#1235 – Mixed Reality Entertainment Investment

AI Constructed Brief

Rapid evolution of XR within the entertainment sector, with increased capital flowing into augmented reality (AR) and mixed reality (MR) applications, particularly in location-based entertainment (LBE). Notable innovations include immersive AR experiences at global events like Kansai Expo and AR theme parks utilizing headsets like Meta Quest 3 and HoloLens2, alongside holographic attractions by Enklu. However, the consumer VR landscape faces turbulence, exemplified by Meta’s shift away from VR hardware development toward AR/MR, a move driven by declining Quest sales and substantial financial losses. Microsoft’s discontinuation of HoloLens and Mojang’s removal of VR support from Minecraft underscore the sector’s challenges. Meanwhile, Asia’s amusement industry remains dynamic, with major expos in China revealing a focus on digital tech, IP-driven attractions, and the integration of VR/AR innovations. Overall, the trend indicates a strategic pivot toward lightweight AR/MR hardware, with significant implications for investor positioning in immersive tech, entertainment formats, and cross-sector collaborations.

Full Stinger Report

The gathering entertainment and technology landscape sees considerable investment. While at the same time the next-generation of XR technology attempts to establish a presence with the consumer base. 

Growing AR LBE Landscape

While the consumer sector pivots away from overt VR applications and looks at an AR and MR future for the tech. As always, the LBE sector has been first to embrace this XR category. First, we need to be understanding the difference between AR and MR. We have a brief rundown of key developments. 

To better understand the revolution, we need to reflect on the technology and terminology. The market is broken into Augmented Reality (AR) – mostly using a lens or glasses-based headsets to superimpose information into the users feed of vision regarding their environment (spatially). The lens based “See-Through” technique. Then there is Mixed Reality (MR) – mostly employs VR headsets that encompasses the user’s vision, and then through front mounted cameras project the real-world image in real-time, superimposed with digital elements to create an immersive blend or mix of physical and digital. Offering as higher level of immersion from a digital capture or “Pass-Through”, compared to see-through.

We have seen a blurring of the lines regarding the definition of AR and MR deployment as developers shape the terminology to fit their promotional needs. With the increased investment in MR capabilities for VR headsets, we have seen more employing this route. But at the same time, the hurdles that impacted developers of AR headsets and glasses have hindered this approach. Most recently Microsoft and their HoloLens hardware range of AR headsets was discontinued – though stated they intend to still offer support and software updates till 2027. While we also had the confused moves, and subsequent departure of Magic Leap and their glasses.  

Examples of this technologies approach has appeared in attractions and installations. At the Kansai Expo, in Osaka, Japan, the new ‘Monster Hunter Bridge’ exhibition was launched. Based on CAPCOM’s Monster Hunter game property, an immersive space experience has been developed, which has guests walking within a LED “XD Hall” enclosure with display and vibrating floor, while using see-through AR headsets to see synthetic representations of the game’s creatures. It was revealed that this new headset was specially developed in a partnership between KDDI and CAPCOM, using Qualcomm XR processor. 

As discussed in our GDC’25 coverage, the team at DreamPark presented their AR digital theme park concept virtual playscape and theme park platform. Currently in Beta-phase operation at a disused 2,300-sq., ft., parking lot in Los Angeles. Players using Meta Quest 3 headsets and their Pass-Through (MR) capability to interact with a digital representation of the playscape offering a strong Mario-vibe. Being run by the company and the team at Two Bit Circus look to roll this and other Phygital applications out as a new line of attractions. The company announcing a $1.1m raise in investment towards developing the concept.

One of the leading developers of AR based experiences is Enklu, founded in 2019, and best known for their ‘VERSE Immersive’ holographic experiences platform. Creating walk-through immersive adventures for groups of guests, viewing holographic creatures and objects that are represented within the physical space, interacting with, through hand tracking. Guests wearing AR headsets such as the Microsoft HoloLens2, as well as others to navigate the Phygital environment as a standalone attraction. 

The company celebrated their entrance into the “Cineatainment” scene with their first theater installation. The D’Place Entertainment’s Mary Pickford Theatre in California, became the first cinema installation for the AR attraction. With an 800-sq.,ft. space near the lobby, converted to support the ‘VERSE’ holographic theater. Currently deployed across nearly 20 locations internationally. The company is also now looking at taking an ad agency approach, managing paid advertising for their experiences across their installed base.

meleap was one of the first to roll out an AR based headset game experience for location-based entertainment and activity deployment and have achieved momentum both as a sports title and a general entertainment experience. The company using smartphone headsets supplying the AR visuals in pass-through mode, along with armband touchscreen. The operation has deployed some 10 ‘HADO Arenas’, and another 30-playing field and store installations internationally. Supporting their eSports-style international competition league. 

Recently, we saw one hardware and firmware developer look to deploy their AR approach to the LBE market. During the recent Amusement Expo International, regarding the AR aspects of the market, we saw the appearance of SNAP, the technology and social media corporation, through their Spectacles division developing their latest generation of AR glasses, and operating system infrastructure. The company last year has rolled out their latest (fifth) generation of smart glasses and have looked towards the commercial and LBE sector as a springboard for user adoption. 

Following on from our GDC’25 coverage and the tempestuous waters that VR is finding itself in the consumer sector. And continued developments seem to rock Meta and their Reality Labs division focused on making wearable AR and VR mainstream consumer applications. We have already reported on the over 100 layoffs that impacted the operation in April, these included departures from Oculus Studios and the other Meta acquired VR game studios. This news was followed the same month with the reporting of Q1 revenue for the division. Reported during the investors call on the financial disclosure the CFO revealed a drop in revenue from the division of some 6-percent, claiming this was “due to lower Meta Quest sales…” This is the first official indication that the Quest 3 and Quest 3S were underperforming in sales. Recent departures from the corporation had alluded to the case, but tight-lipped Meta had avoided commenting till this moment. Attempting to place a spin on the sales decline, the executive counted in the investor call that these lower-than-expected VR sales had been “…partially offset by increased sales of ‘Ray-Ban Meta’ AI glasses”. 

As many observers have voiced, Meta having dropped using the VR term internally, and were now doubling down on AR / MR. What this will mean for the remaining consumer VR community has yet to be revealed. The layoffs from the VR and operation R&D teams were rumored to have placed in doubt a possible successor to the Quest 3 hardware for the near term. Many feeling the next nine mouth’s will be make-or-break for the continuation of Reality Labs. And recent developments regarding focusing their HorizonOS to directly compete with the MR Samsung / Google AndroidXR platform, points to a future where Meta will have completely cut ties with the original VR community as they look to plough back some of the billion Dollar losses that the XR division has incurred.  

Beyond this shortened rundown, regarding a more detailed observation into these AR and MR developments – as well as the new Shared Reality (SR) infrastructure, please go over to our article in the Virtual Arena series.

The changing fortunes of consumer VR can be best illustrated by the abandonment by one of the most popular video game properties. It was revealed that ‘Minecraft’ developers Mojang Studios, had removed VR support for standalone headsets (such as the Meta Quest) in the most recent software update – this follows April’s shutdown of PSVR and PC VR headsets support. That consumer VR would miss out on riding the wave of popularity for the Minecraft property, especially after the record box office success of the movie reveals the harsh reality of support for the technology, eight years on from the claims of mainstream adoption and mass appeal following billion Dollar investment. 

This situation takes on a unique dimension considering that Mojang Studios is owned by Microsoft who had previous collaborations with Meta on the early application of VR with the Oculus platform, and more recently with a VR project. Meta executives claimed in Social Media posts that they had lobbied Microsoft to create a unique version of Minecraft for the Meta Quest 3 platform, but this fell on deaf ears. The reason for the complete removal has not officially been given, though there are suggestions that the Redmond corporation has fallen out of love with the technology and wants to focus on wholly controlling the revenue for their mega-successful game series. 

Just as we were going to the wire with this coverage and it was also reported that Meta would be looking at shelving plans to release an update of the Quest 3 and Quest Pro VR headsets for 2026 and would now focus on releasing a lightweight MR headset for 2027. This seems to confirm speculation of a shelving of VR investment on a plan to focus on AR / MR. This comes amidst reports that the corporation has lost nearly $50b in the last five years supporting their metaverse aspirations, developing virtual and augmented reality technologies. The cancellation of the claimed Quest 4 and Quest 4S development marks a complete reversal of their original VR pipedream and now looks as if Meta will double down wholly on a MR future with hardware like that being released by Samsung / Google and the planned successor to the Apple Vision Pro spatial computing platform. This sub-$1,000 lightweight device is currently codenamed “Puffin” by Meta and is focused on a Q4 2027 release. Hoping to be enough of a reinvestment to address the decline in headset sales Reality Labs has endured. 

Asia Big Exhibition Showing

The developments in the international amusement and attraction sector had been illustrated by the cast of exhibition and conventions taking place over the last few months. We now break down the key events that have shaped the market to the middle of the year. 

We offer one of the few exclusive and comprehensive rundowns for our sector, from one of the largest Asian trade events. This report of the 21st Asia Amusement & Attractions Expo (AAA) in Guangzhou, China that covered some 110,000-sq.,m., and multiple halls. Part of the overarching 22nd Grandeur World Culture & Tourism Industry Expo 2025. Looking at the major trends and industry developments seen at China’s pivotal gathering. Organized by Guangdong Grandeur International Exhibition Group.

Just one part of the 26 exhibition halls of the vast China Import & Export Fair Complex. The expo highlighting five core sectors of Amusement, Digital Technology, Leisure, Water-based Entertainment, and IP Economy. This vast entertainment convention comprises several co-located elements, all reflecting the Chinese leisure entertainment dynamic, including the 6th Asia Tourist Attraction Equipment Expo – the 22nd World Culture Tourism Gala, the 19th edition of the Billiards Expo Tour – Guangzhou. As well as events surrounding the Metaverse (previous VR Summit), Cinema and development, (with a private trade summit).

Though unable to attend in person this year, the founder of The Stinger Report has been a presenter and honoured guest at AAA over the years and has found it a valuable trade event. One of the largest microcosmos of the sector, and one of the hardest to cover in the two and a half days available. We would like to start off by thanking all those that supplied our information for this extensive and exclusive coverage. 

One of the leading forces in the Chinese amusement sector, celebrating 35-years anniversary in service, is WAHLAP Technologies who had a prominent two booth (pavilion) presence at the China show, spending big. Including holding a grand evening event in celebration of the anniversary. While also promoting third party development and releases from SEGA and BANDAI NAMCO, (showing the music games and racers for release). With Chinese versions of the popular Japanese platforms for internal consumption. 

The 3MindWave developed game ‘Alpha Ops VR Strike’ was one of the VR products across the AAA’25 show floor this year. WHALAP representing the game for the Chinese market that is exclusively released in the Western market by SEGA Amusement International (SAI), with some minor modifications and cost savings in the cabinet redesign for the market. The Chinese game development house has been partnered with SAI since 2021, working on releases currently distributed in key territories by SAI.

WAHLAP had their own releases to praise. Sitting alongside last years released Environment Cabinet was the unique four player shooting video – called ‘Monster Eye 3 Unite’, the four-gun shooter comprises the same style of cabinet seen with ‘Halo Fireteam Raven: Unite’ (Raw Thrills), but with different weapons. The IGS developed game series recently was represented by LAI Games in the Western market, and we can expect the new shooter variant to see landfall in this market.  Chinese version of the Raw Thrill developed ‘Marvel Contest of Champions’ – the two-player card battler based on Marvel comic characters, released in the Chinese market by WAHLAP. Also previewed Marvelous’ ‘Pokémon Mezastar’ a card collector based on the popular franchise. The WAHLAP booths where also packed with a selection of the latest redemption and prize machines and new-wave crane systems.