ByteDances virtual reality division announced restructuring and downsizing

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The virtual reality division of ByteDance, the owner of TikTok, has announced layoffs and a massive restructuring plan due to a sluggish market, according to three people familiar with the matter.

Henry Zhou, president of ByteDance’s VR Pico arm, said in an internal meeting on Tuesday that the division would retain its core hardware and technology teams, and the marketing, studio, video and platform divisions, according to two people present at the meeting. reduces itself.

According to the two people, Zhou acknowledged that the VR industry is still in its infancy and Picos’ initial expectations for the market were overly optimistic.

ByteDance acquired Pico in 2021 at the height of excitement in Silicon Valley about the potential of the vast virtual worlds accessible through VR headsets to become the next big trend in consumer technology. Enthusiasm for the idea has waned, however, as artificial intelligence has caught the attention of the tech industry.

Details of the layoffs at Pico were not disclosed at the meeting, but several hundred employees out of a workforce of more than 1,000 will lose their jobs, according to two people familiar with the situation.

The reorganization marks a shift in Picos’ research and development strategy following its acquisition by ByteDance in the face of a declining VR gear market. The company hoped to leverage ByteDance’s strengths to provide content for VR users, but with little success.

Since the acquisition, Pico has been expanding rapidly, building teams that create VR content such as videos and games. ByteDance has invested more than Rmb10 billion ($1.37 billion), a person familiar with the situation said.

According to Zhou, these are the teams most affected by the company’s reorganization and subsequent job cuts.

A Pico employee, who asked not to be named, said: Pico was originally a maker of virtual reality headsets, and for two years they were doing things they weren’t good at.

Considered a rival to Metas in VR headsets, Pico has become a leading VR manufacturer in China, capturing more than 50 percent of the domestic market in the first half of this year, according to research firm Counterpoint.

Meta launched the latest version of its Quest VR headset last month, but the devices are not available in China. Many in the VR industry are hoping that Metas Quest 3, Sony’s new PlayStation VR 2, and Apple’s upcoming Vision Pro can together spark a return to growth for a product that has struggled to enter the consumer mainstream for nearly a decade.

However, so far this year, both the global and Chinese VR markets have experienced significant declines. According to IDC, the global supply of augmented reality and virtual reality headsets in the second quarter of 2023 fell 44.6% year-on-year, the fourth consecutive quarter of decline.

The decline in China was more severe than in the global market. According to Counterpoint, China’s virtual reality market shipments fell 56% year-on-year in the first half of 2023, ending a two-year growth spurt in the Chinese market.

The drop came despite the launch of Sonys PSVR 2 in February, which quickly became the second best-selling headset in China behind the Pico. Analysts say the VR market as a whole suffers from a lack of compelling games or commercial software tools.

Pico said the company decided to restructure the business to focus more on hardware and core technologies.

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