A founder of VM Labs, Richard Miller, was a previous vice president of Atari, and many large VM Labs employees (including Jeff Minter) were also associated using Atari prior to its takeover by JTS. Following, numerous previous Atari users were initially enthusiastic all about a Nuon DVD technology. This enthusiasm lead to disappointment inside a select few subjects, when VM Labs was harshly criticized by a select few Nuon fans for promising features such as the modem & several games, however redeeming super little.

When of December 2001, VM Labs was around debt. It were besides funding games development for Nuon but because of the money problems, games in development were off & the developers never got their money. It filed for Chapter 11 bankruptcy and a Nuon technology was purchased in 2002 by Genesis Microchip. About July 2002, development on the Nuon technology was stopped, most previous VM Labs employees were fired by Genesis Microchip, and a Nuon division was shut down.

A stimulator of VM Labs' failure occurs as matter of debate. A few Nuon owners accuse VM Labs of poor cerebration while it come to video games, accusing a company of misunderstanding the market for their games. Based on data from these fans, VM Labs all over-emphasized elementary games for casual gamers when in fact such casual gamers are impressed by graphics aka eye candy. Others think a company should keep close at hand paid thomas more attention to providing enhanced features for DVD playback rather than concentrating in games. However others just believe a company tried to become as well challenging at an poor instance in the technology industry, just as a major stock market downturn made raising capital more difficult.