On Tuesday, Facebook announced that it has acquired the Czech-based virtual reality (VR) content startup Beat Games. The developer made a splash in 2018 by releasing the best-selling rhythm title “Beat Saber.” As part of the transaction, the studio will operate independently as part of the social network’s Oculus unit.

Oculus’ director of content Mike Verdu expressed enthusiasm about the deal, which will facilitate more than just the development of new games. “Beat Games’ accomplishments are already impressive, but Facebook and the Beat Games team know that there is so much more that can be done across VR, games, and music,” said the executive.

Neither Facebook nor Beat Games disclosed the acquisition’s financial terms.

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Why Facebook Purchased Beat Games

In 2014, the world’s largest social media company spent $2 billion to purchase Oculus. At the time, the firm made the acquisition under the belief that VR would become a mainstream preoccupation akin to smartphones. However, despite some minor successes, the technology has yet to break out.

For instance, this year’s Oculus Quest headset prompted $5 million in content sales during the first week following its release. While impressive by VR standards, that number pales in comparison to the revenue generated by other games, platforms, and brands. As an example, “Call of Duty: Mobile” made $17.7 million in its first seven days.

Indeed, market research firm IDC notes that only 8.9 million VR and augmented reality headsets will ship globally in 2019. Given the financial commitments it has made, Facebook expects its gaming segment to bring in more than low seven-figure revenues. As it happens, Beat Games has shown that it has the potential to foster VR gaming into maturity.

In May 2018, the formerly independent developer released “Beat Saber,” a title that requires players to swing a virtual lightsaber in time with popular songs. Within nine months, the studio sold one million copies of its game at $20 per unit.

Notably, the developer didn’t reinvent the wheel with its popular VR game. Instead, it melded the dynamics of “Guitar Hero” and “Fruit Ninja.” Beat Games found success because it applied a proven formula to a new medium.

With the studio’s innovative thinkers working on new Oculus games, Facebook might soon produce its first smash-hit title.

Facebook’s Gaming Industry Ambitions

While Facebook collects the majority of its revenue from its advertising business, the firm has recently taken to diversifying its offerings.

In 2017, the company launched a video-on-demand service called Facebook Watch. Last year, the social network introduced a video chat hardware segment called Portal. Besides, this summer, the firm revealed its intention to enter the financial services sector with a cryptocurrency project called Libra.

Although it’s a smart business practice to maintain a diverse array of holdings, Facebook has a pressing need for parallel revenue streams. Since the Cambridge Analytica scandal broke, the firm has been a near-constant target of government regulators. Indeed, the firm agreed to pay the Federal Trade Commission $5 billion for mismanaging user data.

The U.S. Department of Justice is also currently investigating Facebook for possible antitrust violations.

With its core business under threat, the social media service is taking steps to ensure that its cash flow remains stable. Right now, most U.S. lawmakers don’t view the gaming sector as one in need of intervention, so it’s a safe bet for Facebook.

Furthermore, TechCrunch estimates that the global gaming market will generate $152 billion in revenue this year. Accordingly, if the social network can break into that sector in a significant way, it will be able to sustain itself indefinitely in the face of regulatory headwinds.

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