will be different for every developer, and those that were willing to go on record with Gamasutra (it's a bit of a sensitive topic at the moment) shared nuanced perspectives on the value of VR dev support with exclusivity strings attached.

As mentioned previously, Other Ocean's Giant Cop (a game about a giant cop protecting the tiny denizens of Micro City) was recently confirmed to be a timed Oculus exclusive for "a few months" when it launches later this year. That rubbed some folks the wrong way, since the game was also in development for the Vive and a prototype of the Vive version had already been sold as part of a Humble Bundle.

The Giant Cop in action

Other Ocean's Ryan Hale says the deal was made after the decision to embrace VR development pushed the studio way over budget, putting it in a risky situation.

"For exclusivity there are a lot more factors to consider than people realize. Developing for VR is a risk for small developers like us," Hale told Gamasutra, noting that Other Ocean's decision to make Giant Cop a VR game "immediately threw us WAY over budget" and made it a significantly more risky project.

"For us, when Oculus approached and wanted to partner, they brought a slew of marketing experience and resources we might not have had access to without the partnership - this was our main motivator," Hale added. "VR is a risky, niche market, which will hopefully experience massive growth in the future. The capital, marketing, and other resources from partnership deals is absolutely crucial to help independent developers take and mitigate risks within a new market."

Hale also says the exclusivity window Other Ocean negotiated with Oculus is about as long as the studio expects it will take for it to adapt Giant Cop to the Vive anyway, so the only choice it made was which platform to release the game on first.

"We've always had enough budget to release on a single platform," he said. "Depending on the kind of game you are making you could probably make a one-size-fits-all kind of design, but because Giant Cop is slightly unique when it comes to movement, storytelling, scene set-up etc. we have decided that we would play to the strengths of each platform one at a time."

So Other Ocean will release a version of Giant Cop on Oculus later this year, one that's tuned to play well with the headset and its upcoming Oculus Touch controllers. That's around the same time that Northway and Radial Games' puzzle game Fantastic Contraption will release on Oculus, but the game is already available on Vive -- and while Northway Games' Sarah Northway says the team didn't take any exclusivity deals, she understand why some developers might.

"I'm glad we were able to go non-exclusive for Fantastic Contraption, but we did consider our options," she told Gamasutra. "It's hard to blame devs for going exclusive when the other option might be to not make a game at all."

A mixed-reality shot of Fantastic Contraption running at desk scale

However, when Northway looks beyond her own perspective as a developer she says she dislikes the notion of exclusivity deals from both a player perspective and a moral one. She says she's disappointed when games she wants to play don't come to PC, but she understands that sometimes porting such games takes significant time and effort -- resources a game's developer might not be able to spare. 

But the notion of games being exclusively available on Oculus vs. Vive is different than on game consoles, she says, because the underlying PC platform is the same. 

" In fact Valve's OpenVR SDK runs happily on both Vive and Oculus hardware, so if your game supports Vive, it also supports Oculus by default," she says, acknowledging that "Valve does have an ulterior motive here in that they make money from a game sold through Steam no matter what hardware it runs on."

And again, a second important differentiator between these VR headsets and traditional game consoles is that the Vive and the Rift are very new -- and therefore very risky to make games for.

"It'd be dangerous to put a large amount of money into a VR game today and bet your company on it making a profit. So as much as Vive and Oculus need content, the content developers need guaranteed income," said Northway. "Both VR platforms have funded some games non-exclusively, because they both want VR to succeed overall. And Oculus has offered extra funding for exclusive titles, because that's what companies do when they're trying to win a hardware war."

And they may harm public perception of the industry at large

But even in the console market, the value of exclusive games seems to be growing more dubious. And when DFC Intelligence analyst David Cole looks at the overall VR game market -- and the history of video game markets in general -- he says exclusivity hurts.

“For getting VR to take off I really think the idea of exclusives is a bad one for the overall industry,” Cole told Gamasutra via email. “ The installed base for these headsets is simply too low to support proprietary content at this early stage.  Even under a best case scenario sales potential is very limited for all headsets combined, let alone a specific one.”

Cole argues that the notion of exclusive games driving people to buy a specific headset is a bit misplaced; sure, it will probably happen, but exclusive games are also likely to frustrate a significant number of people due to the hurdles involved with figuring out what they can play, where, and when, potentially turning off people from buying a headset at all.

“Oculus and Valve are not so much fighting against each other as they are fighting against public willingness to invest in an expensive VR system,” added Cole. However, just because exclusivity deals might be bad for the VR industry at large doesn’t mean they’re necessarily a bad thing for developers to take.

“We look at an exclusivity deal as a short-term ‘take the money and run’ opportunity for developers,” Cole said. “So from the developer perspective I think we have to remember that this is in the very early stages and if you get an exclusive likely all you will get is what you are paid for the exclusive. Fine if the developer wants to get their feet wet learning [VR] development, but they should keep expectations very low.”

So while there's plenty of strong opinions about the issue, the big throughline through all this is that the VR market is young and developers who want to be a part of it should make the deals they need to do so -- even if those deals come with some platform-specific strings attached.



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