rec room — Image courtesy Rec Room

Social VR Platform ‘Rec Room’ Lays Off Half Its Staff Amid Surge of Low-Quality Content

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Aug 26, 2025

Social VR platform Rec Room announced it’s laying off around half of its staff, citing low-level content which has flooded the platform from users on mobile and console.

Founded in 2016, the studio was once valued at $3.5 billion following its most recent funding round in 2021, which brought the Seattle-based company $145 million, making it one of the most valuable XR companies to date.

As an early adopter of user-generated content (UGC), Rec Room was also one of the first in the space to incentivize creators by letting them sell their creations for in-game tokens, which could be exchanged for real cash—following a monetization strategy similar to Roblox.

Now, the company has announced wide-sweeping layoffs in a blogpost, authored by company co-founders Cameron Brown and Nick Fajt. According to a statement provided to GeekWire, Rec Room now has just over 100 employees following the cuts.

The studio says departing employees will receive three months of pay, six months of health benefits, and the option to keep their computers.

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According to Rec Room leadership, layoffs stem from its overly ambitious attempt to make the app a universal creation platform across VR, PC, consoles, and mobile. Top creators on PC and VR drove growth, however efforts to expand creation tools to mobile and consoles underdelivered, creating technical strain and financial instability.

“While we did see creation happening on mobile and consoles, we never got to the point where those devices were good for building stuff that other players engaged with. And some of our efforts to bridge that gap (e.g., Maker AI) just frustrated our more impactful creators,” Brown says in the blogpost.

In short, user-generated content created through its mobile and console pipelines tended to be numerous, but fairly low in quality and optimization:

At the same time, those lower-powered devices still produced millions of pieces of content. This put a huge strain on the team, who had to figure out tools and 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. Supporting all this scope stretched us way too thin, and our attempt at building one big scalable platform (Rooms 2.0) didn’t land like we needed it to. The vision made sense, but we got crushed under the scale.

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.

Rec Room says moving forward it will empower its best (most revenue-generating) creators in an ostensible bid to refocus the core of its content.

“These folks are driving most of the growth and revenue already. In July, players spent more on [user-generated content] than ever. Creators had their highest earning month ever. This segment is actually growing nicely, but it’s heavily focused on PC – so that’s where we’ll focus our UGC efforts,” Brown says.

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Brown further notes Rec Room is “not abandoning UGC,” however “narrowing our focus away from ‘everyone can create’ in favor of serving our very best creators.”

The company says it also hopes to boost the platform not only by improving PC-based tools, but by hosting more curated events, featured content, and fewer but higher-quality updates.

This follows a layoff round in March 2025, which affected 16 percent of staff. At the time, Rec Room leadership maintained layoff were necessary to control costs to ensure the platform’s long-term survival. The studio said fifficulties included a slowing gaming market growth, higher interest rates, and a tougher fundraising climate.

You can read Brown and Fajt’s full statement on the recent layoff round here.

Octogod

Unfortunate and I'm hopeful all let go land on their feet.

Meta is in this "low quality content" phase with Horizon. Their new OS UI recommends nonsense Horizon apps, each one infringing on an IP, above paid content. The exodus of developers will hasten because of this, because the discovery issue when from bad to worse.
sfmike

Horizon take note.
TonyVT SkarredGhost

This is an important lesson about how choosing the wrong metric (quantity) may seriously impact your business.
Christian Schildwaechter

TL;DR: It is always difficult to grow an enthusiast medium into a mass medium, because the users are very different. And sometimes even trying can destroy it.

Rec Room started in an enthusiasts driven VR market, where users were willing to invest time and money because they really wanted to engage with the platform. And then tried to grow it both to newer user groups and different platforms, underestimating not only the lower (quality) engagement the non-enthusiasts would bring, and how much time just dealing with them would consume, but also the negative impact this would have on existing users.

Similarly Oculus/Meta started in VR with the Rift, driven by enthusiasts, many of which had waited for VR for a long time, and were willing to pay for the required expensive hardware. Meta quickly switched to mobile VR to grow beyond the enthusiasts user base willing to deal with a lot of friction, at the cost of significantly reduced graphics on Quest 1 when compared to PCVR. That still didn't sell enough, so Quest 2 followed just 18 months later with much improved performance, sold at cost with a ridiculously low price for the included tech.

Since then most Quest around Christmas, bought as a present for mostly teens. Which drove up user numbers, but also lowered software sales, as many teens prefer free-to-play content, frequently driven by social media hype like Gorilla Tag with literally billions of TikTok view, and all too often of questionable quality compared to professionally produced games. Consequently Meta now emphasizes Horizon Worlds with user created content, largely populated by kids, many of which younger than the 13 years Meta recommended as the minimum age for years.

This changed trajectory is very annoying to enthusiasts, esp. those who were already annoyed by redirecting most money to mobile HMDs with limited capabilities, now facing lots of new content that doesn't even properly utilize mobile SoCs. And the few game studios that managed to survive the first few years and were hoping to see things improve with a growing install base, instead see falling revenue thanks to the newer users being less willing to pay for apps. And Meta primarily promoting/pushing Horizon Worlds down everyone's throat doesn't help. Even worse, Meta has stated that whether their VR venture will be considered a success or failure now largely hangs on whether people accept Horizon Worlds on mobile phones, basically moving from VR enthusiasts to mobile phone Fortnite players as the target audience.

For years the discussion has been whether Meta "saved" VR by infusing it with a lot of money, or doomed it by (too early) focusing on mobile VR (only), with arguments for both. But one has to ask how mass compatible a medium still requiring to strap a heavy plastic brick to your face is in the first place. And if at this point trying to quickly grow it beyond the initial enthusiast market is even a good idea. So far the theoretical benefits of growth like AAA studios starting to create VR content thanks to the larger audience haven't really manifested, quite the opposite actually.
- XRC
  
  An old engineering joke:-
  
  "premature cost reduction is the root of all evil"
  
  VR never needed to be mainstream, it's progression has been horribly stunted by Meta's market-deforming futile cash bonfire
  
  investors piled into VR following the Facebook acquisition, overinflating a premature technology that would have massively benefitted from an open ecosystem and equal playing field
  
  (Meta XR soon to be surpassed by existing Apple/Google duopoly as users transition from handheld to wearables)
  
  ultimately VR will probably shake out as an enthusiast hobby and professional market that can support smaller PCVR hardware companies, and small teams of games developers using early access /crowdfunding, or selling simulations or dlc for popular flight and driving applications
  - Christian Schildwaechter
    
    TL;DR: Even if Meta's plan to grow their XR user base quickly with VR gaming didn't work out, and may ultimately have harmed the existing VR enthusiast market, there are still some ways (involving a couple of detours) how VR and VR gaming could end up where everybody hoped it would end during the early VR days.
    
    In 2016 pretty much everybody was way too optimistic regarding both how fast the technology would improve, and how far the remaining issues would be tolerated by the masses. Michael Abrash no doubt was and is one of the most qualified people on the planet to evaluate what will become possible, and it is quite interesting to rewatch his earlier Oculus Connect talks today and see how many of the things that were expected years ago still don't work outside the lab.
    
    So Facebook going full in in 2014, and also immediately trying to push mobile with first Gear VR in 2015 and then Go and Quest is sort of understandable, even if it in hindsight turns out to be a hasty miscalculation. It sure would be beneficial if their plan had worked, and we now had hundreds of millions of active VR users, with lots of money drawing in developers and competing HMD manufacturers, pushing the technology further and spreading the cost.
    
    But even worse than the much slower than expected technology improvement is probably how everybody, esp all the VR enthusiasts, misjudged how much most people don't want to deal with any HMD. We now got way higher resolutions, lower prices, better games, all of which should have convinced at least a lot of gamers, if not the general public. But VR usage among Steam gamers has barely changed for years. VR is the best thing since sliced bread for those that highly value immersion, but this particular group also cannot fathom that there are people who just don't care and would rather play Match 3 games on their phone for hours.
    
    VR has proven too useful in many areas to vanish again, and I expect it to actually grow, a lot but not through gaming, as this market has apparently already plateaued. IMHO growth will in fact mostly come from AVP, Android XR and others with media and productivity use. Media, because HMDs can offer a significantly better experience than any TV could ever provide, and wearing a HMD while just sitting will be less cumbersome, at least once Apple and Co. reduce the weight of their HMDs by at least half. And for productivity, because for hours sitting in front of a limited display is another form of discomfort that could be improved by light HMDs that basically allow to carry around a huge multi-display setup in your pocket.
    
    This way not only bare-bones, but light and convenient smartglasses could reach high XR user numbers, but more capable hires passthrough XR HMDs too, with all the benefits of more investments, faster progress and falling prices for VR gaming too as a side effect.
Vaske

I think the real issue is that they never had a recommendation system that could actually differentiate lower and higher quality rooms. I guess there's also that there have never been any particularly high quality rooms but that's besides the point
- GrapTops
  
  I've looked in a few times over the years and yeah it's a roulette wheel with no indication of there ever actually being a payoff in fun
Christian Schildwaechter

Absolute growth despite relative stagnation of Steam VR users due to the overall growth of Steam seems comforting, but in reality this is a bad sign. When VR launched with the Oculus Rift CV1 and HTC Vive, a VR capable gaming PC was way more powerful than what the average Steam user had. According to the latest Steam hardware survey, 80% of all users now have six or more CPU cores, and the most common GPU is an RTX 3060. HL:A, still the pinnacle of PCVR gaming, requires a GTX 1060 and a four core CPU, so almost all the new users Steam is adding now already have a PCVR capable machine.

So a higher percentage of the new users should now use VR simply because they can pass the entry bar that has been lowered so much over time. Rising Steam user numbers with mostly constant relative VR usage therefore indicates a reduced overall interest among those that technically could run VR. And in reality it is even falling, with the July 2025 hardware survey now listing only 1.41% of all Steam users with a VR HMD, while Linux as the main OS has risen to more than twice that with 2.89%. 0.31% of that is thanks to the Steam Deck running the Arch Linux based SteamOS as the most popular Linux variant on Steam.

Wearing my wishful thinking hat, I'm hoping that Valve could do something similar as the Steam Deck has done for gaming handhelds and Linux gaming, for standalone VR with a Deckard running SteamOS. The Steam Deck made an already existing handheld PC niche a lot more popular thanks partly to a low price, but mostly by providing a much smoother experience. Valve initially expected people to go for the cheapest USD 399 model, but it was the USD 649 model that sold out pretty much instantly the moment preorders opened. The Steam Deck is still selling a lot of its more expensive configurations despite now being three years on the market and competitors offering much faster hardware at not much higher prices, and it is all due to the streamlined SteamOS experience. As so often, convenience trumps performance.

And I really hope this is what Valve can bring to standalone VR too. Valve hasn't abandoned opening their tech, but they proceed at their usual glacial pace, so we are only now seeing the first 3rd party handheld PC getting official SteamOS support, which immediately levitates the whole experience up to another level compared to running Windows on the same hardware. Deckard will in no way be as cheap as the Steam Deck and remain a niche device in the already niche VR market dominated by USD 300 Quest 2 (still 32% in the current hardware survey, which is ~2x Quest 3 or ~5x Quest 3S). But it will very likely use mobile PC and VR components available to others too, so competitors can build their own Deckards. And it will run SteamOS based on FOSS Linux, allowing others to at least implement their own versions, with Valve hopefully offering near-future 3rd party HMD support in SteamOS. Since Deckard is supposed to also be optimized to run 2D games, a Deckard (clone) has the same advantage that AVP has over TVs, offering an unmatchable experience even for the now 98.59% of Steam users that so far apparently don't bother with connecting a VR HMD.

So in a couple of years we may have the option to buy VR HMDs from multiple vendors that don't bind the users into either a closed HorizonOS, AndroidXR or visionOS ecosystem, allow users to install whatever they want, including desktop apps or ancient emulated games, with different companies trying to outcompete each other through better features instead of locking users in.
- XRC
  
  Thanks for your interesting reply, the recent survey numbers aren't looking great! I'm not really surprised though, a lot of people just can't be bothered.
  
  A sizeable portion of the enthusiast simming market only use OpenXR, which is why Pimax always seems underrepresented in Steam survey
  
  (potentially couple thousand users so still just a statistical blip)
  
  Look forward to what Valve do next, but Valvetime™
  - Christian Schildwaechter
    
    The last official active Steam users count we got was 132M in 2021, mid-COVID-19 with a lot of new users. Numbers probably dropped somewhat after global house arrest ended, but rose again in the last few years, so let's assume it's still/again 132M.
    
    Then 1.41% means 1.8612M VR users, 0.69% of which use a Pimax HMD according to the July hardware survey. Which would be 12,842 Pimax users, so a couple of thousand users extra would be more than just a statistical blip, at least regarding the Pimax PCVR marketshare.