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Big Firms Keep Abandoning the Metaverse Amid Market Turmoil

Published 03/29/2023, 01:00 AM
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Entertainment giant Walt Disney Company (NYSE:DIS) is eliminating its metaverse division as part of broader layoffs that will impact as many as 7,000 employees. The announcement follows similar moves by other tech giants struggling to deliver on big metaverse ambitions amid decreasing user interest and worsening macroeconomic conditions.

Disney Eliminates Entire Metaverse Team as Part of Restructuring Plan

According to a Monday report by the Wall Street Journal, Disney has eliminated its entire metaverse division of roughly 50 people. The move is part of a restructuring plan to see the entertainment giant lay off 7,000 staff over the next two months to reduce operating costs by $5.5 billion.

The metaverse division was tasked with exploring ways to tell interactive stories in new technological formats using Disney’s extensive library of intellectual property. It was headed by Mike White, a former Disney consumer products executive, who reportedly remains at the company.

Disney first made a foray into the metaverse in early 2022, shortly after Facebook’s bold move to change its corporate name to Meta to reflect the company’s new focus. At the time, Disney’s former chief executive, Bob Chapek, described the metaverse as “the next great storytelling frontier.”

While more than a year has passed since the division was created, it is still largely unclear what experiences the team was working on. However, the WSJ report said they could have involved “fantasy sports, theme-park attractions, and other consumer experiences.”

More Companies Dismiss Metaverse Divisions as Interest Wanes

Aside from Disney, several other tech giants that doubled down on the metaverse last year amid the frenzy are reconsidering their approach. While some have put the brakes on their metaverse push, others have entirely dismissed their metaverse ambitions.

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For one, Meta, which made headlines with its high-level metaverse entrance back in 2021, is slowly pivoting to a “new top-level product group at Meta focused on generative AI to turbocharge our work in this area,” as CEO Mark Zuckerberg wrote in a February 27 Facebook (NASDAQ:META) post. He added:

“In the short term, we’ll focus on building creative and expressive tools. Over the longer term, we’ll focus on developing AI personas that can help people in a variety of ways.”

The shift comes after Meta lost billions of dollars last year on the metaverse. According to Meta’s forecasts, the company’s bet on the virtual world cost it $9.4 billion in 2022, and the figure could increase to a whopping $100 billion in 2023.

Furthermore, Meta’s flagship metaverse platform Horizon Worlds, has fallen short of expectations, forcing the company to lower its target. Reportedly, the metaverse platform is plagued with bugs and problems, and there have also been user complaints about the quality of the virtual world.

Likewise, Microsoft (NASDAQ:MSFT) discontinued its Industrial Metaverse Core team this year, a four-month-old project aimed to encourage the use of the metaverse in industrial environments. The tech giant also laid off all employees working on the project, which amounts to about 100 people.

The world’s largest video games company Tencent (OTC:TCEHY) will also disband its XR (extended reality) department, ending its short-lived adventure into the metaverse, according to a report from Chinese news outlet 36KR.

Users’ interest in metaverse platforms has also sharply declined over the past couple of months. According to a Dune Analytics dashboard, metaverse platform Decentraland, with a market cap of over $1 billion, registered only $170,000 worth of LAND sales in February, compared to its all-time high of $7.7 million in January 2022.

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The Sandbox has been hit even harder. The metaverse project registered around $78,000 worth of sales in February, compared to more than $63 million recorded in November 2021.

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Disclaimer: Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

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