Update, October 17: Carmack later acknowledged that Rec Room and VRChat do make money for Meta via 30% commissions on in-app payments. However, as most free-to-play multiplayer games/worlds monetize at under 10% (usually much less), it's still likely the case that the vast majority of Rec Room/VRChat players on Quest aren't paying Meta anything through those platforms.
I noted yesterday that the Quest 2 attach rate seems pretty small based on Meta's reported revenue numbers, but the rest of that story -- and the explanation for why the Quest 2's retail price was recently raised -- comes from senior Quest advisor John Carmack himself, in his Connect 2022 keynote.
Basically, he says, Quest 2 owners are not buying enough premium content and instead, are using their headset for free-to-play metaverse platforms VRChat and Rec Room.
"When you have some of the most popular apps on Quest are free apps, VRChat and Rec Room, that we get no revenue from at all, and while they are sitting there at the top of our ranking list in many cases, there's there's not a lot of internal push for that," as he puts it. (Watch above at about 41 minutes in.)
This is a pretty jaw-dropping revelation. Meta developed the Quest 2 and the Quest app store to grow the market for its metaverse platform. But instead, Quest 2 owners are going in droves to VRChat and Rec Room -- leading metaverse platform competitors. (Rec Room alone, as I recently reported, had 3 million active VR users, most of them on Quest.)
In fairness to Carmack, he adds that he's completely supportive of that happening. Full context of the quote below, and thanks to the eagle eyes of VR devs Derek Johnson and Kim Baumann Larsen for catching this point that I originally missed!
Now of course, price points leads to the point about the Quest 2 price increase, which is obviously super unpopular and there's no question that it's weird to have a headset or have a consumer device go up in price later.
But... the dynamics of subsidizing hardware is super common on all the consoles, and it's just kind of the way a lot of these closed ecosystems tend to work... you sell the device at a loss and you make it up on the software that you wind up selling.
But that winds up having a bunch of perverse incentives for general user value.
When you have some of the most popular apps on Quest are free apps, VRChat and Rec Room, that we get no revenue from at all, and while they are sitting there at the top of our ranking list in many cases, there's there's not a lot of internal push for that.
Because the idea that we don't get anything from that, and if we're losing money on every headset, then there's at least this incentive, like, are free apps really good for ecosystem?
So raising the price to a point where we're not like wincing every time we sell a headset that has that really, really positive upside that people can choose to refocus on, you know, we don't care how you use the headset, as long as you're getting good value from it.
And I think that's really important for us that this idea that free App Lab stuff, free web apps, you know, people sideloading -- it's all good as long as you're getting good value out of this headset. Some fraction of the people are going to use the best of breed high end applications that are curated and selling on the Quest store. And that's great. And we'll make money from that by all this other stuff. I'm happy for it to exist and I'm happy for there not to be even any subtle back of the mind unconscious bias against it. I want us to be celebrating our free applications as much as we possibly can.
Rec Room is a blast. Too much to do in one day.
Posted by: Brian Barrett | Monday, October 17, 2022 at 09:14 AM