Rec Room is making major cuts — nearly half the team is out

Rec Room, the studio behind the hit user-generated content (UGC) platform of the same name, is letting go of roughly half its staff.

The news came straight from CEO Nick Fajt and CCO Cameron Brown in what they called one of the toughest moments in the company’s history.

“What’s happening? Today Nick and I had to make one of the toughest choices in Rec Room history: we’re saying goodbye to about half the team,” they wrote. “These are incredible people who poured their heart, talent, and creativity into this place. We’re heartbroken it’s come to this.”

They stressed this isn’t about anyone’s performance — it’s about money. “We wish we could keep every one of these people,” the statement continued. “But the tough reality is, we can’t. This change is about giving Rec Room a chance to survive — and hopefully thrive — in the years ahead.”

To help ease the transition, departing staff will get three months’ pay, six months of health coverage, and can keep their work laptop or desktop.

So what went wrong?

Over the years, Rec Room poured resources into expanding creation tools for PC, VR, consoles, and mobile. But the payoff wasn’t there — most of the standout content still came from PC and VR creators. Console and mobile saw activity, but nothing that drove big engagement.

Meanwhile, millions of lower-powered device uploads kept flooding in, creating a massive workload for the team, especially with limited tools for creators to optimize their content. Efforts to build one scalable platform (Rooms 2.0) didn’t take off like they hoped, leaving the studio caught in an awkward middle ground: too small to deliver the “anyone can build anywhere” dream, too big to pivot quickly.

As the statement read:

"So we ended up in a tough spot. Too small to realize the “anyone can build anywhere” vision, but too big to pivot to a more focused experience that was more reactive to what our players wanted and would pay for. The result was that we started to dig a financial hole that was getting larger every day."

The new game plan

Rec Room will now focus on its strongest creators and most popular experiences — think Paintball, curated events, and player-favorite modes — while scaling back big UGC pushes like Maker AI/ Maker Pen. The goal? Win back excitement with quality over quantity.

“Today sucks,” Fajt and Brown admitted. “For us, for the team that’s staying, and especially for those leaving. You’ll always be part of the Rec Room story.”

Founded in Seattle in 2016, Rec Room hit a $3.5 billion valuation in 2021 after raising $145 million. Just a few years later, it’s facing one of its toughest resets yet.