Why I am Scared of the Oculus Deal

John Carmack recently tweeted that he was looking for more coherent information on why people are angry about the Facebook purchase of Oculus. Here's why I'm scared:

Oculus used to be a gaming and hardware company. The value proposition was simple: make good hardware, get paid. In the future, maybe make good games, get paid. With this business model, the consumers can be assured that as Oculus profits, there will be continued economic incentive for innovation.

Now, let's take a look at Facebook's 10k filings. Page 47 gives a breakdown of where their revenue comes from. They are world class at ads (90% of revenue), and controlling the platform (10% of the revenue). If you listened into the shareholder meeting, you'll hear that Facebook's plan for the future of Oculus is to sell the hardware at cost, and to make money off of its "app store" equivalent. They also leave the door open to making money on advertising, but don't commit too heavily to this.

The key here is that they plan on selling the Oculus "at cost". This means that the device will no longer be a source of profit, and when times get tough for Facebook (such as when the tech bubble pops), products and services that aren't directly profitable will be the first to drop. I don't care what Mark might have promised, Facebook is a publicly owned company and is legally obligated to act in the shareholders' best interest.

Oculus' business model has gone from "make a great device", to "make the first viral device, and control the platform".

So what could Oculus do to quell my concern?

  1. Commit to releasing, under a permissive open source license, all current and future software required to use the Oculus as a gaming device. This will allow the community to fork it if they ever try to create a walled garden and start milking the users.
  2. Profit from the sale of the Oculus Rift. It should be a significant source of profits for Facebook so that it can continue to be innovated upon in good times and in bad. The technology is extremely exciting, and I'd hate to see Oculus lose its first mover advantage.
  3. Ban advertising from the Metaverse. This idea might be more pie-in-the-sky, but a man can dream.