The Future of Rec Room: A Positive Update?

Everybody, it’s UnderMyCap and welcome back to another video. Today, I have an update regarding Rec Room. If you didn’t see my last video, where I was a little upset about the layoffs, you can check that out in the description below. I just wanted to share a brief update on Rec Room’s finances. They’re releasing this information to give hope to everyone who loves using the platform. This provides insight into how their revenue is growing and offers some transparency about why this growth isn’t necessarily translating into overall business success. They start by explaining that this week has been very difficult due to layoffs—50% of the company is a significant cut. I can understand why that’s challenging for them, and it creates some uncertainty among the community of Rec Room players. I want to address some questions I’ve been seeing coming up, so it’s good to see them providing transparency on certain issues. First, they clarify whether the company is out of money. The answer is no. Their cash reserves, or balance sheet, are pretty strong, but they’re spending too much. That’s why they had to lay off staff. Their spending got out of sync with their revenue and growth, which is a common issue when a company has too many employees. Minimizing resources allows them to better manage revenue and allocate funds more effectively. In their initial press release, they mentioned a big vision for Rec Room—moving from “everyone can create” to “only our top creators can create.” I’m not entirely happy with this change, but that’s a discussion for another time. They’ve shrunk their team to help improve the game overall and make the platform run smoother for everyone. Next, they address whether they have enough runway to continue operating. They say they have several years of runway, roughly until 2029, based on their current budget and layoffs. Without further improvements, they believe they can last until then. However, keeping more staff would likely extend that timeline significantly. Regarding debt, they state, “No, we don’t have any debt.” However, I suspect there may be some investments that are not classified as debt but still require repayment. If they still owe money to investors, that could be a financial burden they haven’t fully disclosed. It’s possible those investments have been paid back; I’m not certain. They also mention that UGC (User-Generated Content) revenue was the biggest ever in July, which is exciting. Yet, this raises the question: why are they laying off staff if July was their best month? The answer is that about 30% of every transaction goes to platform fees, which include third-party costs. Additionally, they pay creators through tokens, with roughly 30 cents of every dollar earned going back to creators, which is considerable. This means they are not making much profit because most of the revenue is shared with content creators and platform fees. They emphasize that they value creators being able to get paid for their work, which I think is very positive. When it comes to their decision to do layoffs, they explain that it’s a matter of making the platform sustainable. Waiting to cut staff could have resulted in even more revenue loss. They chose to proceed quickly, which I understand. They also mention that they provided severance packages and healthcare extensions for all laid-off employees to ensure they are taken care of while transitioning to new jobs, which I really appreciate. In summary, they state that their earnings from credits are growing, and although they still have work to do, they have time to improve. They repeatedly mention that everyone is constantly learning, and this attitude is a good sign. I value their increased transparency, as it shows they want to be more open with their community. However, I do have some questions I hope they will address. Firstly, in their initial statement, they said they want to focus on their top creators, not everyone can create. I’d like to know how this will impact community events, classes, and overall access. Will these still be available to all users, or will they only cater to the top 1% of creators? Secondly, will all users have equal opportunity to access the creative tools, or will only top creators have access? I’m particularly concerned about the principle that “everyone can create” and how that aligns with their recent statements about focusing on top creators. If you have any other questions you’d like to ask Rec Room, please leave them in the comments below. If staff members or anyone from the team watches this video, I hope they check the comments and perhaps release a new statement addressing these questions. Thank you so much for watching. I hope you all have a great day. Remember to stay awesome and stay creative. See you!