High Fidelity: Some Thoughts on the Morning After

First, a disclaimer: I’m a librarian and a blogger, and I don’t really know what it takes to run a successful software company. I’m sure the only people who really know how Philip Rosedale is feeling right now are Ebbe Altberg and other software company CEOs who often have to make difficult decisions, including letting people go. It’s a tough job, and one that I wouldn’t want.

And I must confess that, from my admittedly outsider perspective on High Fidelity, that I was absolutely gobsmacked by the swiftness of this recent turn of fortune. One minute, High Fidelity was merrily cruising along and planning big splashy events; the next, they were slashing server costs by abruptly shutting down public spaces. It was, and still is, a rather stunning reversal that most observers didn’t see coming.

There are a lot of factors that led to this point. Let’s take a look at a few of them. 

First, almost all of the rosy predictions made when the first consumer VR headsets appeared have turned out to be flat-out wrong. As Philip himself has said, he expected millions of people to be in VR headsets at this point. He was mistaken. But then, so were a lot of other people. It’s just unfortunate that it took this set of circumstances to force High Fidelity to pay more attention to the users they should have been paying attention to all along: non-VR users who are looking at virtual worlds through their flat computer monitors. Catering almost exclusively to VR users, and treating desktop users as almost an afterthought, is one of the reasons that High Fidelity finds itself struggling today. For example, there is still no default, built-in text chat system in High Fidelity (although there are third-party solutions on the Marketplace).

Second, High Fidelity has struggled to set up something that was key to the early, resounding success of Second Life: creating and encouraging a space where content creators could make money selling their products to other users. Compared to the nearly 22,000 items now available for sale on the Sansar Store, The HiFi Marketplace is struggling to attract content. The process involved in creating a sales listing is still too geeky and cumbersome, and High Fidelity has created an unnecessary bottleneck by insisting that they review every single item placed on the Marketplace. It’s small wonder that there are only 1,200 items for sale so far, about a twentieth of what is on the Sansar Store. Many potential content creators have simply given up on High Fidelity and walked away after encountering these and several other obstacles. 

Third, there was a strange overemphasis on company-hosted events, which gave High Fidelity some much-needed press and a reason to boast about avatar concurrency records being set, but which also took up valuable company resources which, perhaps, could have been better placed somewhere else. They say hindsight is 20/20, and it’s now clear to me that High Fidelity probably spent a lot of money on setting up and running powerful servers to handle such big events with large crowds. And, in the end, it was probably something that was not sustainable long-term. (Then again, server costs are much cheaper than programmer salaries.)

Also, the were many people who showed up at HiFi’s events because they were getting some sort of financial inducement to do so (like the US$20 gift cards given out at the first couple of stress testing events). High Fidelity was literally paying all the contest entrants in their most recent Avatar Cosplay Contest! Somebody (not me) has said that High Fidelity was essentially bribing people to use their platform, and when the inducements were no longer there, people stayed away.

Take a look at High Fidelity’s new website homepage:

How many companies do you know that would continue to throw resources into a project if, after six years of hard work, their product only has 2,573 users? The writing has been on the wall for quite some time now; it’s just that people haven’t wanted to admit it. Sometimes when you build it, people will not come.

Despite a few modest successes here and there (notably VRChat and Rec Room), social VR as a whole is struggling to attract users. Some companies can rely on venture capital (High Fidelity) or profits from other products (Linden Lab) to get them through the lean times, but that money won’t be there forever. Eventually, social VR has to stand on its own. And sadly, I think we are going to see other companies in this market founder, struggle, restructure, and even close their doors.

So now High Fidelity is pinning its hopes on becoming a workplace teams platform, squarely aimed at the business market. (In fact, they won’t even let you sign up for a sneak peek at the new service with a Gmail email address, which is frankly insulting to those businesses who choose to use Gmail.) There’s no guarantee that this endeavour will succeed, but I do wish Philip and his team the best of luck. They’re going to need it.

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Another Bombshell Announcement: High Fidelity Lays Off a Quarter of Their Staff

High Fidelity, which recently announced that they were shutting down almost all of their public spaces and discontinuing General Assembly meetings, laid down yet another bombshell announcement today.

In an official blogpost titled Toward a Digital World, High Fidelity CEO Philip Rosedale said:

We’ve been working as a company for six years now, writing open-source software and creating test events and experiences to enable this imagined place to come into existence…We’ve done a ton with a small and passionate team.

But as of today, 2019, we probably still have a few years to wait. VR headsets, even the latest ones, are still not comfortable enough to wear for very long, and still cannot be used to read and write messages, take notes, or do most kinds of work…

If you had asked me when we started the company in 2014, I’d have said that by now there would be several million people using HMDs daily, and we’d be competing with both big and small companies to provide the best platform—but I was wrong.

Philip goes on to state that the company is changing direction, to refocus on a creating a platform for work teams to collaborate, and that as a part of this pivot, they are letting go of a quarter of their staff:

To refocus on this new project, we have made the very hard decision today to reduce our team by 25%, meaning that 20 people will be leaving us who have made great contributions to High Fidelity, and whom we will greatly miss.

I’ve heard from an inside source that some very talented software engineers have been let go, instead of (and I quote) “the Bingo Extremo people and the people who put on the disastrous events”. I am hoping that Linden Lab will swoop in and pick up a few good people to help them continue to build Sansar, but who knows what will happen now.

Emily, HiFi’s Community Manager (who appears to have survived the layoffs), helpfully provided some follow-up questions and answers to Philip’s announcement today in a FAQ posted to the High Fidelity Community Forums:

Will you still be accepting feature requests, and what will happen to requests already made?

Unfortunately, no, we do not have the resources to work on broad-based feature requests from users. As such, will be closing the feature request list down as of June 1st. We will no longer triage feature requests; however, leaving it up for a few weeks allows our community to review it in the event it inspires open-source project proposal ideas. Unfortunately, there’s no way to make the feature request board read only.

Will you continue to offer experiences like Nefertari’s Tomb and Remembering D-Day?

We’ll discontinue these experiences after the events currently scheduled to allow us to focus on our new direction.

Do you still plan to add support for the Quest, Focus, and other new HMDs?

Yes, that’s still very much on the roadmap. We don’t have timing of the availability on specific devices at this time.

Does this mean that you are going to improve the High Fidelity experience for desktop users?

Yes. Since many people will use their laptop or desktop PC to access High Fidelity, broadening access is a key part of our strategy. As noted in Philip’s blog post, we simply feel that mass-market adoption of VR hardware is a few years away still.

(I haven’t quoted the entire FAQ; you can read it for yourself here.)

Well, as I had expected, it’s now clear that High Fidelity will not be launching on the Oculus Quest anytime soon. Philip Rosedale has bigger problems on his hands.

And the current user base on High Fidelity, many of whom are long-time committed users, are going to face a stark choice: stay or jump ship? No doubt some will consider Sansar or VRChat or another platform for their creative and development work. The fact that the company will no longer be accepting any broad-based feature requests from end users is very troubling, and it could force some people to switch platforms.

Does this mean that VR is in trouble? No, I still believe that the Oculus Quest and other new standalone and PC-based VR headsets will bring an ever-increasing audience into virtual reality. But it is now very clear that this uptake of technology will take a lot longer than most people originally estimated. The VR platform companies that will survive are those that acknowledge this fact and plan accordingly.

Also, it’s clear that the something has gone slightly awry with the more freeform software development model which had been used by High Fidelity to date, as opposed to the much more structured monthly software updates being issued by companies such as Linden Lab for Sansar. (And yes, I have confirmed from many longstanding HiFi users at the first, well-attended Federated Users Group meeting that this sort of loosey-goosey software development has been a long-standing issue at High Fidelity.)

Frankly, High Fidelity is burning through venture capital and they need to smarten up. Philip Rosedale recognizes this, and it’s not too late (despite what some people may say). High Fidelity is taking a gamble by moving to a workplace team platform, but it’s a calculated risk. (Then again, Second Life tried this too, and it failed miserably. Anybody remember Second Life Enterprise?)

What happens next? Who knows. But it will, as always, be fascinating to watch (and blog about). Stay tuned!

New Podcast Interview with Philip Rosedale

Philip Rosedale

The Stayin’ Alive in Technology podcast’s most recent episode is a detailed, wide-ranging, hour-long interview with the virtual world visionary and Second Life and High Fidelity founder Philip Rosedale. The topics which Philip and his interviewer, former Linden Lab staffer Melinda Byerley, cover range from the very earliest days of Linden Lab to his thoughts about the so-called “3D web”. Have a listen:

Philip Rosedale Announces Major Changes to the High Fidelity Platform: “This model is not working right now”

Despite large investments of venture capital over the years (at least 35 million dollars since 2013, plus another 35 million announced just last year), High Fidelity is burning through that cash quickly.

Last Friday, at the weekly General Assembly meeting, Philip Rosedale made two major announcements:

  1. High Fidelity was immediately (i.e. within the next 24 hours) closing down all its public domains, with the exception of a small Welcome domain for new users; and
  2. In response to complaints from users that the company was not sufficiently supporting open source development of the High Fidelity platform, the weekly General Assembly meetings were to be discontinued, and replaced with a biweekly developers’ meetup.

Here is an hour-long livestream of that meeting, which you might want to watch in full to understand what is going on:

Philip Rosedale explains the abrupt change in direction (these quotes are taken directly from the YouTube livestream of last Friday’s meeting):

We are going to close down all our public spaces. We’re gonna do that after this meeting, before the end of the week… First of all, we are not a social VR game… This is not a chat application where we get people together and hanging around in a room talking to each other. High Fidelity is designed to be a platform anticipating the very broad use of VR across the internet for things like this.. going to work, going to school, doing all kinds or different things.

And we’re certainly doing our very best to get that started, but we sort of feel lately… a couple of things have happened that make us feel we are making a mistake by running the biggest servers… We feel like we are actively doing a disservice to everyone by running these public spaces. Instead, what we ought to have is you guys running your own spaces…

At least as an experiment, but hopefully, as a good call, and we’re going to do it in the next day or so, is we’re going to shut everything down, except for a help space for new users… but it will be a tiny space, and we aren’t going to let anybody hang out there.

Some users at the meeting were understandably quite upset about this change. Philip went on to respond:

One of the problems that VR has right now… the most popular VR app in the world is Beat Saber… the number [of concurrent users] is going to be about 700. So one important thing is that in the prior year, not only have we failed to get 1,000 [user] concurrency, but so has everybody else. Now, VRChat has 1,000 concurrency… but I don’t hang out there a lot… But I don’t think that the experience you have in VRChat is yet my vision of a real virtual world.

Second, by shutting down our public servers, I actually make the prediction that there will be… more people concurrent across the servers that you guys run than us. So I’m not saying that we’re giving up on the servers, I’m saying that I want you to run them.

Philip added that nobody is really making any money from social VR right now:

Given the number of people that we have…let’s add to it Anyland and Neos[VR], and for that matter even Rec Room, even though that’s much more of a game. Let’s actually add all those people together into one product. That company will not survive. There’s not enough revenue… Everybody here that’s having such a good time…you guys need to pay us US$10,000 a month for us to keep the company going, indefinitely into the future, for us to basically be a positive cash-flow company, as we say here in the Valley. And everybody else in VR right now is faced by that.

Now there’s two ways to think about that. This is one of these ego-threatening things so that it’s hard to see clearly, to look at it objectively. Way number one is to say, it’s just that there’s too many bugs in this High Fidelity thing. If they just fix the bugs, why, people would fall out of the sky like cats and dogs into here. If that were true, you’d see them falling into somewhere else. And what’s happening is that the open-platform system we have here isn’t attracting very many people in this day and age. And so we’ve gotta ponder what to do about that.

One thing to do, which all the companies have been doing… is better support for desktop users. Because any assessment of the rate of progress on HMDs is a sobering one… they are not selling enough to create a general-purpose community that is both interesting and profitable… So, it’s really important to recognize, that through no fault of our collective selves… it’s not working. This model is not working right now. The flat world that is an open building environment, is not compelling enough as it stands right now, for the number of HMDs that are out there, to get lift off. And so we’ve gotta think hard about that.

It is going to work, believe me. I’ve worked my whole life on this and I’m quite certain, I know it’s ultimately going to happen. I’m just saying to your guys, just fixing the bugs we have… is not likely to get us or any other company to cash-flow break even…It’s also got to be enough to move you guys to make great content. There should be 15, 20, 50 people around the table right now making a living in here. And we’re not there yet. So we gotta figure that out.

Philip also compared his experiences with Second Life and High Fidelity:

You guys, this is not Second Life in 2004. Second Life actually took off like a rocket, once it got working. Even though it had tons and tons of problems… but it took off like an absolute rocket. And the reason that it did, I think, was that this experience of bringing a lot of people together and letting them build things together live, well, in the time frame when we built Second Life, it had never, ever been seen by anyone. It was the most exceptional, jaw-dropping thing that anybody had ever seen except in science fiction.

The problem we have today is that that’s just not true. The internet affords us many, many, many, many different ways to be together as people, for example, or just to chat. And so one of the things we are up against here is that there is not as much of a genesis moment with something Like High Fidelity or, for that matter, something like VRChat. Coming online you just don’t have the kind of meme in the sense of a grand or cultural meme kind of written out there like Second Life did. That doesn’t mean that we’re not going to make it. It simply means that we have to be more clever and the strategy that we use to get people in here has to be somewhat different.

I have checked and all of the previously popular domains hosted by High Fidelity are indeed gone:

  • Avatar Island (which was supposed to be a showcase for in-world shopping)
  • The Spot (a beautifully designed central meeting place used for many monthly stress testing events)
  • Maker
  • Playa
  • Mexico (one of my High Fidelity Picks of the Day)
  • Zaru
  • and dozens and dozens more, all gone.

The problem I have with this abrupt switch is that these domains were all shut down within 24 hours of the announcement, which left High Fidelity users scrambling to set up alternative places to meet (and the GOTO option on the tablet UI does not make it easy to find new places). I really do believe that High Fidelity could have handled this transition more smoothly.

Caitlyn Meeks, who until recently was a Strategic Evangelist and Director of Content at High Fidelity, told me:

High Fidelity is rightly getting out of the content business, and instead focusing on developing software. Consider this like Netscape focusing on browser development, not hosting web sites. The future lies with the individuals, companies and organizations who will create the Craigslists and Yahoos and Penny Arcades of the VR WWW. I think personally it’s a good move, because software engineering is what they do well. And rather than having users circling around a handful of company hosted domains, and saying “huh this is boring”, the onus of content creation is shifted to the individuals and organizations out in the wild. It’s actually quite exciting. It’s ours. High Fidelity made the technology and has given it to us. It’s ours to develop. We can drop it and ignore it and let it peter out. Or make something as truly wild and decentralized as the World Wide Web. It’s abrupt and shocking, but it’s for the better. And we’re going to see a lot of innovation.

We’re going to have our first Federated Users group meeting on Thursday at hifi://makerbox at 2:00 p.m. PST, you’re welcome to come and join in. It’s an extremely exciting time.

In a private conversation later, she added:

High Fidelity has a fixed amount of runway left in its budget before it is unable to sustain itself. And Philip believes he can’t get the plane in the air by then with the current business model of serving content creators in the model of his original vision: an open and growing metaverse. The one thing High Fidelity does quite well however is facilitate group communication in virtual spaces, like the town hall meetings they (used) to hold weekly. While there are numerous problems on other aspects of the platform, this particular part has worked well, generally. And has potentially profitable application for group (especially business-to-business) communication. They’ve decided to shift away from community content creator focus, and instead are beginning to do some R&D as they investigate the potential for using the technology in virtual world meeting spaces.

The decision to stop the community meetings, to stop hosting High Fidelity served domains like The Spot, and to sunset High Fidelity operated events, are just functions of them winding down this creator-community-centric model, and instead focusing on what will be a new target market. As for me, personally, I intend to help foster ongoing development of the open-source HiFi platform and perhaps even go into business for myself offering some much-needed supplemental services. I’d intend to pick up the opportunities they are dropping.

As I see it, this is just the beginning of a movement, though. I really think there’s an opportunity. I intend to help make it run wild! 🙂

To learn more about the federated HiFi users movement, you can join their Discord server.