Oculus Founder on Meta Cuts: “The ‘Meta abandoning VR narrative’ is obviously false”

By
Scott Hayden
-
18

In light of Reality Labs’ reorganization, which has seen recent internal studio closures and layoffs, Oculus founder Palmer Luckey calls the doomer narrative “obviously false.”

The News

Luckey literally kickstarted consumer VR more than a decade ago with the founding of Oculus, which in 2014 was acquired by Meta (ex-Facebook) for $2 billion.

Having departed the company in 2017, Luckey still maintains close ties to the industry; his defense company Anduril is working with Meta to build “the world’s best AR and VR systems for the US military.” So when Luckey voices his opinion, it’s usually from an insiders perspective:

“I have an opinion on the Meta layoffs that is contrary with most of the VR industry and much of the media, but strongly held,” Luckey says in a recent X post.

“This is not a disaster. They still employ the largest team working on VR by about an order of magnitude. Nobody else is even close. The “Meta is abandoning VR” narrative is obviously false, 10% layoffs is basically six months of normal churn concentrated into 60 days, strictly numbers wise.”

Palmer Luckey demoing Meta Orion AR prototype | Image courtesy Palmer Luckey

Luckey argues that while Meta’s VR layoffs are regrettable, they’re an overall positive since Meta-funded internal games crowded out third-party developers and diverted resources from core platform and technical progress.

“Some people will say ‘they should have just funded those developers as external studios rather than acquiring them, then!’ Yes, I agree,” Luckey says, admitting that hindsight is 20/20:

“Do you think Oculus expected to only sell 700 copies of Rock Band VR after spending eight figures to make sure it was ready and awesome for Rift CV1 launch, to the point of bundling the guitar adapter with every single headset? Of course not, but sometimes you learn what the world actually wants from you the hard way.”

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My Take

The takes are still very hot at the moment, as it’s been less than a week since Meta closed three first-party studios: Armature Studio (Resident Evil 4 Quest port), Twisted Pixel (Deadpool VR), and Sanzaru Games (Asgard’s Wrath).

Details are still coming too, including the revelation that unannounced projects, such as a Harry Potter Quest exclusive and Batman: Arkham Shadow sequel, were reportedly in the works, but are now cancelled.

Maybe this eventually proves healthy for the ecosystem. But right now, it’s hard to call it a clear win when we don’t yet know how far Meta’s pullback goes, or what the ‘plan B’ really is for Quest.

A brief counter to Luckey’s optimism: what if Nintendo announced it was cancelling a bunch of first-party games for Switch 2, and would instead focus on non-gaming platforms? Even if third-party developers benefited in theory, the signal to the market would be unmistakable.

Or maybe the more apt comparison is PSVR 2, where Sony’s quiet pullback from first and third-party funding didn’t “free” the ecosystem so much as signal exhaustion, reinforcing the perception of VR as a medium unable to scale beyond its niche.

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Scott Hayden
Well before the first modern XR products hit the market, Scott recognized the potential of the technology and set out to understand and document its growth. He has been professionally reporting on the space for nearly a decade as Editor at Road to VR, authoring more than 4,000 articles on the topic. Scott brings that seasoned insight to his reporting from major industry events across the globe.
  • Paul Bellino

    If I am a first time buyer as a grow man I pay 300 dollars for a quest. I go home put it on and the first thing I see is horizon World. I say let me try a concert or the NBA game. What happens when I go in there. I meet a bunch of kids and screaming the N…. word. Then then tell me hey old man VR is for children get out of here. Why don't your old self get a job and stop playing with kids toys Ha ha Ha. My being new I don't even know how to block them. I take off the headset feeling like a fool for even buying it. I then hand the headset to my kid that has no money and he plays free gorilla tag. First impressions are everything….Meta sucks big balls.

  • Dragon Marble

    I agree with your take, Scott, especially the Sony example. We've already seen what a first party pullback mean for the ecosystem. PSVR2 right now is not an ecosystem that can stand on its own. That's far from heathy.

    Did Meta first-party blockbusters like Batman "crowd out" indie developers? Obviously not. Just look at how many of them are releasing games on Quest everyday — too many, if you ask me.

  • Paul Bellino

    Here we go, This is for small mined people. VR is dead They said the same thing about computers. People for home use do not just want Business computers or computers that are for just a few specific applications. They want Good computers that can and will do it all. Why take your product and limit its scope and application. It can do it all. Why not take the money. What are you in business for. To give up money? Not to make it.? A total fool thinks like that. I really do not think that type of person should be doing any business at all. Yes, we had people like this back in the day, I remember well. They said PC gaming was totally dead, and it was for a little while. I kept building them anyway kept gaining knowledge. I had a job where I was the only one who knew how to use computers well. I made tons of money. Then a little company with vision came along its name was Steam (do you know them). They saw and knew what I knew. They would build games to push the computer industry and in turn Pushed the hardware, Computers would have to become better, faster, we needed to push them to their limits. We needed that because the computers we had could hardly run the games we needed to play. Small minded Microsoft used to say computers don't need fancy graphics cards. We have DOS, is that not grand. Nvidia said otherwise. AMD said otherwise as well. Do you see a pattern. Have I taught you anything. Steam just this mouth made 1.6 Billion off of one game. Nvidia and AMD are totally no small fries either, and I can see you saying well people have gaming consoles. They are limited and cannot be pushed. PC gamers are the trail blazers, we pushed VR. We pushed what is capable. AND WE HAVE MONEY. We are not little kids that have none, you know, the ones Meta populated Horizon World with. Then gave away free games. Tell me was this strategy wise. There is a happy medium Meta does not understand. Build a device for all, one that can do it all. This way you get all the money. That's how business works. Now go back to school where you belong.

    • kraeuterbutter

      dont understand your last part..
      the Quest 3 is the headset for all..
      it can do PCVR very well – for realy low money
      it can do standalone better than any headset so far,
      with the biggest games-catalog standalone out there by far
      and: it can do Mixed reality better than any headset out there..

      so: the Quest3 IS the headset for all…
      the numbers also tell it: 20-30 Million sold headsets..
      thats far more than ALL headsets from Valve, Vive, Pimax, Bigscreen, PlayforDream, Pico, WMR, HP Reverbs together

      so: the Quest3 IS the headset for the masses..
      and: its also a good choice for enthusiast…
      if you have a quest3, then you can also buy another headset, for example a pimax for better graphic quality (but now Standalone, no mixed reality, no easy using, 4 times the price)

    • Christian Schildwaechter

      You got a lot of your history mixed up here. Nvidia was founded in 1993 by former AMD, SUN and IBM engineers, eight years after Microsoft Window 1.0 released. Microsoft was a big player in spreadsheets with Multiplan on DOS, but were asked by Apple to create a new one using the mouse driven GUI of their still in development Mac that debuted in 1984. This was Excel, and Microsoft created Windows to also run it on PCs, with Window 1.0 pretty much just being an Excel launcher. Microsoft pushed for GUIs requiring graphic cards very early on, long before the first 3D accelerated cards were released.

      And Gabe Newell was convinced to drop out of Harvard by Steve Balmer while he was visiting his brother at Microsoft. He spent 13 years as a programmer and executive there, and was the producer for the first three versions of Windows. His move to leave Microsoft and start Valve was first inspired by the release of the original Doom in 1993, still a DOS application because Windows wasn't optimized for games, and at one time estimated to have been installed on more computers than Windows itself, with Newell offering to port Doom to Windows for free.

      And then by John Carmack plus a friend, who had gone from Microsoft to id Software to work on Quake directly (Newell: "one of Carmack's programming heroes"), telling him and Mike Harrington (also working for Microsoft) "'Hey, you guys should stop working at Microsoft and start a games company". Which they did, flying down to id Software in Texas in 1996, bouncing around ideas with them, according to Newell ending in Carmack saying "'Great, here's the source code to Quake, go build a game". Which was the beginning of Half-Life, and the rest is legend.

      Valve didn't come from some indie game resistance fighers keeping up PC gaming against the mainstream declaring it dead, but from a couple of already wealthy Microsoft managers with the help of the back then most successful PC gaming development studio. And while their fame is for introducing a narrative shooter and tons of game mechanics that basically shook up the whole gaming world the very moment the Half-Life demo released, the real key to Valve's success is the introduction of digital distribution, cutting out the middle men like Walmart and other large stores that had a lot of control over video game publishing through their shelf space, and took a very large cut from every game sold.

      • Paul Bellino

        You missed my point all this came about for a need.

        • Christian Schildwaechter

          I did not miss your point and have written lots of comments about Meta not dropping out of VR, let alone VR being dead. But in trying to make your point, you make up stuff and misinterpret other things, so in the end you just voice an opinion with some imaginary storyline not based on reality.

          And you completely misunderstand the strategic purpose of Horizon Worlds and in how far it contributed to the current situation or not. Meta never wanted to be Steam, they just needed a business model to start and therefore copied Steam, so any argument pointing to how great Steam did in contrast to Meta completely ignores what long term goals Meta is basing their decisions on. It's fine if you want something else, but it is them throwing USD 100B at XR, roughly USD 10K per active Quest user. So no, your budget for VR games is completely inconsequential to them, and this not working out has very little to do with screaming kids or people not understanding game development.

      • Cl

        They cut out stores who took a large cut, to take a large cut themselves? Physical stores and steam both take 30%.

        • Christian Schildwaechter

          TL;DR: Large retail stores took more and came with extra costs; overall Valve still offers the best deal by far, otherwise their 2025 revenue wouldn't have reached USD ~17B, generated with only ~350 (well paid) employees, roughly USD 49M per person..

          Large retailers bought physical games from publishers/distributers for usually 50%-60% of their MSRP, putting quite some pressure on publishers that basically had to fight for the limited shelf space and therefore agree to these terms, as this was where most people bought their games. Given that physical game copies add extra costs for media production, packaging and shipping, a publisher would usually end up with not even 50% of the retail price. Valve taking "only" 30% was therefore quite attractive, due to no media costs and Valve paying for servers and bandwidth, leaving publishers with 70% of the sales price, making them roughly 50% more than the same game sold at Walmart.

          Initially Steam was only used to distribute Valve's own games, and they only created it because they couldn't convince large network companies to offer a gaming client that would allow for easy distribution of patches, updates or anti-piracy/anti-cheat measures. The first 3rd party titles were released on Steam two years after its launch, and for the first nine years, only games picked by Steam themselves were allowed on the platform. After that they introduced Steam Greenlight, letting users vote on what gets published, and nowadays all that is needed is a USD 100 publishing fee (reimbursed against later game sales).

          Valve wasn't the first to come up with the idea of digital game distribution, but other publishers didn't dare to try it themselves out of fear of then getting boycotted by the retailers trying to preserve their role and margins, thereby losing their main distribution channels. Once digital distribution was established, it was very welcomed by other publishers, partly because it provided them with more price negotiation power, as they no longer solely depended on retailers.

          As the per-game cost of running Steam has fallen dramatically, it is debatable whether the 30% are still justified today, even though Steam offers a lot of gaming services for free, and pays for things like the development of Index, Steam Deck, Frame, Machine and Steam OS that don't make them a lot of money, if any at all. The same can be said for Apple's App store or Google's Play store which on launch simply adopted Valve's 30% take. In the early days of iPhone, Apple made no money on the App store due to high setup and maintenance cost relative to moderate sales, but by now it is a money printing press they never adapted the price for, despite offering less services than Steam.

          Epic's store taking a max 12% and often nothing when their game engine or services are used, and luring gamers with free games paid for with Fortnite income, had close to no impact on Valve's dominance. Valve, lacking Apple's walled garden, can keep up their 30% (with some exceptions) margin because gamers stick to Steam for various reasons, one being that most other game stores are even worse. So developers pretty much have to be on Steam to reach their audience. But most of these developers wouldn't be able to get their games published in the first place if Valve hadn't broken the quasi-monopoly retailers had on game distribution with physical copies. Giving up 30% is a lot, but giving Valve 30% is still a way better deal than giving anybody else 30%, and usually even a better deal than publishing on another platform for free.

  • Nothing to see here

    I would like to see those two abandon Trump.

    • Tonanamous

      Take your TDS somewhere else. Nobody asked for your political opinion.

    • NL_VR

      Wont happen. Rich people dont go against the system, they love money to much and only want more and more.

      • FRISH

        Lmao. Most rich people are for the intersectional globalist agenda. The system smears anyone who goes against it, which includes Palmer who paid for some memes (big whoop, if you look at places like reddit today you can see just how much propaganda there is and you get banned just for speaking in the "wrong" subreddits) and Elon Musk from the moment he talked about bringing free speech to twitter. The establushment loves censorship. As for Zuck, the way I see it he's more self interested rather than a Trump fan.

        Progressives are a part of the system, not against it. Frankly it's tiring that TDS needs to infect every space. This is about VR not politics. People really need to stop making it their entire personality. Especially given how much it is backfiring when people vote in the opposite direction because of all of the fatigue.

  • Christian Schildwaechter

    TL;DR: they are not getting out of VR, they are getting out of VR game creation and publishing.

    I agree with Luckey that the doomer narrative of Meta abandoning VR is “obviously false", but it is too easy to say that "10% layoffs is basically six months of normal churn concentrated into 60 days". Technically this is true, and Meta has been through much larger layoffs, but what is special here is that this is only one of several concurrent events hinting at Meta reducing their VR engagement.

    They not only fired a lot of people working on VR HMDs and Horizon Worlds, they also closed three of their gaming studios, killed several contracts with 3rd party studios for unreleased games, ended their program to support VR game developers financially, and finally killed their Quest for business program. So this is a lot more than just regular churn, this is a strategic move that they effectively announced before. Almost exactly a year ago a memo from Meta's CTO Andrew Bosworth leaked saying that 2025 would be the most critical for VR:

    This year likely determines whether this entire effort will go down as the work of visionaries or a legendary misadventure.

    Interestingly he particularly pointed to Horizon Wolds on mobile, not even on Quest:.

    And Horizon Worlds on mobile absolutely has to break out for our long term plans to have a chance.

    Even though most VR enthusiasts despise Horizon Worlds, it was their attempt to counter existing large virtual communities like Fortnite and Roblox that have been venturing out of their pure gaming focus, and turned themselves into large venues that draw millions of players/users/avatars in concerts etc., and come with very lucrative in-world economies, exactly what Meta was aiming for with their Metaverse.

    All the current cuts hint that their internal growth targets for Horizon World (on phones and in VR) clearly weren't met, and their evaluation of the whole VR venture turned more towards "legendary misadventure". But all this is about (multi-user) virtual worlds, basically the metaverse part, not XR as a whole. They are pretty much getting out of either creating or paying for any gaming content for HMDs, but that's not the same as dropping VR/XR.

    They will very likely push future HMDs more towards media devices like AVP and GXR at higher prices, with the long term of merging them into smartgasses. They will still support game developers, just not financially, and the vast majority of apps on the Horizon store will be games for a long time. But you may have to pay extra for controllers on Quest 4.

  • Herbert Werters

    The cuts mainly affect teams working on VR headsets, VR-based social networks such as Horizon Worlds, and VR game studios. I don't know what there is to misinterpret here. What Lucky is doing is sugarcoating the situation.

    I agree 100% with Scott Hayden's comparison with Nintendo or Sony.

  • Jadon Armstrong

    The Oculus sellout that took everyone's crosud sourced money and then sold the product off to Facebook. Money talks, sh!t walks.

    • Christian Schildwaechter

      The Rift DK1 Kickstarter raised about USD 2.5M in 2012 for the headset to ship in early 2013, but by mid 2013 Oculus had also received a first round of USD 16M in venture capital. That was raised to a total of USD 91M later that year, several months before Facebook bought the company for USD 400M in cash and Facebook stock with a combined value of USD 2B, making a lot of money for the early investors.

      Oculus later promised they'd give everybody who pledged at least USD 275 on Kickstarter and already got the DK1 a free Oculus Rift CV1 "Kickstarter edition" worth USD 599, plus two free games. And they did, giving out almost 7K CV1 for free, so any claim of them just grabbing the crowd sourced money to then sell out to Facebook, betraying their initial VR enthusiasts supporters, is bullshit.

  • Oxi

    Why on earth should I care what this arms dealer thinks in 2026?