Rec Room, the Seattle-based social virtual world that raised $294 million and briefly reached a $3.5 billion valuation, will close on June 1, 2026, the company announced yesterday. Snap Inc. confirmed on the same day that it had acquired certain assets from the company.
“Despite its popularity, we never figured out how to make Rec Room a sustainable profitable business,” the company said in the announcement. “Our costs have always outstripped the revenue we make.”
For the broader Metaverse industry, the closure is another stark reminder that user growth is not a business without an effective revenue model.
Snap picks up the pieces.
Snap has acquired some assets from Rec Room and confirmed that some Rec Room employees will join Specs Inc., a Snap hardware subsidiary that develops Spectacles augmented reality glasses. Snap said it was drawn to the Rec Room team’s expertise in building social multiplayer XR experiences.
Neither company has said that Rec Room will be revived in its current form on Snap, GeekWire reported. Nick Fajt, Rec Room co-founder and CEO, said he is “very proud of the team,” grateful to the community and excited for what’s next.
From $3.5 billion to $0
Rec Room raised $145 million in a Series F round in December 2021, bringing its total valuation to $3.5 billion, the company announced at the time. The round was led by Coatue Management, with Sequoia Capital, Index Ventures, and Madrona Venture Group also participating. Total funding across all rounds reached $294 million, according to research firm Sacra.
The company cut staff twice before declaring closure. According to a Rec Room blog post, in March 2025, Fajt announced that it had reduced its workforce by 16%, saying it needed to cover its own costs without relying on additional investments.
Then, in August 2025, the company laid off half of its employees.
Following the August layoffs, Fajt released a very candid breakdown of the company’s finances.
Fajt said at the time that UGC revenue had grown 70% year-on-year, but economic conditions were not good. When players purchase UGC items, Rec Room only keeps about 30 cents on the dollar after paying platform fees and creator cuts, compared to 70 cents for items the company created itself, according to the post. He said the company had planned a runway for 2029.
Didn’t succeed.
What ends and when does it end?
Effective immediately, Rec Room will no longer allow new account creation, new friend additions, and new sign-ups for the Rec Room+ subscription service. After May 1st, players will no longer be able to purchase tokens. After May 18, creators will no longer be able to earn new tokens. According to the announcement, final creator payments will be processed on June 1.
Starting June 1, players will no longer be able to log in, the Rec.net website will be offline, and online services associated with Rec Room Studio will be discontinued. As a parting move, the company offered an 80% discount on its content and made various Rec Room+ subscription features free for all users.
Save your creations
Creators won’t be able to download a working copy of their rooms, but they can export room and invention data in a format that’s compatible with other tools like Unity, so they can potentially rebuild their work on other platforms, the company said. The export feature is only available through the Steam PC build and is in final internal testing at the time of announcement and is expected to be released in about a week.
Players can download their own photo and “final report card” avatar souvenirs.
wider pattern
Rec Room’s closure comes as Meta steps away from its virtual social platform. Starting June 15, Horizon Worlds will be completely inaccessible to users of Quest headsets, the ability to create or publish VR content will end, and only the mobile version of the app will be active. You can read more about this in our previous story here.
Rec Room was making progress in the creator economy even before it shut down. In September 2025, the company announced that creators earned more than $1 million in a single quarter for the first time. This is a milestone reached throughout 2021, when the program was first launched.
What do I get from all this? Producers must be wary of putting all their eggs in one basket, especially those with closed, proprietary ecosystems. There’s a reason we use the World Wide Web instead of America Online.
It would be nice to see an open alternative to the metaverse. Maybe a little better AI coding could upgrade OpenSim for a new era?