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Disney has recently announced that it would be cutting its Metaverse Division. This comes as part of a restructuring that includes 7000 layoffs and the departure of its foremost metaverse champion in former CEO Bob Chapek.
The news follows a number of examples in 2023 of big tech companies, including Meta, Tencent, Microsoft, and Snap, announcing layoffs and reductions in funding for in-house development projects associated with the metaverse and web3.
At a surface level, where much reporting on this topic stays, this is a case of a growing number of companies with a leading influence in the metaverse space suddenly backing away from their commitments to it. Mainstream media has jumped on this narrative to start proclaiming “the end of the metaverse”. But are these events really the symptom of a decline, or just an adjustment in the course to its eventual fruition?
Here are some other important but less mentioned factors affecting big tech’s approach to the metaverse in 2023:
Crypto winter and the FTX scandal
Cryptocurrencies, NFTs, and the blockchain have gotten a bad rap lately, and rightly so. With numerous high-profile cases of mismanagement or straight up fraud leading to disastrous losses for corporate and casual investors alike, blockchain-based assets have taken a huge hit in both trade value and public sentiment.
This has led some brands to distance themselves from any potential association with NFTs and blockchain based assets, for fear of associating with an industry that is undeniably chaotic and, at its worst, predatory. Furthermore, the common belief that the use of blockchain technologies are fundamentally intertwined with the future of the metaverse may lead to brands distancing themselves from the concept of the metaverse as a whole part of the same move.
The flip side: Companies are clearly still interested in using digital assets to develop new business models, enhance their product offering, and reach new audiences. Crucial to this is the understanding that they do not need to rely on the blockchain, or even “metaverse” as a buzzword, in order to do so effectively.
The blockchain and the metaverse have both become controversial topics, but there is plenty of enthusiasm around how their underlying principles can be leveraged in more robust and intelligent business strategies. In the meantime, there needs to be a broader understanding that successful metaverse strategies can continue being implemented without any involvement of the blockchain.
Technical and economic challenges standing in the way of the metaverse
Developing the technology to create seamless and immersive virtual metaverse experiences is a complex and resource-intensive endeavour. It may take longer and cost more than anticipated, which could lead some companies to reconsider their internal investments.
This is compounded by broader financial woes in the tech market; Tech stocks fell more than 30% in 2022, more than the overall market drop of 20%, with higher interest rates, high inflation and uncertain economic conditions to blame.
The flip side: Much of the slack on innovation is being made up by smaller, dedicated start-ups who can afford to be more agile and targeted in their approach to developing cutting-edge, market ready solutions. The result is bigger companies divesting internal metaverse projects in order to move to metaverse strategies based on partnerships, acquisition, and outsourcing.
Regulatory concerns in the future of the internet
Being in its infancy, the metaverse raises many legal and regulatory issues related to data privacy, property rights, and content moderation. Big tech companies may be hesitant to take on the potential liabilities and responsibilities associated with operating a metaverse platform. This has to do not only with blockchain and its uncertainties as a vehicle for economic value, but also on the increase in sensitive personal data generated in interactive virtual experiences, particularly as they bridge into the physical world.
The flip side: Integrating disruptive digital technologies into established socio-economic systems has always been messy, with lawmakers routinely taking years to catch up to the effects of these technologies and agree on their implications for law and order.
With bodies such as the Metaverse Standards Forum already in place to discuss and make recommendations on these issues, as well as new, metaverse ready management and moderation tools being developed, things will surely improve on the regulatory front.
Companies are collaborating to do amazing things in the metaverse space
Beyond the highly publicised struggles that some companies are facing, it is important to note where companies with metaverse-centric visions are thriving. Epic Games and Roblox are both routinely seeing hundreds of millions of monthly active users on platforms that outwardly brand themselves as metaverses. Around the same time as other companies were announcing cuts to their metaverse divisions, Epic’s State of Unreal made their utmost commitment to the metaverse as their focus for the future clearer than ever.
Smaller platforms are also continuing to build immersive virtual worlds that allow people to interact with each other in new and exciting ways, with plenty of brand involvement. Metaverse Fashion Week 2023, hosted at the end of March across Decentraland, Spatial.io and Over, saw brands such as Tommy Hilfiger, Dolce & Gabbana, Coach, and Balmain rubbing shoulder to shoulder with digital-native fashion houses in virtual space.
All in all, there is a busy landscape of companies working on the technology, strategies and standards that will eventually make up a flourishing creator economy in the metaverse. These are inherently cutting-edge businesses, with goals that are often better achieved by dedicated, agile startups rather than slow-moving, profit-driven corporations.
The concept of a metaverse is still in its early stages, and it’s likely that we’ll see much of the development and innovation in this space coming from collaboration. By pooling their strengths, startups and larger companies can create versatile partnership ecosystems that provide fertile ground for turning the metaverse from a spur-of-the-moment marketing fad into a mature technical and creative paradigm. To those participating in these ecosystems, the ambition is clear: to create solutions that solve real-world problems, bearing fruit as the future of commerce, productivity and entertainment.
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