Microsoft worked on, but ultimately chose to abandon, an Xbox-branded VR headset, according to a new CNet report. Unnamed sources told CNet that the company was unable to produce hardware of sufficient quality at the right price point. Internal enthusiasm for such a project may have also waned after Microsoft’s “Mixed Reality” headsets earned a rather, well, mixed reaction from consumers and critics. (The term “Mixed Reality” is potentially confusing, as the first-generation devices were standard-issue VR.) Whatever the reason behind Microsoft’s decision to cancel its VR project, it’s clear that the VR market is struggling somewhat with mainstream adoption. SuperData, a market-intelligence company, estimated shipments of Oculus Go, a lower-cost headset meant to take VR “mainstream,” at 289,000 units in the second quarter of 2018. Not only is that low by the standards of consumer devices (Apple sold 52 million iPhones during that same quarter), but it’s a relative bright spot in the VR market, where sales of headsets have declined year-over-year. Of all the companies currently playing in the VR space, Sony has arguably enjoyed the most success, with its PlayStation VR headset racking up 3 million sales since it made its debut in October 2016. But that’s small compared to the PlayStation 4 consoles sold (82 million, according to research firm NPD); you could easily make an argument that the PlayStation VR is a niche product (or as niche as something produced by Sony can get). Meanwhile, Microsoft is a company that likes to operate at significant scale—selling a couple hundred thousand units per quarter, even at a few hundred dollars apiece, is not overly interesting to its executives. In that context, it’s no wonder that internal enthusiasm for an Xbox VR headset waned, even as the Xbox team continued to devote its efforts to the Xbox console and associated services. If you want to make many billions of dollars, VR is not the industry for you—at least, not right now, in its current state. Developers might find themselves tempted to focus on augmented reality (AR) as opposed to VR, especially since Apple and Google both offer the toolkits necessary to build AR apps and games on phones. The logic here seems pretty straightforward: Why wrestle with building a complex VR app for a handful of niche platforms when your AR app can potentially seize an audience of millions on iPhones and Android devices? Not that VR is going to disappear anytime soon—the hardware will surely grow more powerful, and the apps and games more realistic. And AR itself also needs to evolve into a more polished state; just witness Oculus co-founder Palmer Luckey referring to the Magic Leap, the most buzzed-about headset of the moment, as a “tragic heap.”