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2022 was the year of companies jumping on the metaverse bandwagon. Facebook got the ball rolling in June by chasing its name to Meta. From there, not a month went by without some big-name company crowing about its plans for the metaverse. It seems like 2023 could be the year everyone begins walking back those efforts. As it turns out, getting into the metaverse is not cheap, easy, or profitable any time soon. The latest company to offer an alleged retreat from virtual reality (VR) is gaming conglomerate Tencent Holdings–a notable development from a company known for betting on future technologies.
News of the company’s retreat from the virtual realm comes from Reuters, which describes Tencent as the world’s largest video game publisher. In mid-2022, the company began staffing up a new division for virtual reality. It had plans to produce hardware and software and hired up to 300 people. Reuters said it had devised a “ring-like” controller and was moving forward until recently. Due to a dour outlook for the technology’s future, the company has reportedly cancelled the nascent division. Reuters reports it told the unit’s members they had two months to find a new role internally or externally as the group was being dissolved.
Despite the technology’s recent setbacks in the mindshare department, Sony’s revamped PSVR2 is now releasing and delighting gamers worldwide. (Image: Sony)
Sources say it’s because of the significant investment required to make a compelling product and the time required to be profitable. Tencent’s Extended Reality (XR) team wasn’t expected to be profitable until 2027. In a shocking revelation, the article says the company also had doubts about its gaming and non-gaming software. Tencent denies this is happening, however, saying only that it was making some adjustments to certain teams. It also denied it was dissolving the XR group. Previously the company was known for its investments in gaming software, so the move to making hardware was a novel one for the company.
The company was reportedly planning on competing with Meta and Microsoft, which both have hardware and software VR platforms. However, in November, Meta laid off 11,000 employees, including an unknown number in its Reality Labs division. Microsoft then one-upped the company by laying off entire divisions working on virtual reality in January 2023. As of this writing, it’s unclear if Microsoft plans to continue developing hardware or software for the metaverse. Overall, it laid off 10,00 employees.
It’s not hard to see why these moves by its chief rivals would spook Tencent. Pivoting away from its core competency into hardware just because of the shiny new object doesn’t seem wise. However, that’s with the benefit of hindsight, as last year, the metaverse was all anyone was talking about. Also, the parent company of TikTok recently had layoffs in its VR division for the first time. All these recent developments put the “metaverse” on rather shaky ground heading into 2023. Some still say it’s the next big thing in computing and gaming, but it’s more debatable now. To wit, one analyst recently predicted the vast majority of metaverse projects will be dead by 2025.
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