Roblox rival Rec Room to shut down after losses

A major rival to Roblox is shutting down after failing to turn its large user base into a profitable business, 10 years after its launch.

Rec Room said it will close on June 1, despite having attracted more than 150 million players and creators and reaching a valuation of $3.5bn (£2.65bn) at its peak.

In a blog post, the company said it “never quite figured out how to make Rec Room a sustainably profitable business”, adding that “our costs always ended up overwhelming the revenue we brought in”.

The firm also pointed to a “shift in the VR market” and broader headwinds in gaming, saying the “path to profitability has gotten tough enough” to force the decision.

The closure follows significant cuts last year, when Rec Room laid off around half of its workforce.

The platform had positioned itself as a competitor to Roblox, offering users tools to create and monetise their own games and virtual experiences.

While the model has proved popular with younger audiences, turning that engagement into consistent revenue has remained a consistent challenge.

Roblox, the dominant player in the sector, recently reported fourth-quarter bookings of $2.22bn, up 63 per cent year-on-year, with 144 million daily active users.

However, it also posted a net loss of $316m, highlighting the high costs associated with running large-scale gaming ecosystems.

Elsewhere, Meta has scaled back its Horizon Worlds platform, while Epic Games recently cut more than 1,000 jobs following a downturn in engagement in Fortnite.

Rec Room said its closure reflects the difficulty of sustaining growth in a market where infrastructure, development and moderation costs continue to rise.