The abrupt collapse of several cryptocurrency trading firms in late 2022 accelerated the onset of a “crypto winter,” resulting in significantly reduced crypto art trading volumes. Now, it appears this pessimism has extended to the broader metaverse sector.
Last week, Disney announced the dissolution of its next-generation storytelling and consumer experiences division, a department established in February 2022 to help the entertainment behemoth explore the metaverse. The dismissal of the division’s roughly 50 employees is part of Disney’s plan to lay off approximately 7,000 workers to cut costs by $5.5 billion.
Concurrently, Walmart withdrew its “Universe of Play” from Roblox after only six months. This initiative aimed to engage young children with virtual characters from child-friendly IPs. While societal concerns about marketing to children are believed to be the primary reason for Walmart’s decision, it still signifies another withdrawal from the metaverse by a corporate giant. In mid-March, Meta announced a new round of layoffs affecting 10,000 employees as it grapples with declining revenue.
This “metaverse winter” is also apparent in China, a country that has been optimistic about its future prospects. Ma Yingwu, the director of short video platform Kuaishou’s metaverse initiative, has reportedly left the company. Tencent is pivoting its XR team’s mission toward hardware development, while PICO, tech giant ByteDance’s VR device arm, is “optimizing” its structure and laying off around 300 employees.
The lackluster VR equipment market appears to be a significant factor in the downturn of the until very recently hyped metaverse sector. The International Data Corporation reports that global shipments of AR/VR headsets in 2022 fell by 20.9 percent year-on-year to 8.8 million units, while PICO’s sales target for 2023 is 500,000 devices, only half of its 2022 goal. This indicates that global consumers have not yet widely adopted AR/VR devices.
A challenging macroeconomic environment discourages both consumers and tech giants from investing heavily in metaverse technologies that lack a solid history of performance and compelling applications. Additionally, the soaring popularity of AI services like ChatGPT is eclipsing the metaverse among investors.
Of course, it is too early to discount the potential of the metaverse. The global economy will continue to digitize, and Web3 remains an attractive concept for many digitally savvy consumers.
However, the struggles experienced by major metaverse companies worldwide should serve as a wake-up call: for metaverse-based products to gain long-term support from consumers and investors, they must deliver tangible benefits rather than merely generating hype around an innovative idea.