{"id":34755,"date":"2018-11-13T18:27:37","date_gmt":"2018-11-13T23:27:37","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/htc-vive-overcoming-developer-hesitance-through-open-innovation\/"},"modified":"2018-11-13T18:27:37","modified_gmt":"2018-11-13T23:27:37","slug":"htc-vive-overcoming-developer-hesitance-through-open-innovation","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/htc-vive-overcoming-developer-hesitance-through-open-innovation\/","title":{"rendered":"HTC Vive: Overcoming Developer Hesitance Through Open Innovation"},"content":{"rendered":"<p>How can a video game company launch an expensive, innovative piece of hardware without the support of the traditional game developers the industry has thus far been reliant on? HTC and Valve Corporation faced this dilemma with the launch of the HTC Vive, a virtual reality (VR) headset that immersed users in VR gaming experiences. These experiences came at a very expensive price<a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a> and without a critical mass of HTC Vive owners, large game developers were not willing to make an investment in making games for the headset.<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/Picture1-4.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-34621\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/Picture1-4.jpg\" alt=\"\" width=\"800\" height=\"465\" \/><\/a><\/p>\n<p style=\"text-align: center\">An image of a user interacting with the HTC Vive. Source: Trusted Reviews<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a>.<\/p>\n<p>The video game industry is dominated by large developers that create video games for the most widely used video game systems<a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a> to maximize sales. Rockstar Game\u2019s Grand Theft Auto V, for example, has generated over $6 billion in sales by selling over 100 million copies across five popular game systems<a href=\"#_ftn4\" name=\"_ftnref4\">[4]<\/a>. VR would require these game developers to create games that would only be playable on three VR game systems<a href=\"#_ftn5\" name=\"_ftnref5\">[5]<\/a>, which only sold a combined total of 2.2 million units in the year they were launched<a href=\"#_ftn6\" name=\"_ftnref6\">[6]<\/a>. These relatively low sales figures deterred major game developers from creating games for the HTC Vive, forcing Valve to look elsewhere for game development.<\/p>\n<p>Valve\u2019s solution was to leverage its online video game platform, called Steam<a href=\"#_ftn7\" name=\"_ftnref7\">[7]<\/a>, to encourage independent developers to create content for the Vive. This focus on open innovation was vital as the variety of games needed to sustain a video game system made self-developing all a system\u2019s games impractical. In the short-run, Valve\u2019s prioritized signing-up independent game developers onto Steam. While Valve considered charging up to $5,000 to list a game on Steam, the company decided to lower the fee to only $100 to encourage cash-stripped independent developers to create games on the platform<a href=\"#_ftn8\" name=\"_ftnref8\">[8]<\/a><a href=\"#_ftn9\" name=\"_ftnref9\">[9]<\/a>. Additionally, Valve reduced the price of the Vive with the goal of \u201cexpanding the potential market for developers\u201d<a href=\"#_ftn10\" name=\"_ftnref10\">[10]<\/a>. In the medium-term, Valve plans to continue leveraging open innovation by providing these developers with hardware prototypes and gathering their feedback for future iterations. As an example, Valve provided developers with prototypes of its new controller which was intended to find solutions to issues previously raised by both developers and users<a href=\"#_ftn11\" name=\"_ftnref11\">[11]<\/a><a href=\"#_ftn12\" name=\"_ftnref12\">[12]<\/a>.<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/Picbbture1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-34639\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/Picbbture1.jpg\" alt=\"\" width=\"800\" height=\"526\" \/><\/a><\/p>\n<p style=\"text-align: center\">A member of Cloudhead Games, a VR game developer, testing a prototype for Vive\u2019s \u201cKnuckles 1.3\u201d motion controllers. Source: Youtube<a href=\"#_ftn13\" name=\"_ftnref13\">[13]<\/a>.<\/p>\n<p>Given the nascent nature of the VR industry, I don\u2019t believe VR headset sales will attract large game developers in the short-run. Hence, I would recommend that Valve focus on fostering open innovation and further augmenting the independent developer ecosystem by tackling the developers\u2019 main pain point: funding. In the short-run, Value could use the data collected from Steam to identify independent developers with franchise potential and invest in their studios. These studios lack adequate funding channels which, combined with Valve\u2019s unpublished data on Steam sales, could lead to attractive valuations favorable to Valve. In the medium term, Valve can work towards a more sustainable funding model by leveraging Steam to create a marketplace where independent studios can offer equity stakes in their projects. Many independent developers have turned to Kickstarter, but the cost of creating a prototype for Kickstarter has posed an issue for unfunded developers.<a href=\"#_ftn14\" name=\"_ftnref14\">[14]<\/a><\/p>\n<p>While open innovation does drive product variety, it also comes with added complications for Valve. A pivotal question that arises is: how much control should Valve impose on the independent developers that list their games on Steam? Quality issues with games on Steam will reflect poorly on Valve and the Vive, but too much oversight would be costly for Valve and would significantly increase the time it would take to develop games. (800 words).<\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> At launch, the HTC Vive was priced at $799. During that time, the average video game console was priced between $400 to $500 at launch<\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a> Chris Smith, \u201cHTC: VR decline reports false, Vive headset selling at record rate,\u201d Trusted Reviews, October 4, 2018, https:\/\/www.trustedreviews.com\/news\/htc-vr-decline-reports-false-vive-headset-selling-at-record-rate-3516698, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> Video game systems include the traditional video games consoles, like the Xbox One or Playstation 4, as well as personal computers<\/p>\n<p><a href=\"#_ftnref4\" name=\"_ftn4\">[4]<\/a> Max Cherney, \u201cThis Violent Video Game Has Made More Money Than Any Movie Ever,\u201d Market Watch, April 9, 2018, https:\/\/www.marketwatch.com\/story\/this-violent-videogame-has-made-more-money-than-any-movie-ever-2018-04-06, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref5\" name=\"_ftn5\">[5]<\/a> These systems include the HTC Vive, Oculus Rift, and Playstation VR<\/p>\n<p><a href=\"#_ftnref6\" name=\"_ftn6\">[6]<\/a> Sarah Needleman, \u201cPricey Virtual-Reality Headsets Slow to Catch On,\u201d Wall Street Journal, February 14, 2017, https:\/\/www.wsj.com\/articles\/pricey-virtual-reality-headsets-slow-to-catch-on-1487077201?ns=prod\/accounts-wsj, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref7\" name=\"_ftn7\">[7]<\/a> Steam allows users to purchase digital copies of video games online<\/p>\n<p><a href=\"#_ftnref8\" name=\"_ftn8\">[8]<\/a> Valve Corporation, \u201cSteam Direct: Joining the Steamworks Distribution Program,\u201d https:\/\/partner.steamgames.com\/steamdirect, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref9\" name=\"_ftn9\">[9]<\/a> Samit Sarkar, \u201cValve Sets Steam Direct Self-publishing Fee at $100,\u201d Polygon, June 2, 2017, https:\/\/www.polygon.com\/2017\/6\/2\/15729276\/steam-direct-fee-valve, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref10\" name=\"_ftn10\">[10]<\/a> Vive, \u201cHTC Vive Announces Price of Vive Pro HMD at $799, Pre-orders Start Today; Price of Vive Reduced to $499,\u201d https:\/\/blog.vive.com\/us\/2018\/03\/19\/htc-vive-announces-price-vive-pro-hmd-799-pre-orders-start-today-price-vive-reduced-499\/, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref11\" name=\"_ftn11\">[11]<\/a> Alex Osborn, \u201cNew HTC Vive Controller in Development,\u201d IGN, October 13, 2016, https:\/\/www.ign.com\/articles\/2016\/10\/13\/new-htc-vive-controller-in-development, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref12\" name=\"_ftn12\">[12]<\/a> Stephen Totilo, \u201cValve is Making a New Vive Controller [Update],\u201d Kotaku, October 12, 2016, https:\/\/steamed.kotaku.com\/valve-is-making-a-new-vive-controller-1787718562, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref13\" name=\"_ftn13\">[13]<\/a> Cloudhead Games, \u201cSteamVR Knuckles 1.3 \u2013 Next Gen VR Unboxing,\u201d Youtube, published June 29, 2017, https:\/\/www.youtube.com\/watch?v=FCkD5aM3AwQ, accessed November 2018.<\/p>\n<p><a href=\"#_ftnref14\" name=\"_ftn14\">[14]<\/a> Jaume Esteve, \u201cKickstarter: is crowdfunding a good idea?,\u201d Jaleo, January 22, 2018, http:\/\/jaleopr.com\/blog\/kickstarter-crowdfunding-indie-game\/, accessed November 2018.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This post details how Valve, the developers of the VR headset HTC Vive, used open innovation to provide a wide variety of video games despite the lack of support from major game developers. <\/p>\n","protected":false},"author":11021,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[4628,4970,2607,4971],"class_list":["post-34755","hck-submission","type-hck-submission","status-publish","hentry","category-openinnovation","category-valve","category-virtualreality","category-vive","hck-taxonomy-organization-valve","hck-taxonomy-industry-video-game","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2018\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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