Jason Mackenzie, HTC America President, on Why His Company Is Getting Into Virtual Reality (Q&A)

At CES, HTC made it known that it no longer wanted to be just a smartphone company. Its goal, it said, was to become a personal tech company by expanding into new categories like wearables, connected devices and entertainment. The company didn’t have any products to show at the time, but they came ready at Mobile World Congress.

In addition to launching the HTC One M9, the company debuted its first wearable, the Grip, in Barcelona this week. And in a surprise move, it also announced the HTC Vive virtual reality headset in partnership with PC gaming company Valve.

To get a better sense of where the company is headed, Re/code spoke with HTC America President Jason Mackenzie about why it’s getting into the virtual reality space, how it plans on competing with devices like the new Samsung Galaxy phones and more. The interview that follows has been edited for clarity and length.

Re/code: So, why virtual reality?

Jason Mackenzie: We’re always looking for what’s new and where’s the next opportunity for HTC to go innovate. Similar to where we saw for smartphones back in the late ’90s before there was anything called smartphones, we really see this as a huge opportunity and really the future.

HTC

I think it will start with gaming being the primary reason people are into it and buying it, and that’s why we partnered with Valve. They’ve got such a strong network with the Steam network and so many consumers who are using their service, so it was a natural fit.

My eyes were really opened [to virtual reality] when I took the first demo. I felt like you could see the future and how everything can change from not just gaming but to real estate to education, so really it was a natural thing.

Can you tell me a little more about your partnership with Valve, and how the HTC Vive will be different from other VR headsets?

I think you’ve seen other people doing VR, and the experience has been one of you put the mask on, and you can look at an object side to side. The thing you’ll notice with ours is what we’re calling 360 room scale. If there’s an object here, I can actually walk around the whole thing and interact with it.

So, since gaming is what I would say is the beachhead for virtual reality, there’s no better partner than Valve. These guys have over 200 million users right now and at any given time, there’s nine million people on the Steam network. So, we’re using the Steam network for games. We’re partnering with them to get development partners going and building games and applications for that. But they’re motivated as well to expand into other verticals, so we’re doing the hardware. We’re really in a partnership to drive performance.

You’re now in the virtual reality and health and fitness space. With HTC just getting its footing back in the smartphone market, is it a good idea to expand into so many other categories?

We’ve accomplished something right now that no other smartphone manufacturer has ever done. Not Motorola. Not BlackBerry. Not Nokia — even after big sugar daddies have bought them. Meaning, every time a smartphone manufacturer has quarter after quarter of negative results, they’ve never pulled out. Now, in Q4, we’ve announced our third straight profitable quarter. We reversed literally our trend from 2013, 2014, so we’ve really gotten our core business of smartphones to stabilize with strong growth. And we did that not through laying off a bunch of people and cost restructuring but through growth. We’ve expanded our smartphone portfolio and it’s paying off.

Bonnie Cha

We realize that our core strength is product. So our whole thing is how do we get our products in the hands of more customers. And those products are things like virtual realty and the Re camera. But also applications like Zoe, which has over 10 million downloads already on the Google Play store. And it’s going to be opening up in the Apple iTunes store this quarter.

We’re not trying to build a closed-wall environment like some of our competitors where you have to come into an HTC world and use everything HTC. That’s really strategic for us because we believe in our products and we want to get them in more hands, and you may not be willing to give up your iPhone 6 right now because that’s a huge decision. But if I can introduce you to HTC through our apps and through some of these other great products, the next time you go in to buy your phone, you’re more familiar with my brand now.

On the topic of phones, there’s been some criticism that the new One M9 isn’t all that different from last year’s model. What’s your response to that?

First of all, the HTC One M8 got really phenomenal reviews. We won a lot of awards and a lot of publications named us smartphone of the year. We’re trying to build a brand in the HTC One, and similar to the way that Porsche, with their 911, has made this timeless design, we want to keep what’s good, so there’s no reason to overhaul the entire thing. What we try to do is tackle things that our consumers were telling us that we could do a better job of.

I would just encourage people to use it and look at it before making any judgments. It’s a beautiful device and unless you’ve held it and touched it and looked at it, you don’t get a full sense of that. We’re confident in what we’re doing.

Will you be doing a Windows Phone version of One M9 like you did with the One M8?

We continue to partner with Microsoft. We’ve been together with them a long time. We don’t have any news to announce at the show here around what we’re doing, but they continue to be a big partner of ours.

What about your Desire phone line? How has that been doing?

The Desire line really fueled a lot of our growth, especially in the U.S in Q4. Our approach is really simple. Look, we’re not going to go down and try to compete with the Huawei’s and ZTE’s of the world. We built our brand on actually bringing out the best of the best products in each category. So what we’re doing is taking that approach to the mid-tier and low end. We still want to use premium finishes.

So, if you look at the Desire products, we’re using plastic versus metal on the One, but it’s a unibody [design]. We don’t have part lines, so it’s all one and feels strong and has great construction. We take the same user experiences like BoomSound that we have on the One and we take that down into the Desire line and the approach is working really, really well so we have a tremendous amount of traction right now in those tiers.

Consumers know the HTC brand as really the best technology and as premium, so when they see phones down at price tiers of around $100 to $150, we get a lot of credit. Our channel partners are seeing that, so we’re starting to see a lot of tremendous growth in retailers like Best Buy and customers like Cricket, Virgin and Boost. We’re really optimistic. I think this year you’ll see some big things in those tiers as well.

HTC has certainly been known for its premium designs. But now Samsung is coming out with the Galaxy S6 and Galaxy S6 Edge right around the same time as the One, and they’ve overhauled their design. Will you be doing anything different marketing wise to attract new customers who might be trying to decide between the two phones?

Yeah, we are. We have to market ourselves differently, which is why we’re doing things like opening up our apps and stuff to more customers. That’s a big part of it. But I think the way we have to market ourselves has to be different as well. I don’t have the luxury to go spend an infinite amount of money everywhere, so we’re going to be pretty targeted talking to our HTC customers and talking to people that we believe will be interested in HTC products.

Bonnie Cha

I think there’s a tremendous opportunity for us to solve real consumer pain points that they’re experiencing across whatever phone they have from Apple to HTC. And we’ve got a program that we’re going to be putting in place and going out around this HTC One later this month that I think is going to be eye-opening and also something that our competitors are not going to follow or want to follow.

The interesting thing is [HTC’s] problem is a lot different from Samsung’s. I need to grow, and they also need to grow. Their share … it’s getting tougher, just read the results. I’m coming from a smaller place, so I can be a hell of a lot more aggressive. You’re going to see us doing some interesting things that are going to take a premium product and put a premium wrapper around it in the way we support and engage with our customers, so there’s infinitely more value in buying an HTC One than there is in buying any other smartphone flagship.

This article originally appeared on Recode.net.

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