There are signs that Microsoft may be thinking that AR could win out in the end in gaming as well. They've got some gaming demos that are nearly as impressive as their industry demos.

Studies have shown it will always be safer and less disorienting to leave people at least their peripheral vision when playing games where they move about a physical environment, and if you are going to do that you might as well make that physical environment a part of the game.

There's always going to be games that are more immersive in full opaque VR than AR, but games have been immersive in 8-bit on a tiny CRT screen, the small "quality" difference between AR "partial" immersion and VR "full" immersion may not matter in the long run to good games.