In 2015, Sony created Manchester Studio (originally North West Studio) to develop AAA games for PSVR. Their only game was the unannounced 'CSAR: Combat, Search, and Rescue', where the player would fly a helicopter around shooting enemies and rescuing civilians from them.
Unfortunately, CSAR's development struggled on vital decisions like art style and basic gameplay. The co-lead designers also worked in London - only visiting the studio around once a week and micromanaging the many prototypes when there. Hires were made in London to streamline development, but it created a further breakdown in communications.
Despite these issues, Sony left MS alone due to its small 30-person headcount in a rented space. However, when Hermen Hulst took over PS Studios in 2019, he reviewed the entire portfolio. Even with cheap running costs, Hulst didn't like CSAR's lack of progress after 5 years. Combined with PSVR's ending lifecycle with the upcoming arrival of PS5 and PSVR2, Hulst cancelled CSAR and closed MS in February 2020.
Sony has closed 8 studios since PS5 launched, with MS unsurprisingly closing even earlier (February 2020), as most in Hulst's position would've done the same. By 2020, PSVR was years past its peak in popularity. Therefore, even if CSAR shipped, there was no money to be made from its inevitable low sales.
CSAR could've moved to PSVR2, but this meant a Feb 2023 release at the earliest. An 8-year cycle for a VR game, by an unproven studio, with a track record of development issues, makes no fiscal sense. Furthermore, PSVR2 wouldn't have improved sales. Even AAA IPs like Horizon performed so poorly that PS Studios haven't shipped a PSVR2 title since launch.
It's a shame when studios close, but the unfortunate reality is that it made sense to shut down MS. According to a post-closure exposé, even former devs recognize it was the logical choice and don't blame Sony.
