Starbreeze, the video game development studio and publisher, based in Stockholm, Sweden, released their annual report for 2018, detailing a look back at the year that doomed its VR ventures.

Starbreeze's virtual reality projects were less than successful, but the decision to divest came after company turmoil resulting in the shortcomings of Overkill’s The Walking Dead, company mismanagement, and even an insider trading scandal. After almost four years of investing in VR, the company has all but abandoned its efforts, closing its VR studios and subsidiary StarVR.

Our Analysis:

Starbreeze’s investment into VR went beyond what would be considered normal for a AAA gaming studio. The company began investing millions in its VR projects in 2015 by acquiring InfinitiEye to create StarVR, a leading manufacturer of professional and industrial-grade virtual reality headset. Acer subsequently invested in StarVR, taking majority control in 2018. Now, Acer is reportedly looking to sell or disband the project, less than six months after the Star VR One headset was unveiled at Siggraph 2018. That headset was impressive, with premium features such as eye tracking and 210-degree horizontal FOV, making it one of the few high-end headsets on the market. However, the slow rate of VR headset adoption, both in enterprise and commercial markets, contributed to the company failing to meet expectations.

Although Starbreeze’s hardware investment contributed to a significant loss, the LBE ventures in Dubai and Stockholm created a profit, though a small one. It is unclear if Starbreeze will close Enterspace and their LBE VR locations in Stockholm, but VR Park in Dubai has no sign of closure. Starbreeze’s investment in this location was in partnership with Emaar Entertainment, which is able to maintain the venue without Starbreeze.  

Starbeeze's divestiture of its VR division highlights the complicated dynamics of the LBE VR market. The market is still emerging with prospects to accommodate high-growth ventures. Coupled with few barriers to entry, several companies have entered in haste. Starbreeze, IMAX, and SeaWorld invested in VR installations but subsequently shut down their initiatives, without much risk to the company.