In a move that has left many in the gaming community surprised, Rec Room, a platform often likened to Roblox for its user-generated games and social experiences, announced it will cease operations on June 1st. Despite having amassed a staggering 150 million players and creators and once boasting a valuation of $3.5 billion, the company has revealed in a recent blog post that it struggled to achieve sustainable profitability. “Our expenses consistently outweighed our revenue,” the post candidly explains.

The closure decision comes amidst shifting dynamics in the virtual reality market and broader challenges in the gaming industry. These factors have compounded the difficulty of reaching profitability, prompting Rec Room to make the tough choice to close its doors. The company had already taken significant measures to manage its financial strain, including laying off half of its workforce in August. Rec Room’s CEO and co-founder, Nick Fajt, stated at the time that the layoffs were intended to provide support to affected employees while ensuring the company had enough resources to continue operating for a longer period rather than just a few months.