Rec Room, the Seattle-based social gaming firm as soon as valued at $3.5 billion, is shutting down its platform on June 1, leaving the way forward for the corporate and its workers unclear.
The firm made the announcement Monday afternoon, saying it couldn’t discover a path to profitability even after serving greater than 150 million gamers over the previous decade.
“Despite this popularity, we never quite figured out how to make Rec Room a sustainably profitable business,” the corporate stated in its put up saying the information. “Our costs always ended up overwhelming the revenue we brought in.”
The put up didn’t deal with the way forward for Rec Room Inc. as an entity or whether or not its mental property and expertise could be offered. We’ve contacted Rec Room for extra data.
An investor in Rec Room, talking on situation of anonymity, stated there’s a transaction associated to the choice that has but to be publicly introduced. PitchBook had flagged Rec Room as a possible acquisition goal. The firm had not raised new funding in additional than 4 years.
The platform will go darkish at midday Pacific on June 1. Starting instantly, Rec Room is obstructing new account creation, new pal requests, and new subscriptions to its Rec Room Plus membership. Creators can not publish new monetized content material. Token purchases finish May 1, creator earnings cease May 18, and a last creator payout will likely be processed on June 1.
Rec Room customers, posting in the neighborhood Discord server, expressed shock and shock, with some holding out hope that the announcement was an early April Fool’s joke.
Alas, it seems not.
“We spent a long time trying to find a way to make the numbers work,” the put up stated. “But with the recent shift in the VR market, along with broader headwinds in gaming, the path to profitability has gotten tough enough that we’ve made the difficult decision to shut things down.”
The firm stated it was making the choice now “while we still have the ability to wind things down thoughtfully and do right by the people who built this with us.”
Rec Room was based in 2016 by Nick Fajt, Cameron Brown and a handful of different co-founders underneath the title Against Gravity. The Seattle startup constructed a cross-platform social gaming app that lets gamers create and share video games, digital items and experiences throughout telephones, consoles, PCs and VR headsets.
The firm attracted backing from Sequoia Capital, Index Ventures, Madrona Venture Group, Coatue Management and others, elevating $294 million throughout six rounds. Its December 2021 Series F valued the corporate at $3.5 billion, making it certainly one of Seattle’s most outstanding unicorns.
Rec Room’s recognition surged through the pandemic as gamers flocked to digital hangouts, and the corporate stated it surpassed 100 million lifetime users. But development within the broader gaming market slowed within the years that adopted, and Rec Room’s ambitions outpaced its income.
Rec Room laid off 16% of its staff in March 2025 after which cut roughly half its remaining workforce 5 months later, eliminating 141 positions and shrinking from about 310 workers to simply over 100 individuals at the time.
Fajt stated again then that the corporate wanted to change into self-sustaining and will not depend on elevating more cash, however famous that Rec Room had sufficient runway to function into 2029.
“If we had just kept going, we would have run out of money in the next couple of years,” he wrote at the time. “And with no money left, we would have had to lay everyone off.”
The firm guess closely on a imaginative and prescient of letting anybody create video games on any gadget. It rolled out AI options together with Maker AI for sport creation and a synthetic intelligence companion known as Roomie, although the per-user prices of AI exceeded subscription revenue.
As of final September, income from user-generated content material was rising about 70% yr over yr, and creators earned more than $1 million in a single quarter for the primary time.
However, as noted by Fajt in public posts, the margins on person generated content material have been skinny: Rec Room retains solely about 30 cents of each greenback of gross sales of user-generated content material, after paying platforms and creators, in contrast with 70 cents on gross sales of first-party content material.
