It's Really Hard to Make Money with Virtual Reality Games

The sad reality of virtual reality development is that profitability remains an elusive dream. With all three major headsets now on the market, we're now in what should have been the heyday of VR development, but to hear it from Eerie Bear Game's Joe Radak in a post on Medium published Friday, you're very likely to lose money if you give it a shot.

It's a warning worth heeding. Radak's puzzle game Light Repair Team #4 was one of the launch titles for the HTC Vive, and even now the vast majority of its Steam reviews speak favorably of it. Many posts claim the puzzles are a bit too simple and Radak himself says it only takes 70 minutes to finish, but for what it is, it not a bad deal for the $8 Radak has always charged for it. And yet to date, Radak has lost more than $36,000 on the project. Unchained by the non-disclosure agreements that silence developers with platform exclusivity deals, Radak's post serves as a warning for anyone wanting to follow in his footsteps. His take also provides a window into reality for anyone thinking that keeping a staff down to two dudes working at home on their computers (which is essentially what Eerie Bear Games is) will automatically lead to profitability.

Radak funded the game entirely on his own and did "like, 95%" of the work, but his post outlines what his project would look like if he'd pitched it to Valve or Oculus for funding. The cheapest expense would have been the server costs, which came to just $30 for three months. But (even figuring in some free time from Eerie Bear's Noah Rojahn), paying for developers over the course of four months cost $40,000. Setting up the company took an additional $3,500, and commissioning two music tracks cost $3,000 more. Right there, that's $46,000.

Launch trailer for Light Repair Team #4. Source: Fr0z3nR

But he points out that there are piles of other expenses to factor in, especially for other developers who run their own offices, whether it's the $3,000 needed for two computers or the $500 to $5,000 needed for office space, or even the $110 a month needed for good internet.

Beyond that Eerie Bear Games still has to pay taxes to the government and royalties to Epic Games for their use of the Unreal Engine, not to mention the cut Valve itself takes out of each sale on Steam.

"So, for each unit sold at full price ($7.99 USD), we're getting about $5.20 USD," he said. "So, with the 'wrong' budgeting [Eerie Bear needs to sell] 5,602 units [to make a profit]. With the 'correct' budgeting — 8,949 units. This is going number will be higher though, due to the fact that we have gone on sale on Steam in all sales that we could. And this also reflects that we were working from home, on personal computers."

After the big HTC Vive launch came, Light Repair Team #4 sold 2,300 units for a total of $14,000 in revenue before taxes and fees. Even if they'd managed to keep their budget unrealistically low, Radak says, Light Repair Team #4 still wouldn't have pulled a profit. Worse still, those numbers don't even figure in the additional work Eerie Bear Games put in with patches over the following months.

Considering the high profile of the launch we're talking about 2,300 is an awfully low number, even factoring in some of the criticisms of Light Repair Team #4 and its sparse marketing. That speaks to another problem facing virtual reality development: Even after the release of all the major headsets, many Americans don't even know about it. In fact, according to a new study from Parks Associates, 63 percent of Americans are either unfamiliar with or know nothing about virtual reality, and only around 6 percent of men and 2.5 percent of women have any interest in buying a headset. In those conditions, even the best games likely have trouble making a profit.

You hear these kind of things from other developers as well. The day before Radak wrote his post, Rocketwerk's Dean Hall wrote a lengthy post on Reddit about his troubles making Out of Ammo for the Vive, specifically to defend developers who've taken exclusivity deals to limit games to one platform. Radak wrote his post partially to show the truth of Hall's claim, namely that such deals are usually the only way to break even in VR development.

"There is no money in it," Hall said. "I don't mean 'money to go buy a Ferrari'. I mean 'money to make payroll'. People talk about developers who have taken Oculus/Facebook/Intel money like they've sold out and gone off to buy an island somewhere. The reality is these developers made these deals because it is the only way their games could come out."