Oculus, which reunited its developers this week for the first time since the launch of the Rift goggles, is coping with competition from HTC Corp. and Sony Corp., and a string of disappointing gaffes. Shipping problems and a higher-than-expected price bungled the launch. The headset still doesn’t have a hit game that would broaden its appeal to mainstream consumers.
In recent weeks, anger at founder Palmer Luckey for his political views has caused backlash from the developers Oculus relies on to make games and other attractions for the Rift. Those hiccups cost Oculus about 5,000 units in lost sales last month, estimates Piper Jaffray analyst Gene Munster.
The Rift had “a little bit of a slow start,” Facebook Chief Executive Mark Zuckerberg acknowledged Thursday at its developers conference in San Jose, Calif.
Now Oculus is trying to reignite enthusiasm for its headset. Oculus revealed Thursday that it is working on a new lower-end headset that wouldn’t need to be tethered to a personal computer, like the Rift, or a mobile phone. It also unveiled its $199 Touch hand controllers for grabbing and moving virtual objects, allowing users to move more freely through a room, a feature that HTC’s Vive headset bundled with its launch.
Mr. Zuckerberg also said Facebook would pay $250 million to developers creating virtual-reality content—on top of the $250 million already spent.
Developers’ attitudes toward Oculus, which Facebook snapped up for $2 billion in 2014 before it had launched a single product, have shifted during the past year from what one developer described as a “love fest” to varying shades of disappointment.
“People got pumped up about VR for a very long time,” said Edward McNeill, a game developer who goes by his first initial, E, and has worked with Oculus for 3½ years. He described the Rift as a “good product,” whose rollout was clumsy and imperfect. “Against that mountain of hype, some people were inevitably going to be disappointed,” he said.
Mr. McNeill and other developers said they were optimistic about virtual reality and plan to keep building for Oculus. Nate Mitchell, head of product for Oculus, said the company was on a good trajectory and had always expected virtual reality adoption would be slow. He said the company has learned a lot over the last year.
Mr. Zuckerberg has predicted virtual reality will be the next major computing platform, allowing the most immersive way yet for users to play games, socialize online and watch videos.
Startups focused on VR and augmented reality—technology that blends the virtual world with the real world—have drawn $2.3 billion in investment during the past 12 months, says Digi-Capital Inc., a mergers-and-acquisitions advisory firm.
The market for high-end virtual-reality headsets is still nascent. Oculus, the first to market, was followed soon after by HTC’s Vive. Next week, Sony Corp. is planning to release a headset that analysts expect to have broad appeal because it connects to the company’s PlayStation 4 videogame console, which has sold more than 43 million units world-wide.
There also are more low-cost headsets that work with smartphones, such as the newly announced Daydream View from Alphabet Inc.’s Google unit or the $100 Gear VR headset co-developed by Samsung Electronics Co. and Oculus.
“We have yet to see that killer app,” such as a game, that “can make or break a platform,” said Ben Schachter, an analyst at Macquarie Securities. For example, the success of Nintendo Co.’s Wii console largely was driven by the popularity of its “Wii Sports” launch title.
Piper Jaffray’s Mr. Munster projects Oculus would end the year with 180,000 units sold. Mr. Munster said the sales target he set earlier in the year, for 500,000 units, was too optimistic.
Oculus struggled to meet expectations of when the Rift would ship and how much it would cost—common misfires among new technologies. After targeting a release by the end of 2015, the company pushed shipment to regular customers back to April 2016.
Days after the launch of the Rift, which garnered mixed reviews, Facebook said an “unexpected component shortage” would slow deliveries.
Last year, executives said it would cost $1,500 for consumers to buy the Rift and the high-powered personal computer required to run it, implying the headset alone would cost $500. Mr. Luckey later suggested the price tag would be about $350. In January, however, Oculus set the headset’s price at $599.
Mr. Luckey apologized for the miscommunication, saying: “I handled the messaging poorly.”
The latest flashpoint emerged in late September, when Mr. Luckey said he donated $10,000 to a small political group that favors Republican presidential nominee Donald Trump and whose stated goal was creating images to oppose Democratic nominee Hillary Clinton. The news hit a nerve among developers, who debated it over social media, adding to the sense of disappointment over Oculus. Mr. Luckey said he regretted any damage his personal views caused the company.
Recently, some top Oculus officials contacted developers, including Andy Moore, CEO and founder of Radial Games, which co-created the game “Fantastic Contraption” for Touch controllers, to smooth things over. Their message about the donation and the launch gaffes: “That is not us,” Mr. Moore said.
Mr. Luckey, who played a high-profile role at last year’s conference, didn’t attend the festivities this year because he didn’t want to be “a distraction,” Mr. Mitchell said.