#1156 – Restructuring the Tech Space

Just one month into the New Year, and the ramifications of tectonic change are reverberating round the tech industry landscape. Major restructuring across all the leading social media, tech and entertainment corporations, with a new focus on how best to apply this technology into the commercial, entertainment and enterprise landscape, are underway.

Microsoft Restructures XR Position

Now some five-years since the ‘Microsoft 2018 LBE Summit’, held in San Francisco at the Microsoft Reactor venue, and the news greets us that, following the momentous layoff of some 10,000 Microsoft employees, much of the infrastructure purported to be focused on supporting the emerging VR LBE scene undertaken by ‘Windows Mixed Reality’ (WinMR) has been shuttered. The reality of the situation is still be played out, but the sacking of the complete development team at Microsoft’s ‘Mixed Reality ToolKit’ (MRTK) operation, has also seen the whole of the VR and AR investment, including WinMR, seriously impacted or closed. The remainder of Microsoft’s interests in MR are now relegated to their work on ‘Mesh for Microsoft Teams’ (Mesh is an ambitious holographic virtual collaboration platform – think virtual-Zoom).  

As one of those 200 executives invited to the ‘Microsoft 2018 LBE Summit’, The Stinger Report had questioned, at the time, the ability to support their aspirations to grow the LBE business. Especially as, following the event, a revolving door of different executives passed through control of the corporation’s interest in this direction. Their last LBE event was held in 2019, but it was clear that Microsoft’s interest was waning. Concerns were voiced at the time of another repeat of the aborted attempt by the Redmond corporation, now some 27-years ago, to implement their ‘Open Arcade Architecture’ (OAA) initiative (inherited from Intel). Dubbed ‘ArcadePC’, it was hoped to revolutionize the amusement scene with their interpretation of what the industry needed (in the shape of a standardised PC for arcade development and operation). Only to crumble due to neglect and management incompetency.

Back in 2018, the Microsoft brand was looked to push several VR headset developers and operators towards utilizing their WinMR platform standard and encourage the creation of a walled garden to ensure control of the emerging LBE VR scene (fuelled by grandiose projections that the LBE market would be worth $12b by 2023). The grandiose aspirations soon faded as the operation focused more on consumer applications of VR, then when these failed to achieve mainstream adoption, moved towards AR and then MR, and the tools they create in the new immersive nexus. However, the AR/MR aspirations of the operation found it difficult to grow. The corporation’s ‘HoloLens’ platform proved difficult to establish in commercial business, and engendered a toxic work environment at Microsoft, who eventually had to close and disband the ‘HoloLens’ executive team following accusations of abuse and management misconduct. 

Things continued to prove difficult, with the division seeing mismanagement leading to the collapse of a relationship with Samsung to develop a new ‘HoloLens 3’ headset (codenamed ‘Project Bondi’) – only for Samsung to reveal their new plans to launch their own MR platform. And then Microsoft lost a lucrative $400m US military contract for a soldier equipped ‘HoloLens’, rejected by US Congress this year, after failing field tests. With the departures of key executives responsible for these calamities, it was no surprise that the Microsoft layoffs would see the final shuttering of the division.  

Now following these record layoffs undertaken by Microsoft – following similar massive sackings at Meta – the actual division controlling the toolkits for the WinMR environments has been shuttered. The remaining team members are now relocated to work wholly on the commercial workspace applications of these tools, through the ‘Mesh for Microsoft Teams’ initiative. This initiative is working with Meta on their ‘Quest Pro’ for deployment in the commercial sector on their MR headset. At the same time, it was revealed that the veteran social VR platform, ‘AltspaceVR’, a popular social engagement platform for VR enthusiast, was also to be shuttered. This platform, acquired by Microsoft in 2017, will see the service and accounts end in March.

And this begs questions for those LBE VR operators who are still dependent on the ‘Windows MR’ (WinMR) platform and supported VR and AR headsets. Likewise, regarding the Enterprise initiative by Microsoft, including the HoloLens projects, the question is: are these applications now seen as being incredibly vulnerable with no support or updates? 

Obviously, those operators in the VR arcade scene will be hit the hardest are those who still depend on support of their WinMR VR headsets and platforms. That said, many operators have migrated away from older WinMR systems deployed by HP, Samsung, Pico, Lenvo and Canon, now updating to the latest hardware such as the HTC platform for workday deployment in the harsh environment of VR arcade and free roaming. Those who still use WinMR systems have, in most cases, taken full control of the firmware or are running custom management platforms. It was this concern – if the corporation would be able to support their grandiose aspirations in Enterprise, including LBE – that had raised concerns back in 2018. No matter what, there will be some impact on the VR scene in general, from Microsoft’s departure from this aspect of the scene.

The record Microsoft layoff are expected to have other ramifications within the corporation, which has pivoted heavily into AI, having invested some $10b into OpenAI. Sources stating that several consumer game studios were hit hard, and this could see the cancellation of games in development, with the Xbox console series feeling the sting. Meanwhile, for the consumer VR community, and those commercial enterprises such as in design, education and simulation, who had come to depend on the WinMR or MRTK framework, the next few months will prove very difficult. And with that, the current VR sector will feel the reverberations of this decision by Microsoft – especially if other VR developers and manufacturers follow in the spate of layoffs. 

Tech Corporations Restructure

These restructurings and redevelopments come on the back of major upheavals in the tech and social media sectors. In what some have tried to label the “Tech-Job Apocalypse”, the leading operations in the sector have started 2023 by making major layoffs towards preparing themselves for the changed global financial conditions, and to address massive losses incurred.

Amazon, the streaming movie and entertainment producer, started the year by announcing 18,000 job cuts from the operation (6-percent of the workforce). The cuts were stated to mainly impact e-commerce and business resources. Alphabet, the parent company of search engine and internet giant Google, also announced in January the cutting of some 12,000 jobs from their operation (6-percent of the workforce), in a statement claiming the move was forced on them by “difficult economic conditions”. Microsoft, the technology and software giant, announced their planned layoffs of 10,000 jobs (5-percent of the workforce). As mentioned previously, these layoffs saw the MR operation and research groups impacted. While Meta, representing the social media and technology sector, announced the removal of some 11,000 jobs (some 13-percent of the workforce – a record for the corporation).

A number of these corporations included the phrase “previous pandemic hiring spree” as a reason they feel they need to cut back on staffing to address the error. However, some also shared, in many of the statements about these losses, the plans by these corporations to invest heavily into advancing Artificial Intelligence (AI), as with Microsoft investment into the markers of ChatGPT. Industry observers see this beginning a year of announcements, as the continuation of a culling of tech-jobs, also seen with Snap (1,290), HP (6,000), Twitter (3,700), Cisco (4,100), and Spotify (600), is all alongside these companies undertaking major restructuring.

Reminiscent of the 1997 major shakeup in tech-hiring, this period has also seen companies that had previously embraced both VR and AR look to restructuring. Such as seen with the Meta’s Metaverse aspirations, Google’s previous ‘Google Cardboard’ and ‘Project Iris’ investment, HP’s VR division (now disbanded), and Microsoft’s WinMR VR and ‘HoloLens’ MR divisions. But also, many of these operations had invested heavily into their own video streaming services and were paying heavily from subscription cancelations, with even Netflix laying off 400 workers last year (some 4-percent of their workforce). This also included the shuttering by Google of their ‘Stadia’ cloud-gaming service that failed to achieve any of its user targets. Concerns are also voiced that the tech-job purge has come for both videogame and movie content providers, with the likes of Unity (300), and Riot Games (50) as the first to undertake their own layoffs. 

Meanwhile, major corporations like Apple and Disney, who also have interests across all these areas of tech, entertainment and streaming, have yet to announce their own layoff plans. Concerning Disney, sources suggest news surrounding the expected reorganization will be revealed after the first earning report under the new top management, that will include considerable cost-cutting measures to address a significant hole in finances caused by various issues across their entertainment empire. Meanwhile, regarding Apple, leaks from sources have suggested that the tech-giant, with their entertainment apps and streaming interests, had put on hold their own internal AR plans. The company is still linked to a possible MR headset release later this year (dubbed ‘Apple Reality’), but is now looking away from a concurrent AR glasses system, feeling the market was not ready for this, while considering their own internal restructuring. Expect a full report on the Apple entry into the immersive technology scene in the coming weeks, along with rumors of a retail attraction element to their plans. All these are part of the expected industry-wide reorganization, with further major layoffs expected to be announced.

Along with tech-jobs, the media, news and editorial staff have also fallen into the spotlight, in part of the so-called “slow death of print media”. More and more news services have been seen major redundancies, while the print media has been decimated, and the online news services have started to see a spike in layoffs. Most recently, Vox Media announced some 180 layoffs, while other news services such as The Washington Post, NBCUniversal and CNN revealed serval hundred staff let go (avoiding giving exact numbers). There has also been a focus on games media services layoffs, with IGN, GameSpot, Kotaku, Giant Bomb, Future, Game Informer, Polygon and others seeing layoffs; while G4 has been shuttered.

This was compounded by the news that BuzzFeed had laid off some 180 employees (representing 12-percent of its workforce). In a concerning move, the management announced that these roles would be replaced by an increased usage of AI generated editorial and commercial content. The digital publisher will be relying on the OpenAI chatbot app ChatGPT. This marks a concerning move towards automation of the editorial process, opening it up to ad-based manipulation.

Rethinking the Metaverse

An aspect of the layoffs across tech is also the fallout regarding the aspirations of the much-lauded concept of the “Metaverse”. 

As the Web 3 successor to the internet and virtual commerce hub, the concept was championed by many of the corporations who are now being forced to make impactful layoffs across their operations. The Microsoft announcement of their job losses also included the announcement of the shuttering of their own embryonic metaverse. AltspaceVR had been an early incarnation of a virtual social space, launched in 2013, seeing at its height some millions of active users, holding virtual events across the platform. But by 2017 the company had suffered financial difficulties and was eventually acquired by Microsoft to become the foundations of their metaverse aspirations.

Compared to VRchat (estimated at 2.3m active users) and RecRoom (estimated at 3.5m active users), AltspaceVR had become less popular, falling to an estimated 300k daily active users, but had still surpassed active users compared to the troubled Meta ‘Horizon World’ (estimated 200k active users). The writing, however, had been on the wall for the service, with Microsoft having to implement stricter user guidelines for AltspaceVR in 2021, including a tighter ‘Microsoft Family Safety’ policy regarding interaction within the virtual worlds. This was followed by other social networks looking to shore up their frameworks following media scrutiny, such as Meta clamping down on their ‘Horizon World’ and Meta Quest 2 hardware age usage.

The impact of virtual social networks has continued to gain traction, no matter how far from the grandiose aspirations of some corporations. It was recently revealed that the social game ‘Gorilla Tag’ had generated some $26m in revenue. A free-to-play game on some platforms (such as the Quest), the game made its revenue mainly through the sales of virtual items via in-game app purchases. This was supported by monthly active users calculated as being over 2.3m, mostly fuelled by TikTok social media word of mouth. The game appeals to young VR users, comprising fun activities within a social space. The news of this success is one of the few Meta bright lights for their attempts to define their interpretation of the metaverse concept. 

Other virtual social hubs have also seen revenue from their virtual items and land sales, such as ‘Decentraland’, that had received a market evaluation of some $1.2b in 2021. But the virtual world is estimated to see daily-active-users of some 8k. These connected spaces also include the likes of the still active ‘SecondLife’ (estimated 64m active users), seen as the original metaverse – as well as the consumer game-space ‘Roblox’ (estimated 160m active users) and ‘Minecraft’ (estimated 140m active users) virtual communities. However, there is a danger to mix up what are free-to-play social experiences, and those dependant on a in-game payment model, through virtual-land acquisition or avatar customization. 

The fluidity of these virtual spaces, and the revenue generated from their in-game stores, have been significantly impacted with recent turmoil in the blockchain financial scene. The implosion of the market in NFTs, and the collapse of leading crypto-currency exchanges, have significantly impacted commerce across these social environments – and it is expected to decrease as time moves on. As with streamed TV, VR and virtual social worlds, the post-pandemic consumer landscape is changing drastically.  

Evaluating Continued VR Investment

Reflecting on the impact on the LBE sector, and the changing conditions following the merger of Dave & Buster’s and Main Event chain of operation – with the 2022 $835m acquisition from Ardent Leisure. It had been expected that the inevitable management and operation restructuring, and removal of duplication, would start to be seen to be taking effect. For those who have followed D&B closely over the years, the operation had exclusive amusement deployment, unique licensing agreements linked to new movie releases, and an eclectic approach to the game room. 

This level of eclecticism is personified by the development of the D&B ‘Virtual Reality Attraction’. Developed in partnership with several VR specialists in experience and motion hardware, this four-player VR motion-system was rolled out with 128 units in 2018, initially across D&B sites. Blockbuster content was released during its operation, first with ‘Jurassic World VR’, and also with ‘Men in Black’, ‘Star Trek’, ‘Transformers’, and most recently, ‘TopGun: Maverick’. But even with all this investment, it was clear that the VR attraction did not bring to the table all that was needed from an attraction to wow the yearly 45m customers.

Sources close to the operator reported on constant technical difficulties with the VR hardware over the years – which employed one of the largest single placements of ‘HTC VIVR Pro’ headsets in the FEC sector. Along with this, the system proved a difficult platform to operate and promote, and its vast expense on prominent movie licenses was a burden that few venues could afford lightly. Inevitably, the writing seemed on the wall and, after just over four brief years of operation, sources revealed that the hardware was being removed from D&B sites. This was an expensive learning process for the company, but one which the new management team is taking in its stride, as they move towards figuring out how their operation can stay relevant and popular in the changing social entertainment landscape.

No official word yet if all the ‘Virtual Reality Attraction’ systems will be removed for all sites, or if there are plans to replace the system with an updated platform. While this may be the end of one approach, it is not the end of VR application within the business – athough what follows next will have to prove its value to the bottom line, more so than in previous years, being seen as the latest “novelty technology”.

Regarding another corporation looking towards its future in the VR entertainment landscape, it was announced that Dreamscape Immersion had signed a partnership with Swiss watch specialists Audemars Piguet, to create an immersive experience based around their brand. The experience, called ‘The Clockwork Forest’, sees guests wearing free-roaming VR, navigating the magical forest created for this adventure inspired by the brand, which will be exclusively operated at the ‘Dreamscape Geneva’ location from March 2023, for a limited period of two-months. This marks the latest endeavour by the luxury watch brand in VR, as in 2017, Audemars Piguet commissioned a VR experience that offered a virtual tour of their factory, watching the creation of their famous watch brand. The marketing and promotion opportunities with VR have not been lost on the leading luxury brands looking for greater recognition. 

Dreamscape, and their chain of VR LBE venues, have been working to establish their market position, and have been involved with other commissions such as their partnership with Warner Bros. Entertainment, for the ‘Harry Potter New York’ stores VR adventures. But at the same time, the company has been working in other sectors where their advanced immersive networked technology can be applied. It was announced, also in January, that the company’s division Dreamscape Learn had raised some $20m in a Series-A funding round. The financial investment will be deployed into developing immersive STEM coursework for students using VR experiences based on their world-building skills. This is not the first time we have reported on the corporation’s “Edutainment” aspirations, having covered the operation’s work with Arizona State University. This new investment will be used to distribute courses to schools and colleges across the country. Expect more news from other companies, of the crossover between immersive technology and education in the coming weeks.

About the author

Kevin Williams

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The brainchild of two location-based experience enthusiasts, Christine Buhr and Brandon Willey, the LBX Collective aims to inform and educate, create opportunities to connect with industry peers, and to spur collaboration, discourse, and cross-pollination of ideas.

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