The company admits it ‘never quite figured out how to make Rec Room a sustainably profitable business.’
Rec Room, a social gaming platform similar to Roblox that allows users to create games and experiences, will be shutting down on June 1st. Despite a user base of over 150 million players and creators and being valued at $3.5 billion, the company stated in a blog post that they “never quite figured out how to make Rec Room a sustainably profitable business” and “our costs always ended up overwhelming the revenue we brought in.”
The decision was also influenced by “the recent shift in the VR market, along with broader headwinds in gaming,” making the path to profitability challenging enough to necessitate closing down operations. Rec Room had previously laid off half of its staff in August. Following the layoffs, CEO and co-founder Nick Fajt mentioned that the timing allowed the company to take care of its people while setting up Rec Room for extended funding periods.
Rec Room is not alone in facing difficulties in the social gaming space. Meta’s Horizon Worlds will stop launching new VR experiences starting in June as the company redirects the platform’s focus to mobile. Epic Games also laid off over 1,000 employees last week due to a “downturn in Fortnite engagement,” leading to excessive spending beyond earnings, as stated by CEO Tim Sweeney.