Rec Room
Players logged a cumulative 68,000 years inside Rec Room over its decade-long run, but costs always outpaced revenue. Rec Room

Rec Room, the social gaming platform once valued at $3.5 billion (£2.7 billion) that let 150 million players build virtual worlds together, will shut down on 1 June after conceding its artificial intelligence (AI) features cost more per user than its subscriptions ever brought in.

The Seattle-based company announced the closure on Monday. 'Our costs always ended up overwhelming the revenue we brought in,' it said in a blog post.

But the shutdown may not be the final chapter. An investor, speaking to GeekWire on condition of anonymity, said a transaction connected to the closure hasn't been publicly announced. PitchBook had already flagged the company as a likely acquisition target.

Why AI Became the Money Pit

Rec Room bet heavily on AI to stay competitive. It launched Maker AI in March 2025 to help the 90% of players who don't build create games through text prompts. It also rolled out Roomie, an AI companion for subscribers of its $7.99 (£6.05) monthly Rec Room Plus plan.

The economy fell apart fast. The monthly cost of one Maker AI user exceeded net revenue from each Plus subscriber, according to research firm Sacra. Rec Room pulled the feature from its subscription bundle before a wider rollout. Roomie ran into the same problem, prompting a separate $20 (£15.14) monthly plan just to cover running costs.

A Platform That Grew but Never Profited

Rec Room raised $294 million (£223 million) over its lifetime. Its last round, a $145 million (£110 million) Series F led by Coatue Management, closed in December 2021, and it never raised again. The company laid off 16% of staff in March 2025 and cut roughly half its remaining workforce five months later, shrinking from about 310 employees to just over 100.

Chief executive Nick Fajt warned during the August 2025 layoffs that the company would run out of cash within a couple of years if nothing changed.

User-generated content (UGC) revenue had been growing roughly 70% year over year as of last September. Creators earned more than $1 million (£758,000) in a single quarter for the first time.

But Rec Room kept only about 30 cents of every dollar in UGC sales after paying platforms and creators, compared with 70 cents on first-party content. Growth without margin wasn't enough.

Creators Race Against the Clock

For people who built audiences and earned real money on the platform, the timeline is tight. Token purchases end on 1 May. Creator earnings stop on 18 May. A final payout will be processed on 1 June, the same day servers go offline at noon Pacific time.

New account creation, friend requests, and subscriptions have already been blocked. Players can download room data through Rec Room's Steam PC build, but no created world will survive without the platform's servers.

The VR Squeeze

Rec Room pointed to 'the recent shift in the VR market, along with broader headwinds in gaming' as key factors. That shift has been stark. Meta's Reality Labs division has accumulated over $80 billion (£61 billion) in cumulative operating losses since 2021. Apple's Vision Pro hasn't driven mainstream virtual reality adoption either.

Rec Room tried to hedge by supporting traditional platforms alongside VR headsets, but that added complexity without fixing profitability. For the creator economy, a platform that hit 150 million users and still couldn't profit is a warning that scale alone won't guarantee survival.

The transaction hinted at by the anonymous investor could determine whether Rec Room's technology finds a second life or vanishes with the worlds its players built.

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