The Global Immersive Out-Of-Home Entertainment Sector covered in The Stinger Report .

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- The Stinger Report, published by Spider Entertainment and its co-founder, Kevin Williams, is the leading interactive Out-of-Home Entertainment news-and-views resource, covering the immersive frontier and beyond.

The realities of the consumer technology scene have been shaken by layoffs and restructuring in recent months. The holding, in Spain, of the recent Mobile World Congress (MWC) trade convention for the smartphone, wearables, app and connected technology market, acted as a unique barometer of the health of the sector – charting the state of the VR, AR and overall XR landscape in general.

It would be easy to see the issues impacting the consumer Virtual Reality (VR) scene as a reflection of the “Tech-Jobs Apocalypse” hitting the sector. But the reality is that we are seeing a massive restructuring of a technology boom – some 10-years since the latest phase of VR (which we coined Phase Three). All started with the reignition of interest in virtual headset technology, with the 2012 Oculus VR Kickstarter, and culminating with the eventual launch first of the Valve partnership ‘HTC Vive’ headset in 2016.

Following this first emphatic phase of investment, we have seen Meta (acquiring Oculus) leading the charge, for what they have labelled the “Metaverse” – which we have covered in detail previously. While at the same time, the vast sums invested into VR technology, content creation, and patent securing, have resulted in a mixed bag in the consumer sector. Investment such as the speculated $10b by Meta into this sector, dwarfs many other considerable sums. But the reality is that active users are calculated in the 15m on the leading VR headsets. Meanwhile, the hopes of creating a unified mainstream “metaverse” environment have faltered. Meta’s hopes of retaining their 300,000 monthly users on ‘Horizon Worlds’ have dwindled significantly, and their targets of 1b active users on their VR platform by the end of 2024 now seems a pipedream.

2023 seems to mark a period of moving towards what is coined as Phase Five – ultra slim headsets, with wireless or tethered technology, incorporating sophisticated haptics and eye-tracking technology, are poised for release. Already, consumer electronics giant SONY has released the sequel to their 2016 system, with ‘PlayStation VR2’. Likewise, Meta is positioning for an October release of their current platform with the ‘Quest 3’. But the storm clouds seem to be growing.

The tech industry round of layoffs have started to see considerable restructuring across the VR landscape. Originally with Meta’s 10,000 layoffs. But also seen previously with Google, and HP all redressing their staffing, especially in the VR scene. At the same time, once popular multiplayer virtual worlds were being shuttered, to make way for new developments, but also to address the need to see a business proposition from this investment. Most recently, this impact has been seen hitting not just the American tech companies but also the Chinese tech scene.

It was reported in February that ByteDance, the Chinese corporation that owns TikTok as well as newly acquired VR corporation PICO, has held a round of layoffs that had seen some several hundred leave the operation. This came just after reports circulated suggesting that the new ‘PICO 4’ VR headset had seen less than estimated pre-orders (released for sale only in China and Europe). In a report it was suggested that the company had halved its sales target for 2023. No word was given on how hard the VR operation at PICO had been impacted by these job cuts. PICO had established an enterprise facing business approach with their previous range of headsets (such as with the ‘PICO Neo 3’), and the ‘PICO 4’ was their first major foray into consumer placement. Some sources are suggesting the latest layoffs see the VR division cut back by 30-percent.

In other news, it was reported that Tencent Holdings, the vast Chinese consumer entertainment investment operation, had started cost cutting measures internally, seeing layoffs and the abandoning of plans to develop their own VR (XR) hardware. Alhough the news was denied soon after by the company, in statements about these plans in the metaverse, it was revealed they had only expected to turn a profit in 2027, which now went against the needs for cost-cutting. Following close behind this news, Chinese media ran rumors that Tencent was in discussions towards representing the ‘Meta Quest 2’ in their market as an alternative to their now abandoned plans. This claim had drawn scepticism from some in the industry, as the Meta app store and services will not be available in China. But, more importantly, there are many other comparable VR headset designs from supported Chinese manufacturers available.

The Chinese government has placed considerable faith in VR to develop their own, home-grown technology industries. This was called a new period of “explosive” growth, as defined by the Ministry of Industry and Information Technology in China during 2022, with promises to invest 350b yuan ($50b) into VR by 2026, creating sales of over 25m VR devices from the country. These grandiose expectations were fuelled by the likes of Statista (an online statistics database), which estimated that the size of the global VR/AR market may exceed $12b in 2024.

The new repositioning of Chinese corporations towards their metaverse-based aspirations is illustrated by iQiyi – the Chinese online streaming service (sometimes called the Netflix of China). The corporation launched in 2021 their ‘Adventure Dream’ VR headset for consumer sale, supported by over 100 game developers, along with specially streamed VR content (the system is a near identical platform to the ‘Meta Quest 2’ using the same processor). However, the corporation has pivoted its investment towards all-immersive, LBE, entertainment experiences, opening a new attraction called ‘Luoyang VR Project’ in Shanghai. This move allows the company to address their exposure in immersive technology, away from the issues of consumer hardware and software adoption.

Chinese e-commerce giant Alibaba Group, in July of 2022, laid off some 30,000 staff at mid-level and senior levels across their mainland Chinese operation, including many of those involved in their metaverse initiative, re-focusing on their core business, and looking towards new AI and cost-reduction measures. This follows a considerable period of investment in AR, and VR projects. Meanwhile, in more positive news, China-based Pimax Technology, known for their Kickstarters and development of a range of high-end PC VR headsets, announced at the end of February that they had secured C1 Series investment to the tune of $30m, with the round led by Beijing-based Danmu Capital. This investment will allow the corporation to continue their development of a new generation of high-end VR systems for consumer and enterprise application.

Regarding US leader Meta, internal leaks from the corporation revealed some of the cost-cutting measures as part of the recent layoffs. It was reported by MIXED that the company had cancelled plans to launch, after their planned October release of the ‘Quest 3’ VR headset, two successors’ headsets that had been codenamed ‘Cardiff’ and ‘Hermosa’. But amongst these changes, the corporation was linked to leaks of a 2024 release of a ‘Quest 3 Lite’ – addressing the expected sticker shock of the October release. This news reflects major reorganization of the VR operation, including reports of a new round of layoffs within the heart of the R&D department, Meta Reality Labs. These are the clearest illustrations of the complete redrawing of the roadmap within the VR community, what many are now referring to as the “Metaverse Bubble Bursting Moment”! Meanwhile, other observers see this reorganization as a pivot more towards a smart-glasses (MR) future for Meta.

In the shadows, one of the biggest developments to hit this phase of VR is lurking. The possibility that VR will be side-lined once again for a new vision of an immersive future. So, with the launch of Mixed Reality (MR) technology, mixing virtual objects and environments with real-world visuals. This technology has seen Meta pivot towards launching the ‘Quest Pro’ platform as a creative path finder general computing system. At the same time, technology corporation giant Apple prepares to launch its MR headset – previously scheduled for reveal in February, the reveal of this system has been moved to June. Extra time is needed, according to well-placed rumors, to address functionality and reliability (drop-test) issues before launch.

Just as we went to the wire, it was revealed by The Verge, that Meta had conceded to complaints regarding the high price of their vaunted productivity MR platform, the ‘Quest Pro’, and had slashed, permanently, the price of the system (now $999 from its original $1,499). This was, in fact, the second discounting as, in January, only three months after its launch, it was discounted by $300. This was claimed to be a temporary move – as this new discount is now confirmed to be permanent. It was also revealed that the ‘Quest 2’ would also receive a discount. This move was claimed by a Meta spokesperson as “creating hardware that is affordable for as many people as possible.” However, it did not draw on any of the original criticism that the hardware had been overpriced for the market and had seen poor sales, and this may be more of a warehouse clearing before Septembers ‘Quest 3’ reveal.

MR now seems to have surpassed VR, as the new hotness. Partnerships between Google, Samsung and Qualcomm have been announced, to launch their own MR headset in the coming months. Meanwhile, other manufactures such as HTC and Canon have released their own platforms. However, for VR, this transition to MR is not supported by a strong game following yet, more an enterprise ambition. And many are concerned that, like AR previously, it does not have the legs to gain traction.

The continued shakeup of the sector was best illustrated during Mobile World Congress (MWC), held in Spain during February. The convention focused on smartphone technology and the latest connectivity tools, with this year's theme being “Velocity: Unleash Tomorrow's Technology Today”. The show also offered a means to chart smart device trends, which have included VR and AR platforms, and the migration to MR. During the show, Chinese VR developer DPVR presented their P-Series VR headset, which incorporates a 4K display, and 5G modules to stream VR (as they claimed) “seamlessly”, in a standalone package.

Meanwhile, HTC had on their MWC’23 booth, labelled “VIVERSE” (their interpretation of the metaverse), their new ‘HTC VIVE XR Elite’ – a system hoping to embrace the VR and MR future. It was shown to attendees sporting a new 5G streaming solution. These kinds of MR-focused systems depend on strong pass-through capabilities. AR was still holding on, seen playing a major part in the strategies of Chinese exhibitors, with phone manufacturer Xioami presenting their wireless AR glasses. The company is coming off the back of their turbulent partnership with Meta, to try and sell the ‘Oculus Go’ in mainland China (that would see the laying off the entire Xioami VR team in 2019, pivoting all their efforts now to AR technology). At MWC’23, one noticeable absentee from the show floor was Meta.

The hopes and aspirations of this latest phase of Augmented Reality (AR), can be traced back to 2013 with ‘Google Glass’ and the hopes that AR would be the next tech goldmine. Following this, we saw ‘Snap Spectacles’ in 2016 and ‘Echo Frames’ from Amazon in 2017. Along with the vast investment of over $4b placed in Magic Leap, the Ray Bands partnership with Meta, or the launch of the ‘HoloLens’ by Microsoft. There were hopes that augmented glasses, offering superimposed computer visuals overlaying real world scenes, would become a mainstay of entertainment, social and commercial apps, foretelling dreams of millions of sales.

However, the overly hyped claims of what the AR market represented failed to deliver, and already reality has started to set in. Even though CES’23 was still littered with AR glasses concepts looking to be adopted, the restructuring of business has been seen (as outlined in The Stinger Report’s recent coverage of the “Tech-Job Apocalypse”). Magic Leap has bailed out and been taken over by the Saudi Arabia sovereign wealth fund, consuming billions in debts. Microsoft closed their current HoloLens and MR operations, and there are other major layoffs across the scene from those who had once proclaimed AR as the next sure bet in mainstream technology.

Of all the hype, there is only one key example of AR receiving critical acclaim and success in a real-world environment. The obvious vast adoption and download of the game ‘Pokemon GO!’ – the Niantic developed smartphone location-based game app, became a phenomenon during 2016, and is said to have been downloaded some 500m times during the first year, with an estimated revenue by 2020 of some $6b. But it has proven difficult to recapture this “lightning in a bottle”, no matter how hard Niantic has tried with other AR-based releases, even abortively partnering with Microsoft.

Niantic has gone on to raise $300m for development, and now partnering with Qualcomm, to launch their own AR glasses called ‘Lightship’ – supported by what they call their “Niantic real-world metaverse", based on the ‘Lightship Positioning System’ (VPS). Working with developers to populate their web-based technology, with rumors of a 2023 release date, they hope they can establish as a tentpole, in time to go head-to-head with Apple.

Not only the technology, but also the social entertainment environments that are engendered by these applications, are being impacted by the changing business conditions. As we touched on, reporting the reorganizations in the VR scene, we have seen several multiplayer competitive online VR game environments announcing their plans to shutter. Most notably was the Meta-owned studio behind the popular VR eSports game ‘Echo VR’, revealing their intention to shutter their service – which ignited the obvious community backlash.

It has been the removal of much of the crypto funding (called by some the “crypto-winter”), especially felt with the high-profile bankruptcy of cryptocurrency exchange FTX, forcing a rationalisation across the eSports business. Those initially impacted have been the teams. We have seen the ending of operation of eSports teams such as eUnited, ORDER and Torrent – shutting their doors immediately, after a brief social media announcement. The Brazilian eSports association, FURIA, announced cutting association and sponsorship deals valued at some $3m with FTX in November, after the crypto exchange filed bankruptcy. The impact of the loss of sponsorship deals, advertising and partnerships, due to the loss of crypto investment, has been hard felt on teams who depended on this investment to survive.

It was announced that Beyond the Summit (BTS), eSports live event organizer and facility operator, reported in February to have laid off its entire staffing – this will see the corporation re-evaluating its future towards restructuring in the market. The co-founder of BTS, in a social media statement, blamed last year’s economic conditions for these developments. This drastic approach was also employed by The Guard, an organization operating eSports teams, who announced they had laid off their staff, shuttering the operation. This operation was the eSports division of Kroenke Sports & Entertainment (KSE), and the sports and entertainment corporation is now being reported as in the process of divesting all their eSports holdings (though no official word has been made at this time). 

Likewise, the slowdown in the consumer videogames industry has seen cost-cutting measures, and layoffs. And this has impacted eSports investment. Many publishers, a few months previously, had doubled down their investment into eSports-based content, which could have affiliations and even the creation of their own teams. But, under these new conditions, these plans are under pressure. Major game publisher Electronic Arts had laid off some 200 staffers involved with quality assurance (QA) testing for their free-to-play multiplayer battle-royal game title ‘Apex Legends’. While publisher Blizzard Entertainment announcing its scaling back of eSports investment, feeling the pressure across key properties, even including ‘Overwatch’ and ‘Hearthstone’. Content providers, teams, and event organizers are all under pressure. In similar developments, we see leading corporations consolidating their position in the market.

Esports Entertainment Group (EEG) has sold, for $10m, their sportsbook division Bethard, to an unnamed corporation. The move allows EEG to focus their core activities on their online casino commitment. This development comes less than two-years since the company acquired Bethard’s assets for an estimated $16m – now prepared to accept with this sale a $6m loss. This also follows last year’s move by EEG to sell off its ‘Helix eSports’ gaming center business to SCV Capital for an undisclosed sum (having acquired the business in 2021, for $42m). All these moves are focused on returning the operation back to profitability.

These developments by no means discredit the opportunity of eSports but rather represent a period of rationality, and many eSports operations are using this time to consolidate their positions. ESL FACEIT Group (EFG) announced their plans to acquire Vindex, a specialist in data infrastructure and analysis technology, for an undisclosed sum. This move is being made to help EFG grow their eSports event organization and promotion – optimizing their support of teams and event audiences. Vindex had, last September, divested their eSports venue portfolio, run by Belong Gaming Arena, moving to a franchise model to be spun off as a separate entity. This mirrors other shakeups in the acquisition and reorganization moves made by other venue operators. As seen with developments within Nerd Street Gamers, which has seen staff layoffs as they evaluate their options. This comes after raising $12m in Series A funding in 2019, and $5m Series B in 2020, led by retailer Five Below. 

The opportunities for eSports business still seem vast, as reported during the recent China Esports Annual Conference – the eSports industry in that territory generated revenue of some $21b during 2022. This marks a 14-percent increase on the previous year. Moreso, investment has continued to be made in the sector, most notably the announcement that VSPO (abbreviation of “Virtual eSports Projects” and formerly known as VSPN) had received an investment of some $265m from Savvy Games Group (SGG) (owned by the Saudi Arabia’s Public Investment Fund (PIF)). VSPO, one of Asia’s largest eSports service and events providers, has hosted many events since they were founded in 2016. SGG, through their PIF connections, also controls EFG (including brands ESL, FACEIT, DreamHack and DreamHack Sports Games).

This concept was taken to a new level with the 2017 reveal that Walt Disney would be opening, in 2022, their ‘Star Wars: Galactic Starcruiser’ – a concept that would see the deployment of LARPing, themed dining, and specially created attractions and specially themed standard and deluxe “cabins”, all set within the Star Wars universe. It all came with attractions and audience interaction with cast members acting out scenarios. This two night “Voyage” was priced high and proposed to offer an exclusive experience for true fans of the franchise universe.

However, the experience opened to a barrage of criticism, and the questioning of its value, or quality of experience. Along with questions on the decision process regarding the theming, acting, and general immersive elements of the experience. While actively defended by the corporation, and stalwart Disney defenders (nick named “Pixie Dusters”), cracks in the concept became apparent, and soon it was clear that initial bookings were drying up, as more and more slots became free of reservation. Confirmation of problems internally would see drastic discounting of packages (as low as 25-percent), and sudden cast member departures. This continued with news of discounts, as low as 50-percent, for Walt Disney cast members and their families, for standard cabin accommodation. The discount also applying to selected merch, as if preparing to clear the decks.

Now under the new reorganization of the Walt Disney Corporation (as covered in our previous report), including new management, more upheavals of the ‘Starcruiser’ experience have been leaked. It was revealed that Disney was now looking to offer single diner events at the venue, reducing the experience from a multi-night destination to a dining attraction, over selected dates. Scaling back on the cast members is needed, along with the hospitality element. Although there is no word yet if the operation would be considering a total abandonment of the themed cabins, sleepover element. This public debacle will have many re-evaluating the vale of this kind of immersion.

This concludes our latest Stinger Report, we thank all our subscribers and advertisers for their support, and the next report will follow shortly. 

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