Developer Rec Room lays off ‘about half’ its staff

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Developer Rec Room, the team behind the namesake user-generated content (UGC) driven social game, has laid off “about half” its staff.

Announced yesterday via the official site, CEO and co-founder Nick Fajt wrote that both he and CCO and co-founder Cameron Brown made the decision, which they called a “business necessity based on the financial trajectory of the company” that doesn’t reflect on the individuals affected.

“This is not a reflection on the talent or dedication of those departing—we wish we could keep every one of them,” reads the announcement. “I’m gonna say that again, to make it clear this isn’t just ‘one of those things you say in a layoff message’. We TRULY wish we could keep every one of these people on the team. But we can’t. This is a reflection of the tough reality we face as a business and the change needed to give Rec Room a chance to thrive in the years ahead.”

According to the post, the laid off workers will continue to be paid for the next three months, receive health benefits for the next six months, and have the option to keep their laptop or desktop computer. Rec Room didn’t specify how many people were affected.

‘The writing on the wall became very clear’

Back in December 2021, Rec Room raised $145 million for its social platform, bringing the company’s lifetime raised funds to around $294 million. According to Brown, the team invested “heavily in creation tools across PC, VR, consoles, and mobile,” but the reality “has been harsh.” The CEO claims the mobile and console versions never got to the point where “those devices were good for building stuff.” Some of the efforts to bridge the gap, including the Maker AI tool, frustrated the studio’s “more impactful creators.” 

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At the same time, the lower-powered devices still fostered “millions of pieces of content,” which reportedly put a strain on the team that had to come up with procedures to review it all. “Making all this run across every device was a massive technical challenge and burden. While our most skilled creators optimized their content cleverly, most creators didn’t—couldn’t, really, because we didn’t provide them with the necessary tooling.”

Last month, Fajt announced that Rec Room hit a “record-breaking month” for UGC sales thanks to the creations from players, with creator token earnings from room and Watch store sales increasing 47 percent year-over-year.

“We deliberately started with a small group of creators as the Avatar Studio tool is still in the early stages,” Fajt wrote at the time. “All of the early joiners helped us iron out the workflow and onboarding, providing feedback on how to improve our systems and processes. With creators already finding success, we’re ready to expand.”

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Today’s announcement continues by saying that supporting the aforementioned scope stretched the team thin, and began to “dig a financial hole that was getting larger every day.” The CEO says the studio has been stuck in an “uncomfortable middle ground” during the past few years, wondering whether to keep pushing the internal UGC vision while potentially increasing the frustration of players and the team, or scale back the vision by cutting the team in half.

“Both paths were painful,” Brown wrote. “But ultimately we got to a point where it was clear that staying the course meant low growth, a high burn rate, and no clear path forward. In a word: Unsustainable. The writing on the wall became very clear.”

Looking forward, Brown says the team will focus on “empowering our very best creators” and “ensuring Rec Room is a great experience for our players.”

“For those leaving—you will always be part of the Rec Room story,” Brown wrote as a closing note about the layoffs. “We thank you for everything, and wish you the best for your next chapter. For those staying—we know this sucks. We know this hurts. Thank you for pushing forward with us—we have hard work ahead, but with a new focus we believe strongly in the future we can build together.”

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Game Developer has reached out to Rec Room for clarification on the number of workers affected.

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