Social VR platform Rec Room, as soon as valued at $3.5 billion, introduced earlier this week that will probably be shutting down in June. The studio says it by no means fairly found out find out how to flip a revenue, although prime avatar creator blueasis maintains the story is a little more difficult.
When you’ve ever seen the bizarre little VRChat avatar ‘Brush the Marmoset’—a staple of Web memes since 2020—you’re possible already aware of blueasis.
Whereas they’re one of many OG 3D character and atmosphere artist on VRChat, they’re additionally the prime creator on Rec Room, which provides them a good bit of perception into why the platform’s decade-long existence is quickly coming to an finish.
As one of the vital well-funded VR firms to this point, the Seattle-based studio attracted over $294 million since its founding in 2016. Its most up-to-date spherical got here in December 2021, bringing to the corporate $145 million and briefly giving it a $3.5 billion valuation.
Regardless of its recognition and enviable startup runway, the corporate stated earlier this week it “by no means fairly found out find out how to make Rec Room a sustainably worthwhile enterprise. Our prices at all times ended up overwhelming the income we introduced in. We spent a very long time looking for a option to make the numbers work.”
In a thread on X, blueasis offers an insider perspective on why they assume Rec Room is closing up store. In brief, it wasn’t a foul creator financial system or lack of returning customers; the corporate simply type of … bungled issues.
“I joined Rec Room 1.5 years in the past to take part of their avatar cosmetics program,” blueasis recounts. “I made a number of objects (2000~) honed my craft, grew to become the number one vendor on your complete platform, met superior creatives & talked immediately with the group.”
“My estimation of the shutdown; overhiring through the covid increase, making guarantees they couldn’t preserve, frequently playing on new gamers & tech earlier than specializing in the core expertise & current gamers.”
Having joined in late 2024, blueasis says it was “instantly apparent that the group was sad.”
“Spending a lot cash on participant acquisition, cellular, console and so on, with little to no payoff, these customers not often grew to become creators, not often spent cash on the platform and so on. The individuals who cared in regards to the platform, PC, VR, did! however they had been uncared for in favor of ‘progress’.”
It was ostensibly that gamble to push for fast enlargement that finally tipped the studio into its first large tailspin: in August 2025 the corporate laid off round half of its employees, citing prices associated to a surge in low-level content material flooding the platform from customers on cellular and console.
“I believe by the point they realized this it was too late, the numbers had been already dire, in order that they needed to preserve trucking alongside in any course that will make them income, which simply meant extra playing new options to hope one thing caught, AI pet chat bot was a giant one individuals hated.”
Blueasis says the platform’s push for user-generated avatar cosmetics was “their largest success,” which they reveal accounted for 60% of participant spend, “outselling Rec Room unique objects by 10x.”
In September 2025—notably only one month after shedding half its employees—the corporate introduced it was paying out greater than one million {dollars} per quarter to creators. That’s some huge cash coming in, loads leaving into the palms of creators, and surprisingly little captured by the corporate.
Blueasis highlights the recognition of the UGC avatar cosmetics program and its outsized share of participant spend, though the platform’s modest rake on creator gross sales may be a giant contributing issue.
Whereas the corporate retains 70 % income after paying platform charges on first-party content material, in the case of UGC, Rec Room solely takes a 30 % rake. This leaves creators with the majority of the income, that means Rec Room retained far much less from top-selling objects.
Ultimately, low charges are often a robust device to assist purchase an preliminary userbase. However they aren’t an enduring technique, particularly when new customers aren’t contributing to the ecosystem in a means that offsets prices. And it appears the studio received interminably caught in that harmful hole between aggressive person acquisition and eventual platform stability—and simply by no means managed to climb out.
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