Meta’s Reality Labs cuts sparked fears of a ‘VR winter’

MetaThe prioritization of virtual reality in favor of artificial intelligence and internet-connected smart glasses has cooled the industry and raised concerns about its future.

“I can see what VR winter feels like,” said Jessica Young, an independent VR content creator who specializes in Horizon Worlds, Meta’s virtual social network.

The social media giant laid off 10% of employees working at its Reality Labs unit last week, with the cuts focused on VR-related initiatives like the Quest VR headsets, CNBC reported. Teams working on Horizon Worlds have been hit hard, and some in-house studios have been shut down. According to CNBC, approximately 1,000 people were laid off.

The move is part of the company’s effort to redirect its Reality Labs investments from VR to artificial intelligence and wearable devices such as the Ray-Ban Meta smart glasses produced in partnership with EssilorLuxottica, a spokesperson for the social media company said last week. Meta declined to comment beyond its previous statement.

Meta’s reduced investment in VR is notable given how much the company has helped grow the industry since its $2 billion acquisition of Oculus in 2014. The company became synonymous with VR when CEO Mark Zuckerberg changed its name from Facebook to Meta; this represented the founder’s obsession with the future of digital worlds called metaverses. Meta’s Reality Labs division has recorded total losses of over $70 billion since late 2020.

Zuckerberg’s sudden reversal has some VR developers worried about his future prospects. While they say they don’t see Meta ending its VR efforts, it looks like a big change is on the way.

Meta traditionally announces new Quest VR headsets at its annual Connect conference in the fall, but for 2025 the company is short on VR hardware. Instead, Meta introduced the $799 Meta Ray-Ban Display glasses, which include a single built-in digital display.

“If Meta doesn’t release a new headset for another year or two, it’s going to feel stale,” Young said. “It already is.”

Since the layoffs, Meta technology chief Andrew Bosworth has stated that the social media giant has not abandoned VR.

“We’re still investing heavily in this space, but frankly VR is growing slower than we hoped,” Bosworth said. technology newsletter Resources. “And so you want to make sure your investment is the right size.”

This week, Bosworth also shared a post from Oculus co-founder Palmer Luckey: Who wrote to X on Sunday It is stated that Meta still employs “the largest team working on VR by approximately an order of size.”

While Luckey said he “really feels bad for the people who are affected” by the layoffs, Reality Labs’ changes represent “a good thing for the long-term health of the industry, especially the ongoing incentives.”

Market research firm IDC said: in december report A major transition is occurring in the device segment called Extended Reality or XR. This category includes VR and so-called mixed reality headsets, which allow users to switch between virtual environments and see the environment outside the helmet. The category also includes AI-powered smart glasses and more powerful versions with digital displays.

IDC predicts that the XR device category will grow 41.6% year-over-year to 14.5 million units sold in 2025. But this growth has nothing to do with VR and mixed reality headsets; these shipments are expected to decline 42.8% to 3.9 million in 2025. The rest of this XR category, which includes screened and screenless AI glasses, is predicted to grow 211.2% over last year. 10.6 million units will be shipped in 2025.

Jitesh Ubrani, director of research at market analyst firm IDC, described the VR headset market as a niche market, appealing to only a small segment of video gamers. He said average consumers seem uninterested in wearing “big, bulky headsets” for long VR sessions, as much of the tech industry hoped for about a decade ago.

“The market has spoken,” Ubrani said. “There are certain niche audiences that will continue to use these headphones, but they won’t be attractive across the board.”

Andrew Eiche, CEO of Google-owned VR game studio Owlchemy Labs, said it was always misguided to think that VR was on the verge of having its breakthrough moment on smartphones. He called comparing VR headsets to iPhones a “strategic mistake”

Eiche said the VR market is more like the old-style Atari video game consoles that were popular before sales plummeted. During the infamous gaming market crash of 1983. It wasn’t until the late 1980s that Nintendo consoles helped revitalize the market, laying the groundwork for the overall industry to grow into the massive industry it is today.

“A lot of tech people thought: [VR] Eiche said of the tech industry’s push for the latest craze: “It’s going to be great in an instant, and the same goes for AI. When you look at long-term technologies, VR isn’t going anywhere.”

Still, Eiche said that beyond Meta’s layoffs, other VR studios have also been downsizing recently as part of the broader slump in the video game industry. Since the Quest is the dominant VR headset on the market, the app store is an important distribution channel for third-party VR.

To make matters worse, Eiche said Meta’s Horizon Worlds push comes at the expense of third-party developers trying to gain visibility among Quest users.

“We are at the mercy of Meta,” Eiche said, adding that this “creates a situation where if Meta retreats, we will all retreat.”

Eiche said he’s optimistic that gaming company Valve’s upcoming Steam Frame wireless VR headset and recent entries of other devices like the Samsung Galaxy XR, which launched in October, will help the market. Apple’s Vision Pro.

But Apple’s entry into the VR space in February 2024 didn’t do much to move the needle, and in January IDC said Apple’s Chinese manufacturing partner Luxshare had been discontinued. produces new Vision Pro headphonespoints to a lack of widespread consumer demand. Still, Ubrani said he finds Apple’s $3,499 spatial computing headset essential as a business tool.

“Apple has been successful in selling to a lot of developers, but they’ve also sold to some very large companies,” Ubrani said.

As part of Meta’s Reality Labs outages, the company said: support page said it would discontinue its Horizon managed services program for businesses that use Quest headsets for internal tasks such as virtual employee training.

Meta “failed to realize how big VR could be if they embraced the big picture outside of gaming,” said Sean Mann, CEO of RP1, a startup that has developed a “metadata browser” for people to access virtual and augmented reality environments.

As Meta scales back its VR ambitions and redirects Horizon Worlds to a mobile-focused online gaming platform robloxYoung said he plans to continue creating experiences on the platform.

Young was able to make a living by taking money from other Horizon developers to create trailers to promote experiences available to users on the service. He also monetized the Meta by winning Horizon-related rewards. competitions It aims to help improve the overall platform.

But Young said he was less enthusiastic about Horizon’s mobile move because there was something special about the platform’s earlier, VR-centric years, especially in the Covid era.

“Horizon has become a lifeline for people isolated by the pandemic, disability, age or geography,” he said. “Many users who never imagined themselves as creators, with no background in art or programming, were inspired by friends to try.”

But Horizon was lost, and “the frustrating thing now is watching people declare it dead without ever experiencing or understanding what it was,” Young said.

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