Hi there! My name is Janko Roettgers, and this is Lowpass. In this newsletter: Sandbox VR CEO Steven Zhao on what worked for the company in 2026, what didn’t, and how AI changes almost everything.

There’s no way to sugarcoat this: 2026 has been a pretty brutal year for VR gaming. 

It all started with a bang in January, when Meta closed down several internal studios as part of a broader realignment towards AI and wearables. A number of third-party studios, including Survios (Raw Data, Creed: Rise to Glory) and Polyarc (Moss), closed their doors in the following months.  Many more had significant staff cuts, with Kluge Interactive (Synth Riders) laying off half its staff in April and Schell Games (I Expect You To Die, Among Us VR) letting go about as many staffers, percentage-wise, over two rounds.

The bloodletting may not be over yet, despite new hardware coming out from Meta and Google. “As far as investing in new VR games, none of the upcoming devices seem to be changing the landscape at all,” noted Kluge Interactive CEO Arturo Perez recently on LinkedIn, adding:

“The VR winter is expected to continue for at least another year.”

However, there’s one part of the VR gaming universe that has shown some surprising resilience: location-based entertainment. After facing significant pressure during the pandemic, a number of startups have re-emerged with entertainment centers and arcades that take VR gaming to the next level. In the United States, one of the most successful companies in this space is Sandbox VR, which is about to open its 100th store.

For this week’s newsletter, I decided to catch up with Sandbox VR CEO Steven Zhao to learn how Sandbox grew its location numbers by nearly 30 percent this year, what content has and what hasn’t been working, why Sandbox had to adjust its ticket pricing in 2026, and how, even for location-based gaming, AI is changing almost everything.