The Canada-based development studio, which bills itself as the “creative heart of VR,” has laid off 70% of its staff.
Cloudhead Games CEO Denny Unger released a statement announcing significant layoffs at the studio that developed Pistol Whip and The Gallery.
“Due to industry forces beyond our control, Cloudhead is being forced to make the difficult choice of reducing its workforce effective January 7, 2026. 30% of our workforce will remain to continue our mission,” Unger’s memo said. “We continue to believe in the power of VR as a medium and as a shared dream machine that will one day transform humanity. There’s no doubt that VR is destined to go mainstream, and there will be devices in the future that can do ‘anything’, but when that time comes, studios like ours will need to be there. ”
While promising further updates on “industry challenges and potential opportunities”, Mr Unger posted a document titled “Reverse Recruitment” giving contact details for more than 30 staff who will be leaving Cloudhead due to job cuts. Most are based in Canada and prefer to work remotely.
Unger said 16 people will remain at Cloudhead after the layoffs, with a total of 40 people affected by the layoffs. The studio has hinted that it will work on additional projects in 2022.
“We’ve been steadily releasing new content for Pistol Whip for five years, but more importantly, we’ve been quietly working on new projects for three years,” Unger writes in the comments below. “Games take a long time to finance and produce.”
Cloudhead released Pistol Whip in 2019 to widespread acclaim. I rated it “Great” at launch, and in the years since, the studio has piled up quite a few updates, including multiple campaigns and “a growing library of explosive scenes created directly in-game by the Pistol Whip modding community.” Currently on sale for $29.99 on Steam, Quest, and PlayStation VR2, this title is a great cinematic action experience delivered in one big package rather than being metered out as paid DLC.
Pistol Whip is also a member of Meta’s Horizon+ subscription games program, and this title is offered at a discount with new memberships in the Sony program. Many other top VR developers have contributed games to these gaming programs, which has helped supplement sales revenue in the past.
We’d love to hear more from Mr. Unger about his special journey at Cloudhead. In 2019, the studio was energized by the development of Aperture Hand Lab for Valve as a sampler experience for Valve Index. With Steam Frame’s launch on the horizon, Cloudhead will open up new territory for selling Pistol Whip in 2026, but the layoffs suggest a partnership won’t materialize for a project dedicated to this system.
The layoffs are unlikely to be the last major downsizing in the VR space for the experienced development studio, as creator groups continue to be shocked by shifting platform priorities. Among many creators, Myst creator Sian laid off half of them last year.
If you have anything to share regarding funding and recruitment in the VR and AR space, please contact us at ian@uploadvr.com.
