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The Stinger Report #1260 - Consumer VR Reboot!
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The consumer VR market faces significant headwinds amid major industry shifts, with declining headset sales and strategic retreats from key players. Valve’s unveiling of the ‘Steam Frame’ signals a high-end PC VR resurgence, emphasizing streamed infrastructure and extensive ecosystem support, potentially marking a last-ditch effort for mainstream adoption. Conversely, Meta’s scaled-back investment, staff cuts, and closure of Horizon for Business reflect a reassessment of VR’s commercial viability, shifting focus toward AI and AR smart glasses. Apple’s Vision Pro underwhelmed with disappointing sales and a scaled-down future roadmap, highlighting the challenges of premium headsets in capturing mass interest. Sony and Panasonic have also reduced VR commitments, signaling a broader industry retrenchment. Despite these setbacks, immersive enterprise and location-based XR applications offer a more promising avenue for growth, suggesting that while consumer VR’s mainstream prospects wane, the XR ecosystem’s commercial and enterprise sectors could drive future value for investors.
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This is the Stinger Report, issue number 1260, Consumer VR Reboot by Kevin Williams. The consumer VR landscape looks a little less hospitable in the face of major upheavals and restructures. The market that has reportedly seen a slowing on consumer headset sales year on year is about to see the entrant of a major challenges that offers an all-or-nothing plan. While the corporation that has gambled billions on making consumer VR mainstream decided to pull out. All this and more, the final countdown. Following on from the announcement prior to IAAPA25, the reveal by Valve Corporation of their suite of new consumer gaming platforms was topped by the launch of the Steam Frame, a VR headset that replaces the previous six-year-old Valve Index PC VR headset. One of the worst-kept secrets in the consumer VR community, the final reveal of the Steam Frame, came with a mixture of emotions from the hard-pressed consumer VR community. Deep in tribalism, the Valve platform represented the last serious gasp of trying to force VR into mainstream against being sidelined as a niche. The Valve platform looked clearly to buck the trend towards moving headset development towards mixed reality, MR, facing designs, also known by some as XR. The lightweight Steam frame offered a compact form factor with pancake displays and an impressive streaming ability, able to offer VR and flat gaming access to a user's Steam library of game content into their giant game theater. Content consumption via immersive headsets factoring into Valve's thinking. The inevitable downsides of this compromise of cost performance and bank ability saw the Steam frame adopt LCD displays over the ubiquitous OLED alternative, stated to be a cost saving. And Valve clearly distanced themselves from MR, only including a BW front-facing camera, not seeing pass-through as relevant to the high-end PC VR offering they developed. The core module utilizes a Qualcomm Snapdragon 8 Gen 3, high-end smartphone processor, but is fundamentally a streamed high-end VR infrastructure with high fidelity. In drawing the battle lines between high-end PC VR offered now through a streamed VR infrastructure, the popularity of Steam VR titles will obviously receive greater recognition, along with the ability to access the extensive Steam game library, able to be played within the immersive environment on a virtual big screen, supported by the new Steam controller and directly from the new Steam machine PC console, along with support with the previously launched Steam Deck, handheld PC Gaming Portable, all this PC goodness glued together by Valve's adoption of a Linux backbone to support the whole Steam Gaming platform. Clear consumer battle lines drawn between the standalone mobile processor MR facing headsets personified by the discontinued MetaQuest Pro, the current top-selling MetaQuest 3 and 3S, along with the newly released Samsung Galaxy XR and Tempestuous Apple Vision Pro, and the high-end immersive platforms using PC VR, such as the promised release of the Pimax Crystal Super, the already launched Big Screen, and now the Steam frame to define the consumer VR landscape. The reality is that MR, as with AR, has yet to prove any of the hyperbole that surrounded its appearance, including those that attempted to define pass-through immersion as spatial computing. Valve is not placing a priority on MR in their game plan regarding the deployment of their full Steam infrastructure. And the Steam frame fits into this, with considerable customization available to ensure longevity. Valve looking at a Steam ecosystem supported by a loyal indie development base, the same base that established the original Oculus, but were abandoned following the acquisition by Meta. Many see this as the last chance saloon for the mainstream adoption of VR headset, immersive consumer, home user platforms this generation, not MR or AR, but the full consumer immersive entertainment platform adoption. This some 11 years since Valve started the bull rolling with the VR Room demonstrator at Steam Dev Day, and encouraged the Kickstarter, merges, and metaverse hyperbole that has brought us to this point in this phase of the VR revolution in immersive entertainment. Twelve years ago, Valve presented at their then indie developer forum, Steam Dev Day, in 2014 their VR Room, a workbench platform that gave a glimpse at what high-end PC VR could offer. This platform was offered to developers like the emerging Oculus, and with that tech investors were pulled into the promise of what VR could offer. Now in 2025, the promise of VR Room has been achieved. It is now up to the consumer community to confirm that this is the platform and ecosystem they want to support. At this time, the actual sales price for the Steam Frame has yet to be released, with plans for an early 2026 release. The question will be if the remaining VR community is prepared to pay what the final bill will be. Major restructuring for Meta. The reality of the changing structure of the consumer VR landscape was revealed only a matter of weeks into the new year, with the announcement from some sources that Meta was pulling up the drawbridge on their VR investment. This incendiary statement was a reaction to a series of developments that were revealed regarding Meta's investment and support of their Reality Labs division and their overall VR aspirations. Initially, it was revealed that Meta management had decided to cut investment into their Reality Labs operations spend on VR headsets and content by 30%, relocating their core investment into the AI and AR smart glasses business. The company revealed they were looking to work with partners Ray-Ban to ramp up production of their latest AI smart glasses, while at the same time were suspending plans for an international role out of their AR version of the glasses, Ray-Ban display, as they addressed production bottlenecks to keep up with demand. The monocular AR display platform, still clearly a stepping stone to a real AR platform. But then Meta dropped a series of major announcements on the consumer VR community. First, with the reveal that along with the reduction in investment, the corporation was looking at a 10% cut of staff across the Reality Lab's VR and Horizon World divisions, calculated as the laying off some 1,500 staffers. This news was followed by the closure of three VR game studios owned by the corporation. The VR community was perplexed by the news as many of the game studios had developed successful VR releases, and many were working on new VR content. This following news that other VR game studios had started to cut their losses. Cloudhead Games describes itself as VR's creative heart, laid off 70% of its staff, more than 30 staffers departing. The studio behind pivotal games like Pistol Whip and the Gallery, but has not released a new VR game in over six years. This one of many such reductions in staffing from dedicated VR studios. The next shoe to drop was the announcement that Meta would be closing their Horizon for business operation, the enterprise side of their VR aspirations, and the much confused VR for business strategy, the company ending the licensed support structure and the need for a payment of a fee annually for use in commercial application, devices previously requiring a Meta Horizon Managed Services MHMS package costing$180 per device yearly, leaving recent educational and business partners perplexed at the sudden cancellation of their projects. Meta also ended the Horizon Business application that allowed remote working within the virtual environment. The founder of Meta, in an internal memo, Leaked to the Media, stated that our overall reality labs portfolio, we are shifting some of our investment from Metaverse toward AI glasses and wearables. The consumer VR community was left shell-shocked by the developments. Numerous articles and video essays from once supportive influencers derided Meta for the move and even spoke of the death of VR. The less incendiary commentators saw this as a move to the margins for VR once again since 2021 and the estimated$78 billion gamble by Meta to move VR and the metaverse into the mainstream. It has hit the buffers and the company has faced the inevitable. While Meta spin doctors worked hard to paint the news as not an abandonment of their VR interests. Statements from CTO of the reality labs claiming VR had not grown as quickly as they had hoped. And while VR was still a priority, it was clear that the future investment for the platform had now changed significantly. The culling of staff from their VR operating self-evident. Meta statements claimed that plans for a successor VR headset to the Quest 3 would now be pushed back to 2028 and that the new headset would be aimed more at an MR approach, and they would be pulling the subsidized support on future hardware, meaning that headsets sold from this point would now be sold at cost with no subsidizing. The changed climate for consumer VR was reflected across the scene. Sources have also pointed to the abandonment of previous VR investment by Sony. Leading up to the holidays, no new major VR content was available for the PlayStation VR2 platform. Sony Studios even launching a new Men-in-black VR game for meta headsets, but leaving out a version for their own hardware. This was marked by less than enthusiastic support of their VR platform during the Christmas sales season and a clear move by management to focus on other aspects of their consumer business in the face of a changing video game landscape. The abandonment of Metaverse aspirations has also been reflected in the VR and MR headset sector. Most notably is the situation with Apple. Clearly, the company has greatly revised their aspirations in creating their own spatial computing empire. The company has only seen 420,000 sales at this point of their$3,500 priced Apple Vision Pro, only some 47% of their expectations. In comparison, the worst first-year reaction across their product line, the iPhone selling$1.4 million in its first year, the Vision Pro unable to achieve even half of this. This collapse in audience interest seeming to spell disaster for what many felt was an Apple CEO vanity project. In development for 10 years at a rumored$7 billion to$10 billion cost in RD, possibly representing Apple's biggest failure to date. Rumors of a cheaper Apple Vision Pro, a rumored Apple Vision Air, were abandoned, and Apple would only offer lip service to the platform with 12 months after launch offering an updated chipset and processor, M5, and a new head strap to address complaints of discomfort of wearing the front heavy design for any extended period, a key factor in attempting to establish any user interest for media watching. At the same time, a brain drain of Apple executives seemed to be underway, even seeing key execs responsible for the Vision Pro leaving to join Meta now to work on their AI Smart Glasses platform away from headsets. It was interesting to note at IAAPA25, we saw the Operation A Station promoting their MR immersive attraction using Apple Vision Pros. This Chinese operation stated to be the largest buyers of the Apple's spatial computer across their seven venues. With an estimated 20 headsets per location, how many of these Chinese sales have gone into that 47% of expected sales? What next for consumer VR? A lot of interesting terms like timeline change and roadmap shift being used to try and paper over the Meta Reality Lab's development. YouTubers and VR influencers attempting to defend these moves that mark an abandonment in previous VR investment, shock clearly that Meta would abandon the heavily subsidized hardware model, the make or break new management attitude spelling the cold hard reality of Meta's future VR support, the company moving from first-party VR support to a future of third-party ecosystem, while mainly focused on wearables. Where Meta had promoted their aspirations for the metaverse with the badly received Horizon Home avatars of the company founder, other corporations are looking to enter the creation of transmedia platforms that capture players' avatars. This recently seen with Netflix acquiring Ready Player Me, a startup avatar creation platform developer. This part of the corporations pivoting into video game development in support of their streaming services. The new year was also marked by the Consumer Electronics Show 2026 in Las Vegas. The expectation was for a show floor littered with the latest AI smart glasses and an omission of VR investment. The reality was not as simple to define. While there were hordes of new AI smart glasses on display, there were some VR headsets still being presented, such as from PyMacs and others. But it was clear that the investment in consumer VR was now marginalized, seeing the niche investment into the technology rather than mainstream aspirations. Also, news came of repositioning of major corporations regarding previous VR investment. Panasonic announced they are withdrawing from VR headset business after acquiring Shiftall in 2018 to develop and sell their range of Mega New X VR headsets. Panasonic has now decided to withdraw from VR market and is also looking to lay off some 5,000 positions related to this investment, leaving the now independent ShiftAll to continue development their headset business, now focused more on commercial application of the platform. Much of the news cycle following CES-26 has been filled with the developments of MetaReality Labs migration from VR and their metaverse aspirations. These developments are expected to have continued reverberations in the consumer development sector. Other major players who invested heavily on the tech looking to cut their losses and reinvest. However, the XR landscape seems to be able to weather the storm with proven business successes. The hope that LBEXR will become a new beacon for investment in bankable immersive entertainment.
