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When a price war breaks out it can be a sign of a number of things. One is that the market is maturing and that the only ground to fight for is market share, instead of actually aiming to grow the market. Another is that a new product is about to be launched and the manufacturers want to clear the inventory of the old one before launching the new one. The rationale behind this is that the new product will be so desirable that they will have to discount the old product even more if they wait till after the new one is launched. So when Facebook and HTC slash prices, what are we to make of it?
There is the possibility that one of the products is currently overpriced relative to comparable competition and has to come down in price to compete. But then you usually only get one of the products on the market reduced, not a price war. It could simply be that all the competitors realize that they have saturated the hard-core market that wanted the product at any price and must now appeal to the more elastic portion of the market that counts the dollars if not the cents.
Whatever the reason, a price war seems to have broken out between Facebook (owners of Oculus) and HTC (makers of the Vive). First Facebook temporarily slashed the price of the Oculus Rift by $100 from $499 to $399, for a six week summer sale. Then HTC cut the price of the Vive by $200 from £799 down to $599. But unlike the Oculus price-cut, this one has no set time limit. This effectively reduces the price difference from $300 to $200. But it will drop to only $100 when the Rift returns to its pre-Summer $499 price tag.
At one point this might have put the Rift at a disadvantage as they sold the Touch controllers separately, whereas HTC bundled the controllers with the Vive headset. But Oculus started bundling their controllers with the Rift for $399 as part of the Summer promotion and have announced that they intend to keep them bundled when the normal price returns to $499. This means that both companies will be bundling the controllers with the headset, but a $200 price will separate them.
HTC has fought back in other ways too. The new Vive headset is lighter and more comfortable than the old one. Also, whilst they both bundle two tracking sensors as standard, the Oculus Rift needs a third sensor (costing an additional $59) to get true “room scale” tracking. This effectively narrows the price gap to $41.
But at the end of the day, both headsets have their hard core of followers and it may be the software that comes with it that ultimately serves as the tie-breaker.