Andrew Eiche, CEO of Google-owned mixed reality studio Owlchemy Labs, has some clear thoughts on why the VR market has yet to become a truly established presence within the video game industry.
Since the turn of the year, notable VR studios includingSurvios,Twisted Pixel Games,Sanzaru Games,Armature Studio,Vertigo Games, and more have either laid off numerous employees or shut down entirely. Is the VR industry suffering in the same way as other studios across the gaming sector, or are there unique challenges preventing companies in the space from finding sure footing?
During a conversation with Eiche at Gamescom 2026, the long-serving chief exec suggested the VR market is still emerging because the form factor of hardware is simply too unwieldy. “We haven’t found our form. Look at forms, right? It’s easy to look at the iPhone and say ‘it just happened,’ but you need to go back to the Motorola StarTAC in the ’80s [to understand how that journey happened]. There is a very realistic chance that the headsets we use today that we feel might be our final form are equivalent to Nokia flip phones or the Motorola Razr,” says Riche.
“So, it’s emerging for a few reasons. I look at [today’s hardware] as the Nintendo Entertainment System of VR. Our audience is young, right? But they will age up. There were many years—and I was a video game kid—where I was ostracised because I was the kid who played video games. But now there’s almost nobody on planet Earth that doesn’t play video games. Like, my dad got so addicted toBalatro, he was playing it before a doctor’s appointment.”
Eiche feels certain VR (or XR, if that acronym floats your boat) hardware is starting to pass what he calls the ‘cafe test.’Pointing to the Xreal Aura spatial headset(which looks like a oversized pair of shades) as an example, he suggests hardware is now becoming streamlined enough to wear in public.
“That headset, the Aura, is finally starting to pass the cafe test. Like, would you wear it in a cafe? Would you wear it out in public? You start to think ‘okay, yeah, maybe. I don’t look like a bug.’ […] I love the big immersive headsets, but not everybody has to watch every movie in IMAX. If you watch The Odyssey on your phone, Chris Nolan might be very mad at you—but you still saw The Odyssey.”
Does VR need to no longer feel “novel” to succeed?
Ultimately, Eiche feels VR hardware needs to undergo a period of “societal iteration” so it might eventually stop being perceived as “novel” technology for a small subset of devotees. Again, he feels that will come with time, as people age with the technology.
Discussing the layoffs and subsequent brain drain within the VR industry specifically, Eiche suggests other major players such as Meta are jettisoning workers because they wildly misjudged the market. “[Those companies] are cutting the talent because they made an enormous strategic error, which was they had all the data that showed what was popular, right? What was popular was social games with lots of embodiment.Gorilla TagandAnimal Company,” continues Eiche, suggesting that a number of Owlchemy’s competitors simply failed to accept what the numbers were showing them.
“The reason why is we’re meeting the audience with what it wants.”
