This week's edition of "Game On" includes an interview with Cloudhead Games CEO and Creative Director Denny Unger. Cloudhead is a virtual reality studio behind VR titles like 2019's "Pistol Whip," an award-winning shooter available on multiple VR devices. Cloudhead has partnered with sector giants Valve, Sony (SNE), HTC, and Oculus (FB) to create games for next-gen VR hardware.

'PISTOL WHIP': Cloudhead's 2019 effort "Pistol Whip" released last November to "very positive" reviews, according to Steam's reviews. When asked how the company feels about how the game was received both from a critical and financial standpoint, Unger said the game succeeded on both fronts to his "great relief." "While our other experiences [Call of the Starseed, Heart of the Emberstone, Aperture Hand Labs] focused on deeply immersive world building and complex interactions, Pistol Whip was an exercise in proving out VR’s merits to new consumers as quickly and as simply as humanly possible," he told The Fly. "It was really the culmination of many years in the market figuring out which qualities were driving retention and how best to accommodate all major hardware platforms. We went through a deep QA cycle with Pistol Whip and had a lot of great feedback from vets in the industry and testers in general. But it was the fact that we ourselves were having such a blast playing it, even after a few hundred hours, that we knew we were onto something special. So when Pistol Whip launched in November of 2019 we knew it would find its audience, we just didn’t know how big of an impact it would have." Unger noted that "Pistol Whip" will soon become available on PlayStation VR, which has the "largest" installed VR base.

"Perhaps more importantly than the success of the title, it represented a turning point in the market itself that indicated an upward trajectory of growth and health within the Virtual Reality space," Unger added. "It enabled the studio to bring additional talent to our team and to work towards long planned projects, R&D, and infrastructure."

VR CHALLENGES: Speaking on the particular challenges of developing games in virtual reality, the Cloudhead CEO said, "When bringing various “Flat-Screen” skillsets to the Virtual Reality industry, more often than not you are forced to relearn your specific trade and or radically adapt prior learnings into a completely new medium. More than a few companies have failed when trying to shove a round peg into a square hole here with poorly considered 2-D ports. Everything from basic movement, interaction design, environmental design, and narrative design/cutscenes change by necessity. These are pillars of game design and Virtual Reality has its own unique ruleset for each discipline. Thankfully, the industry has worked very hard over the last 6 years to develop a subset of 'Best Practices' and we continue to find answers to some of VR’s most challenging issues."

CONSOLE VR: Besides Sony's foray into the virtual reality space, even console rival Nintendo (NTDOY) has its own such device in Labo VR. When asked if he believes that console makers including VR functionality or devices will be the norm going forward, Unger said while many "investors, consumers, and press" have been "stuck in a mentality that did not account for just how mind-blowingly good" VR has become, he believes 2019 turned out to be the year that VR cleared a tipping-point and started proving out its viability as a profit positive industry with a "hungry" consumer base.

"AAA game development studios not pouring significant resources into VR in 2020 are missing a critical moment in VR’s ascent to the mass market," Unger said. "That’s a blindspot that shouldn’t be ignored or their competitors will take the opportunity to dominate that sector early. Flatscreen gaming, while still the highest grossing industry on the planet, is about to be confronted with an evolution of platform that will be driven bottom up from a hungry consumer base looking for something more. If they want their titles to land in the sweet spot they need to be developing right now. The same applies to console makers not following Sony’s significant lead in the space [upwards of 5 Million Headsets sold]. If they want to maintain their market share then VR should probably be included in their roadmap of console accessories or there’s a risk of falling behind. It would be amazing to see the Microsofts (MSFT), Nintendos & Sonys of the world dedicate resources to a stand-alone VR console much like the Quest. That’s where the real competition begins."

MAINSTREAM VR: Though virtual reality headsets have gained popularity with consumers each year, the medium still has a ways to go before becoming a more mainstream product. When asked what he believes needs to occur for VR to become more of a household product on par with traditional gaming consoles, the Cloudhead CEO said that he actually believes that the "important foundational work" has already happened and that 2020 will "drive a very different perception of VR within the mainstream."

"2020 is ripe with new and impressive content, and further improvements to the ecosystem including a broader push into the social aspects of the technology," Unger added. "Beyond 2020 I think we’ll start seeing a hardware cadence that starts to look a bit like the cellphone market, with incremental improvements to the devices. You’ll likely also see competitors entering the space in an attempt to level up the stand-alone-console, high-end VR market. By that point, the genie is already out of the bottle and VR’s evolutionary growth will become a commonplace technology segment."

FUTURE OF CLOUDHEAD: On the topic of Cloudhead's future, including whether they'd consider making non-VR games, Unger said that the company's passion for virtual reality "has never shifted." "We are best known for award winning VR games, innovations like snap-turns, teleportation, inside-out motion capture, narrative VR, and deep interaction systems," he said. "Virtual Reality is one part creative, nine parts R&D but those discoveries are some of the most enjoyable things about the medium. We’ve finally crossed a threshold where so many of the initial pain points have been solved or are well on their way to being solved and we can focus almost purely on product."

When asked if Cloudhead was looking into making augmented reality games, Unger noted that while both VR and AR share the term "reality," the represent "entirely different use cases." "VR is completely replacive of reality and pure escapism, whereas AR is more about overlaying individual 3D elements on top of the real-world with a focus on utility," he told The Fly. "So until we are presented with a capable AR device, from an industry established hardware leader, and with a clear path to market, we are unlikely to invest money in software development/R&D... If VR is finally ascending into the 'Plateau of productivity,' then AR is deep in the 'Trough of Disillusionment,' putting it 5 years behind VR. AR will absolutely succeed and over time those two devices will merge into one but that future is probably further away than AR studios might want to admit. Lots of hard problems yet to solve there."

"For us, and likely for the next 5 years, we’re focused on building entertainment focused, premium VR experiences, that meet the market where it lives," Unger added. "There is tremendous opportunity here during that window and for the first time in 6 years, we’re seeing the proof of that blossom before our eyes. This is an incredibly exciting time to be in the Virtual Reality industry."

"Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.