Meta closing its Deadpool VR, Resident Evil 4 VR, and Asgard's Wrath studios is bad news for Quest 3 owners, but plays right into Steam Frame's hands

The imminent arrival of Valve's Steam Frame means the existing best VR headset rivals have a big fight on their hands in 2026, but instead of lacing up its gloves, it seems as though Meta is already backing away with its tail between its legs. Meta is issuing large-scale lay-offs to its Reality Labs gaming division, shuttering three studios that have made some of the publisher's biggest and most popular games for the Meta Quest 3, 3S, and Quest 2.

Twisted Pixel, the developer behind the recently launched Deadpool VR, has found itself in the line of fire. Sanzaru Games, the studio behind the Asgard's Wrath franchise, and Armature, which produced the widely loved VR port of Resident Evil 4, have also been closed, as reported by UploadVR.

For the last month or so, it's been clear that Meta's strategy is shifting away from the Metaverse (and thus, VR), as the global AI bubble continues to grow. Even though I've heard from a few folks in the industry that Meta is selling its Quest devices at a loss, I didn't expect the brand's shift to AI to mean a severe closure of some of its most successful gaming outfits - especially when the Steam Frame is about to try and steal a large part of its market share.

Marvel’s Deadpool VR | Red Band Gameplay Trailer | Meta Quest 3 & 3S - YouTube

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Asgard's Wrath 2 and Resident Evil 4 VR were bundled with the Quest 3 and Quest 2, respectively, arguably helping both headsets reach the mainstream popularity that they have. Meanwhile, Deadpool VR was released in November of 2025, but to my surprise, wasn't thrown into a new bundle with the Meta Quest 3 or 3S to help boost headset sales over the Holiday period.

This could still happen, but shuttering all three studios and, in the process, laying off hundreds of developers isn't an optimistic sign for the future of Meta's gaming plans for its Quest devices. Naturally, the majority of gaming support for this platform comes from linking to Steam or from third-party games on the Quest store.

In other words, regardless of what other outlets may love to report, this isn't even close to the death knell for VR gaming that some outlets have dubbed it.

In fact, I'd argue that Meta laying off three significant VR studios actually plays right into Valve's hands as it steers the market into its next phase.

Asgard's Wrath, Deadpool VR, and other homemade Quest games have all been exclusive to the Quest store, which means these games haven't appeared on Steam or been available to other VR headset owners. With the developers of these games now freed from their ties to one specific device, it's much more likely that should these developers find their feet at other studios or form new ones, their work will be available to a wider group of VR players across all headsets.

Speaking of which, the Steam Frame now has a much clearer route to market domination. If Meta is giving up the ghost on making its own VR games, it feels like a submission of any reason for gamers to buy a Quest 3 going forward. There is still tough competition out there from PSVR 2, the Pico 4 Ultra, along with HTC Vive and the new Samsung Galaxy XR headset, but PSVR 2 is the only other headset out there right now that prides itself on gaming alone.

Steam has access to countless VR experiences, which will likely entice plenty of gamers once it releases. PSVR 2 has a pretty limited VR game offering on the PlayStation store, but also has Steam VR support through its PC adapter, so it's clear that cutting out the middle man and going straight to Valve may be the best option for a lot of consumers from here on out.

For me, it's all going to hinge on the price of Valve's upcoming headset. The reason the Meta Quest 3 and 3S have been popular is due to accessible pricing, so if Meta can bridge the gap between pricey headsets and the mainstream gaming market that's never wanted to invest as heavily, while also showing the breadth of what's on its VR shelves, it's onto a winner.

For more, check out the best Meta Quest accessories, the best PSVR 2 bundles and deals, and the best gaming PCs.