$3.5B valuation, 150M users: Why gaming platform Rec Room collapsed
What's the story
Rec Room, a social gaming platform similar to Roblox, announced it will close on June 1. The company made the announcement in a blog post, citing profitability issues as the main reason behind the decision. Despite having over 150 million users and being valued at $3.5 billion at one point, Rec Room struggled with making its business financially sustainable.
Financial difficulties
Blog post cited 'never quite figured out' profitability issues
Rec Room admitted in its blog post that "we never quite figured out how to make Rec Room a sustainably profitable business." The company said its costs always ended up being more than the revenue it generated. It also cited recent changes in the VR market and broader challenges in gaming as reasons why profitability has become increasingly difficult, leading to this tough decision.
Staff layoffs
Rec Room laid off half its staff in August
In August 2025, Rec Room had laid off half of its staff. The company's CEO and co-founder Nick Fajt had then said that the layoffs were intended to "take care of people, while still setting up Rec Room for years, not months of funding." This statement hinted at a long-term plan for the company despite its financial challenges.
User response
Users react to shutdown announcement
The announcement of Rec Room's closure has drawn mixed reactions from its user base. While some expressed sadness over the end of a platform where they had made friends and memories, others were disappointed with the company's inability to remain profitable despite its popularity.