Sony Group Corp (SONY  ) has halted the production of its PlayStation VR2 (PSVR2) headset as it addresses an accumulation of unsold units, highlighting challenges in the virtual reality market's consumer appeal.

Despite initial enthusiasm, sales of the $550 accessory for the PlayStation 5 have gradually decreased, leading to a significant stockpile.

Sony, having produced over 2 million units since the headset's launch last February, now faces a decline in shipments each quarter, as observed by IDC, Bloomberg reports.

Sony and Meta Platforms Inc (META  ) find drawing sufficient content and entertainment developers challenging to enrich their virtual reality offerings.

Similarly, Apple Inc's (AAPL  ) Vision Pro headset encountered obstacles in securing apps from major platforms like Netflix Inc (NFLX  ) and Alphabet Inc (GOOG  ) (GOOGL  ) YouTube.

Meanwhile, Microsoft Corp (MSFT  ) divested the Activision-owned Toys for Bob video game studio in March, known for popular titles like Skylanders and Crash Bandicoot N. Sane Trilogy.

The industry itself is undergoing a period of consolidation, underscored by job cuts and the cancellation of games.

In January, Microsoft announced downsizing 1,900 positions within its gaming divisions.

In February, Electronic Arts Inc (EA  ) shared plans to lay off 5% of its employees, around 670 people, to streamline operations.

Sony's decision reflects the virtual reality segment's struggle to gain mainstream traction, partly due to high prices and a limited selection of supporting games, exacerbated by the higher costs of developing virtual reality games than traditional titles, limiting the incentive for creators and consumers.

In response to these challenges, Sony is exploring new avenues, such as enabling PSVR2 users to access PC titles, to expand the headset's utility and appeal.

The company's recent closure of its PlayStation London division, responsible for developing virtual reality games, and layoffs at other studios further illustrate the difficulties facing the virtual reality gaming sector.

In February, Sony reported third-quarter fiscal 2023 sales growth of 22% year-on-year to $25.34 billion, versus the analyst consensus estimate of $24.62 billion. Adjusted EPS of $1.99 beat the consensus estimate of $1.65. Sony sold 8.2 million PS5 units in the quarter versus 7.1 million a year ago.

Investors can gain exposure to Sony via WBI BullBear Quality 3000 ETF (WBIL  ) and Exchange Traded Concepts Trust MUSQ Global Music Industry ETF (MUSQ  ).

Price Action: SONY shares traded higher by 2.08% at $89.20 premarket on the last check Monday.