The company said it struggled to build a sustainable business model despite its wide user base. “Despite this popularity, we never quite figured out how to make Rec Room a sustainably profitable business,” the company said in its post announcing the news. “Our costs always ended up overwhelming the revenue we brought in.”
The announcement did not clarify what will happen to Rec Room Inc. as an entity or whether its intellectual property and technology could be sold. The company also pointed to broader industry challenges. “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.”
Rec Room had already reduced its workforce last August, laying off half of its staff. Shortly after those layoffs, CEO and co-founder Nick Fajt addressed the decision, saying that carrying out the cuts when the company did “gave us the ability to take care of people, while still setting up Rec Room for years, not months of funding.”
According to the company, the platform will go offline at noon Pacific on June 1. Effective immediately, Rec Room has stopped new account creation, new friend requests, and new subscriptions to its Rec Room Plus membership. Creators can no longer publish new monetized content. Token purchases will end May 1, creator earnings will stop May 18, and a final creator payout will be processed on June 1.
The closure also comes as the industry is feeling the heat of layoffs. Last week, Epic Games laid off more than 1,000 employees following a slowdown in engagement with Fortnite.