May 5, 2017 / 1:33 AM / in 3 months

Facebook's virtual reality unit Oculus shutters film studio

Showgoers wear Oculus Rift virtual reality headsets during the Intel press conference at CES in Las Vegas, January 4, 2017.Rick Wilking

LOS ANGELES (Reuters) - Facebook Inc's virtual reality content production unit, Oculus' Story Studio, is shuttering its doors to shift focus on supporting external content makers, the company said on Thursday, two years after the in-house studio launched.

Oculus, which makes virtual reality headsets Rift and Gear VR, will allocate $50 million to directly fund creators of non-gaming VR content, Jason Rubin, the company's vice president of content, said in a blog post.

Rubin added that Oculus is "still absolutely committed to growing the VR film and creative content ecosystem."

Facebook paid $3 billion to acquire Oculus and retain its employees in 2014. Chief Executive Officer Mark Zuckerberg said he believed the medium that offers a 360-degree panoramic view using headsets "will become a part of daily life for billions of people."

Oculus tapped talent from both Oscar-winning animation company Pixar and the video gaming world to head up Story Studio, which it launched in January 2015 at the Sundance Film Festival.

Facebook's VR ambitions have been threatened somewhat by a lawsuit from video game publisher ZeniMax Media Inc accusing Facebook and Oculus of infringing ZeniMax's copyrighted software code.

A jury found in ZeniMax's favor in February, awarding it $500 million. Oculus has asked for a new trial.

Vive, a unit of HTC Corp, and Sony Corp are also racing to bring virtual reality products to a mass audience.

Oculus debuted its first short film called "Lost" at Sundance two years ago, a story of an animated mechanical creature in a forest.

Last year, Story Studio won an Emmy for original interactive program for its short VR film "Henry," and at Sundance this year, it premiered "Dear Angelica," an illustrated film of a mother and daughter.

But internally, Oculus has undergone some changes in its management in the past year.

Brendan Iribe stepped down as CEO in December, saying he was going to head up the PC division of the VR company. In March, Oculus founder Palmer Luckey, who created the prototype Oculus headset, parted ways with Facebook.

Additional reporting by David Ingram; Editing by Lisa Shumaker

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