Meta’s shutdown of its VR studios for Deadpool, Resident Evil 4, and Asgard’s Wrath spells trouble for Quest 3 users, while benefiting Steam Frame.

The upcoming launch of Valve’s Steam Frame is set to shake up the VR landscape in 2026, putting pressure on existing headset competitors. However, it seems Meta is already retreating, as evidenced by significant layoffs in its Reality Labs gaming division and the closure of three studios responsible for some of its most popular titles on the Meta Quest 3, 3S, and Quest 2.

Twisted Pixel, known for the recently released Deadpool VR, is among those affected. Sanzaru Games, creators of the Asgard’s Wrath series, and Armature, which developed the acclaimed VR version of Resident Evil 4, have also been shut down.

Recent trends indicate that Meta is pivoting away from the Metaverse and VR, especially as the AI sector continues to expand. Despite reports suggesting that Meta is selling its Quest devices at a loss, the scale of these studio closures—especially with the Steam Frame poised to capture a significant share of the market—was unexpected.

Asgard’s Wrath 2 and Resident Evil 4 VR were key titles bundled with the Quest 3 and Quest 2, contributing to their mainstream success. Deadpool VR, launched in November 2025, surprisingly wasn’t included in a new bundle for the Meta Quest 3 or 3S during the holiday season.

While there’s still a chance for bundling, the closure of these studios and the layoffs of hundreds of developers cast a shadow over Meta’s gaming future for its Quest devices. Most gaming support for this platform relies on connections to Steam or third-party titles available on the Quest store.

Contrary to some reports, this isn’t the end of VR gaming as some might suggest. In fact, Meta’s decision to close three major VR studios could actually benefit Valve as it navigates the market’s next phase.

Titles like Asgard’s Wrath and Deadpool VR have been exclusive to the Quest store, limiting their availability to other VR headset users. With these developers now free from their previous constraints, there’s a greater chance that their future projects will reach a broader audience across various VR platforms.

The Steam Frame now has a clearer path to market leadership. If Meta is stepping back from developing its own VR games, it diminishes the appeal of the Quest 3 for future buyers. While competition remains fierce from PSVR 2, Pico 4 Ultra, HTC Vive, and the new Samsung Galaxy XR headset, PSVR 2 stands out as the only other headset focused solely on gaming.

Steam offers a vast array of VR experiences that are likely to attract gamers once the Steam Frame launches. Although PSVR 2 has a limited selection of VR titles on the PlayStation store, it does support Steam VR through its PC adapter, making a direct connection to Valve an appealing option for many consumers.

Ultimately, the success of Valve’s upcoming headset will hinge on its pricing. The Meta Quest 3 and 3S have gained popularity due to their affordability, so if Meta can balance the cost of high-end headsets with the mainstream gaming market’s reluctance to invest heavily, while showcasing a diverse VR library, it could find itself in a winning position.