Valve CEO: 'We're comfortable with the idea that VR will turn out to be a complete failure'

When you’re worth over $US4 billion like Valve CEO Gabe Newell, you can do whatever you want.

We’re not just talking about flights of fancy, but business decisions as well. Take Newell’s company by way of example: Valve is notorious for making bets that seem risky — even strange — at first, but then pay off in the long-term.

Such is the case with Steam, the world’s largest video game service. When Valve launched Steam back in 2003, it was a risky lark: create a digital storefront to sell and maintain Valve’s own games, like “Half-Life” and “Counter-Strike.”

Nearly 15 years later, Steam is a juggernaut in the world of gaming with somewhere in the realm of 150 million users.

SteamValve SoftwareThe Steam digital storefront is a free service available to both Mac and PC users. It’s the ‘App Store’ of video games.

Initiatives like Steam aren’t solely from Newell, of course, but he’s the driving force at Valve and the only employee with a hierarchical status. The company otherwise has a “flat” structure — except for Newell, who’s on top. And Newell’s latest big risk has yet to pay off.

“We think VR is going great. It’s going in a way that’s consistent with our expectations,” Newell told a group of reporters in a recent roundtable interview, as reported by Polygon.

What he said next was far more striking: “We’re also pretty comfortable with the idea that it will turn out to be a complete failure.”

That’s particularly striking because Valve is a forerunner in the burgeoning virtual reality market: It is one half of the two companies responsible for the HTC Vive headset.

Valve partnered with HTC to create the $US800 Vive, and Steam is the service powering the Vive. The Vive competes directly with the Oculus Rift, from Facebook, which costs $US600; both headsets require an expensive, powerful computer to be used.

The Vive is another risky-sounding bet, which Newell readily acknowledges.

“Vive is the most expensive device on the market. It’s barely capable of doing a marginally adequate job of delivering a VR experience,” Newell said. If that sounds rough, it’s because Newell isn’t one for parsing words — lest you forget, this is a man who’s made billions by doing things his way. Valve isn’t a public company, so there aren’t shareholders to outrage, or even marketing plans to abide by.

“Some people have got attention by going out and saying there’ll be millions of [VR headsets sold],” Newell said, in a not-so-subtle bit of shade-throwing in Facebook’s direction, according to Polygon.

“We’re like, ‘Wow, I don’t think so.’ I can’t point to a single piece of content that would cause millions of people to justify changing their home computing,” Newell said.

And he’s not wrong: Regardless of the high price of virtual reality headsets, there simply isn’t enough good stuff to do in VR for people to buy expensive headsets in large quantity. It’s a space currently reserved for people who are willing to shell out a ton of money to live on the bleeding edge of technology — a really cool space, but one that’s tremendously limited.

Newell could be interpreted as being harsh, but it sounds more like he’s the only one being realistic in a still very-nascent market.

NOW WATCH: This virtual reality system is so much better than the Oculus — but is it worth it?

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.