Icelandic developer CCP Games surprised us all this week with the announcement that it would be winding down its VR operations. The company's Atlanta location will be shuttered while its Newcastle studio is up for sale - all told, about 100 jobs are affected and it clearly doesn't send a great signal to those waiting for the VR business to take off. CCP, after all, has been one of the VR leaders from the very start, with Oculus using EVE Valkyrie as a showcase for what its Rift headset could do even before a consumer version had been finalized.
So if CCP is jumping ship, what does that say about VR's prospects? And should other developers working in VR, especially those who are 100% committed to the space over traditional gaming, be ringing the alarm bells? The situation isn't as dire in VR as CCP's situation might suggest, say the developers we chatted with.
Proclamations that "VR is dead" are nothing more than "scandalous headlines," says Denny Unger, CEO of Cloudhead Games, whose studio is responsible for the critically acclaimed The Gallery franchise.
"[Saying VR's dead] really calls out a lack of understanding about what's really going on," Unger comments. "In some ways this narrative is being prompted by an impatient investment community latching onto AR as 'The next BIG thing', a cool but wholly incomparable medium. On the other end of the spectrum, you have AAA software companies with inflated expectations on return contrasted by lower-end shovelware muddying the gears of quality.
"CCP's decision to take a break from VR likely had more to do with over-estimated short-term expectations and challenges in production scope/scale this early in the cycle"
Denny Unger, Cloudhead Games
"And finally, you have a fragmented market of VR devices, with wildly different quality standards/features and price points, and few opportunities for the public (or developers) to try the devices. The net effect of all of this is a seriously confused general public, resource strapped developers looking for stability and a foggy future outlook."
He adds, "CCP's decision to take a break from VR likely had more to do with over-estimated short-term expectations and challenges in production scope/scale this early in the cycle. Stakeholders in larger companies are much less likely to have the patience and understanding of VR's slow boil to widespread adoption. VR development in 2017 is an investment in the future and an early chance to plant your flag before the scales of widespread adoption tip.
"Finding 'success' in VR right now requires that project scope and team sizes are kept within a nimble and realistic realm. If you're in it for the money in 2017, you're doing it for the wrong reasons. Our job as content creators during VR's sensitive reboot is to drive adoption, to sell the dream, to introduce the public to the next big medium. The spoils of war come later."
Richard Stitselaar, Studio Director at Vertigo Games (makers of Arizona Sunshine), agrees with Unger. He's not surprised that a larger company with a headcount in the hundreds might need to look elsewhere.
"VR is not dead - it's simply suffering from growing pains," he says. "It is our belief that VR gaming thrives when games are created for it exclusively and from the ground up. So when a leading dev like CCP is in the position to invest in the development of a VR product or a non-VR product, it's not hard to look at the respective install bases, do the math and figure out why they might decide to leave the VR space.
"Vertigo Games and other studios have found their niche in VR. For us, this has meant a solid return on investment with both of our VR-exclusives, Arizona Sunshine and Skyworld. We won't be leaving the VR space anytime soon."
"I did not react to it from the standpoint that there is a titanic shift occurring away from VR anymore so that I worry that there's a titanic shift in the games business when a single developer or publisher closes a project or studio"
Steve Goldstein, Turtle Rock
Steve Goldstein, president at Turtle Rock Studios, which devotes a portion of its workforce to VR, says that we're all reading too much into CCP's exit. One studio's decision should be taken as just that.
"I think that any studio or publisher decision to pivot is usually an individual story as opposed to a bellwether of the industry as a whole," he remarks. "The people who are yelling that 'VR is dead' are the same people who are also yelling that 'single player is dead' because EA is changing direction on the Visceral Star Wars title. So apparently according to these folks, single player is dead in the same year that Breath of the Wild came out. Ok...
"In short, I didn't greet the announcement by CCP as good news, because it means that a developer is laying people off and people in our industry are losing their jobs. Nobody wants that. But I did not react to it from the standpoint that there is a titanic shift occurring away from VR anymore so that I worry that there's a titanic shift in the games business when a single developer or publisher closes a project or studio."
Ultimately, despite slower adoption than many would like, VR developers remain optimistic about the future, and CCP's decision to press the pause button doesn't change that.
"We support all content creators in the space, especially those like CCP who have been essential to broadening the appeal of VR," says Ben Kim, Chief Financial Officer at Survios, which developed the top-selling Raw Data. "We know that existing VR audiences seek high quality, premium content experiences, and we see great opportunities for diversifying business across retail and arcade environments to reach more people and bring premium VR to even wider audiences."
When asked for comment, an Insomniac Games spokesperson tells us, "We're dismayed any time we see layoffs and studio closures in our industry. We're still excited by the long-term potential of VR/AR, and will continue to support our own VR games like The Unspoken while looking ahead to the future. We're further encouraged by the recently revealed projects at Oculus Connect 4 and at Sony's Paris Games Week press conference."
"We're seeing the VR install base continue to grow, and are fairly bullish about the market this Christmas with the Rift and Vive price drops bringing them to a much more affordable level"
Patrick O'Luanaigh, nDreams
Some developers are obviously more confident than others. UK's nDreams (The Assembly, Bloody Zombies), for example, says it's on track to double its revenues this year, so you certainly can't blame the studio for its optimism.
"We're seeing the VR install base continue to grow, and are fairly bullish about the market this Christmas with the Rift and Vive price drops bringing them to a much more affordable level, and the updated headset, big games and marketing push that we see coming to PlayStation VR," nDreams founder Patrick O'Luanaigh states.
"As with most new technologies, there is no doubt that it is going to take a while for VR to reach mass-market (and I personally think VR and AR will have converged into a single device by that point). For nDreams, between now and then, we're being sensible with our development budgets, are continuing to build partnerships/co-funded opportunities, and are exploring areas like VR arcades and other VR entertainment."
He adds, "We remain firm believers in VR, and 100% committed... We've sold a lot of units and we're determined to be a leading player when the VR/AR market reaches mass-market, and given the billions of dollars being invested into VR and AR by all the big technology giants, we remain convinced that it will."
Cloudhead's Unger is highly encouraged by the success his company has had as well. "Cloudhead Games has a focus on high-end VR (Vive, Oculus, PSVR) which in a little over a year and [a half] has made frankly astounding strides in that short time," he says.
"From everything we understand about the market, the general public is still in for a number of key surprises. VR isn't going anywhere and with hundreds of companies developing hardware for the market and thousands of software developers jumping in, the industry is just building up steam. Competition will drive down costs and standards/winners will finally emerge. We're not worried but can certainly understand why there's confusion out there."
GamesIndustry.biz did request an interview with CCP, but we were directed to the previously released statement on the company's restructuring. Earlier in the year CCP boss Hilmar Pétursson indicated that his company's VR projects at the time were about break-even. We also followed up with Oculus after our Jason Rubin interview to ask for comment on CCP, but did not receive a response.