Tencent is apparently abandoning its efforts for virtual reality gear. Instead, it told employees at its XR unit, which was established last June to create VR gear and software in the aftermath of metaverse hoopla, to “look for other options.”
According to Reuters, the key reasons for the course shift were “difficulties in reaching early profitability,” the scale of the expenditure necessary to produce a competitive VR headgear, and a dearth of engaging games and non-gaming applications. While the business had developed a prototype for a “ring-like hand-held gaming controller,” it did not anticipate the unit to be viable until 2027. (Despite the change in approach, Tencent does not intend to dismantle the unit.) “It no longer fits in with the company’s new overall strategy,” a source added.
Moreover, it cancelled a planned acquisition of gaming phone company Black Shark, which would have brought 1,000 new employees to the team (after hiring 300 last year). The Chinese government was said to be looking into the purchase.
According to company insiders, Tencent “dabbled” with VR around seven years ago, when consumer VR excitement was undoubtedly at its pinnacle. After seeing the success of the Meta Quest and learning about developments in pancake lenses and screens, it renewed attention in 2021. Nonetheless, Tencent faced regulatory scrutiny and the impact from COVID-19 precautionary measures in 2022, making it a difficult year.