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Oculus Rift to Shift 5 Million 2016, Sell at a Loss Predicts Credit Suisse

Despite being on the other side of the Oculus Connect 2 developer conference, virtual reality (VR) fans are no closer to learning the final date and price of the Oculus Rift head-mounted display (HMD). We do know that the kit will cost at least $350 USD when it launches in the first quarter of 2016, but the wait for the launch of a pre-order campaign that sets these facts in stone continues. Despite the lack of concrete information, one company is predicting that the kit is destined to sell 5 million units next year, selling for a loss when it first becomes available.

Oculus Rift consumer headset

That is according to Credit Suisse, a Switzerland-based multinational financial services holding company. As reported by Baron’s, the company’s Stephen Ju has recently estimated that Facebook’s revenue will total $26.38 billion in 2016, up from some $24.695 billion. Ju mostly cites the Oculus Rift for this bump, but noted that he expects the company to initially sell the HMD at a loss in a statement below.

Ju first looks towards Oculus VR’s first major release, the consumer Gear VR: “Last month, Facebook introduced consumer version of its low-end Gear VR headset in partnership with Samsung. The device will be compatible with a number of newer Samsung smartphones and tablets, will be priced at $99, and is expected to begin shipping in the U.S. by November 2015.”

He then turns his attention towards the Oculus Rift itself. “While pricing for the Oculus Rift has yet to be announced, various media outlets have pegged initial pricing at ~$500, with a cheaper Oculus Gear version priced at $200 for consumers who chose to pre-order the device,” he says. “Our current forecast implies that Oculus will ship ~5 million units in 2016, with an average ASP of roughly $350. We expect Facebook to price the headsets at cost in an attempt to drive initial consumer adoption – with the expectation that the company plans to monetize the devices overtime via associated software revenue.”

But this is a strictly hardware-only prediction, as Ju explains: “Note that our current projections do not contemplate any software revenue, although at launch Oculus will be offering a number of made-for-VR games and video content from partnering developers and content owners – which include Sega, Lionsgate, Fox, Twitch, Hulu, and Vimeo. Net-net, we expect Facebook will grow hardware revenue generated from Oculus at a 4% five-year CAGR from $2.1 billion in FY16 to $2.6 billion in FY21. However, given our assumption that Facebook will once-again demonstrate a willingness to forgo near-term monetization in return for increased product adoption, we are modeling an initial negative gross profit impact from the initiative – with Oculus gross margins reaching breakeven by 2021 and contributing ~$50 million in gross profit by FY22.”

VRFocus will continue to follow the Oculus Rift closely, reporting back with any further updates on the device.