Rec Room Reduces Workforce by 16% in Response to ‘Dramatically Changed’ Market Conditions

Around 16% of the team at Rec Room is being let go, as the company charts a path toward greater self-sufficiency. Since its debut in 2016, Rec Room has become a popular social hub, accessible on most VR headsets and standard screens alike. In an open letter to the company, CEO Nick Fajt recently disclosed the details of this reduction in a blog post. According to Fajt, reducing the team size by 16% was not a reflection of the employees’ performance, but a necessary move “for the long-term success of Rec Room.”

Explaining the reasoning behind this decision, Fajt highlighted how the gaming market has “changed dramatically” since the early 2020s. A slower pace in market growth, the increase in interest rates, and “a more challenging fundraising environment” were mentioned as factors intensifying financial strains. He underscored the urgency for Rec Room to pivot towards being self-reliant.

For the employees impacted by these layoffs, the company is offering a package that includes three months of paid severance and six months of healthcare coverage. Moreover, they will receive help in finding new employment opportunities, with personalized support like one-on-one resume writing assistance and career coaching.

In describing the layoffs as a “last resort,” Fajt shared how the team had already undertaken preventive steps, such as cutting down on third-party expenses and infrastructure costs, in addition to re-training team members for new roles. Although Rec Room’s recent port to Nintendo Switch and a crossover with Destiny 2 were mentioned as positive financial steps, these alone weren’t enough to resolve the financial challenges.

Looking ahead, the blog outlines several strategic changes at Rec Room. The studio plans to adopt a less hierarchical structure by having fewer managers, which should lead to quicker decision-making. Teams will be smaller, more adaptable, and empowered to act independently, underscoring the need for increased efficiency.

Regarding the platform itself, Rec Room is set to “dramatically expand who can create” within its ecosystem through two significant yet unspecified updates. The introduction of Rooms 2.0 is touted as “the largest bet we’ve made as a company,” which will enable more substantial and intricate room designs. Lastly, Fajt mentioned plans to “add more value” to the Rec Room Plus subscription, though specifics on what that entails are still under wraps.