Partnered Creator Exchange Rate Update
Starting January 1, 2024, the new exchange rate to cash out tokens is 250,000 tokens = $150. The matching bonus will also be going away and tokens earned before the new year will be exchanged at the old rate.
Rec Room hit a new all-time high for creator payouts in 2023, and with your help, we plan to set a new record in 2024.Since 2021, partnered creators have been able to exchange tokens they’ve earned in-game for real-world money at a rate of $100 for 250,000 tokens. To jumpstart the program, we launched the Early Creator incentive that matched that exchange rate up to $15,000. This program had an expiration date of December 31st, 2023, and starting in 2024, tokens exchanged will no longer have a matching bonus.Our creator community is bigger than ever, and we appreciate everyone who has contributed to the amazing growth we’ve seen. As we continue to scale our ecosystem, we want to make sure creators are fairly compensated.We weren’t happy with how earnings dropped off sharply for creators after their matching bonus cap was reached, so starting on January 1st, 2024, we are introducing a new standardized token exchange rate of $150 for 250,000 tokens.Tokens earned before January 1st, 2024 will continue to be exchanged at the rate of $100 for 250,000 tokens, so make sure to exchange any tokens you may be holding if you want to take advantage of the matching bonus!
We put a lot of thought and research into this new exchange rate with keeping in mind our commitment to investing in our creators. We wanted to ensure all creators have a fair and even exchange rate - that being said, we also want to be transparent about the costs to Rec Room when it comes to making decisions like this. Rec Room’s share gets invested into moderation, hosting costs, and other business costs - to break things down, we can start with how $1 is distributed in the creator ecosystem, as announced at RecCon.
So where does $1 spent on creators’ content go?
Is that what Rec Room wants it to be or is that what it actually is? Both. This is what we intend it to be, and that’s what the actual numbers look like for transactions on creator content between Jan 2023 to now. There’s some month-to-month variation, but that’s where the numbers average out. For every dollar of gross revenue spent on creator content, the creator made $0.40.
But I’m doing the math using $50 token packs. That doesn’t seem right. Are you sure it’s 40%? Not all tokens are created equal. A lot of the tokens that are in the ecosystem are not purchased with cash. They’re given away by Rec Room for completing various activities.Those tokens are not “backed by cash”, but when a creator receives them from selling their content, Rec Room still allows those “free tokens” to be exchanged for cash just like any other earned token.This has a very powerful effect on the “cash value” of tokens in the ecosystem. Doing the math on just the value of purchased token packs won’t paint the full picture.
But I don't get that many tokens for completing activities; how many “free tokens” could there be?Only a single-digit percentage of players spend money in Rec Room, but everyone can earn free tokens. Even a small amount of free tokens given out to millions of people accumulates to a lot of tokens.
What about the 30% marketplace fee? Is that factored into all these numbers?Yes, it is included in all these numbers. 70% of any tokens that are spent on creator content will still go to the creator.
Why is Rec Room paying platforms 30%?Almost all platforms charge a 30% fee on all transactions that occur in digital games. Rec Room pays a 30% fee for transactions that are made on platforms like the App Store, Play Store, Playstation, Xbox, etc.
What does Rec Room do with their 30%? Are you really profiting that much?We use that money to host and moderate your room and pay for servers. Currently, it costs us a lot more than the 30% we’re getting to do those things. At our current scale, we’d need about 71% of that $1 to cover our costs of hosting, moderating, and supplying servers for your room.
Does that 71% include the cost for employee salaries working on creator tools, RRO development, or hosting RROs?No, it doesn’t. That’s a separate cost that’s not included here. We’re only talking about the cost of hosting, serving, and moderating creator content.
Wait, so Rec Room is losing money on every transaction with creator content?Yes. We are not making money off creator content at our current scale.
That can’t be good. What’s the plan Rec Room?Some of these costs scale sub-linearly. As we grow, the cost to incrementally support one more room, user, and transaction goes down.Additionally, creator rooms are getting better by the day. As they get better, they engage more, they generate more revenue and ultimately lead to these economics looking better.We’ve done the math and see a path to growing our creator ecosystem so that everyone (including us) wins.
Why is the matching program ending?The matching program essentially paid out 53% for every $1 spent on creator content. We still paid the platform 30%, which left 17% for Rec Room. This is definitely not enough to cover our hosting costs, and no amount of scale would fix that.Still, this was a great way for us to reward early creators who took a chance on us. It wasn’t sustainable, which is why it’s always been planned to sunset at the end of 2023.
So why are you increasing the standardized rate by 50% in 2024?One thing we didn’t like about the old exchange rate was how sharply creator earnings fell off once the matching bonus no longer applied. Without the bonus, creators made about 27% of each $1 spent in their room. With 30% still going to the platform, that left us with 43%.This is not where we want the creator economy to go long-term, as it strays from the target 40% share of gross revenue made by creators. Even though this year we saw creators earning 40% in aggregate across the ecosystem, some were earning a higher percentage, and some were earning a lower percentage, depending on whether they still had the early matching bonus in effect.With the early matching program expiring, we wanted to raise the base rate by 50% to ensure creators were still getting that 40% cut in 2024.
What if I was holding my tokens to get a better exchange rate?Being able to exchange your previously earned tokens at a higher rate would be unfair to those who have already exchanged.Any tokens earned before December 31st, 2023, are exchanged at the old rate (plus the matching bonus if exchanged before the year ends). Starting January 1st, 2024, any tokens earned are exchanged at the new rate.I would really like more than 40%. Gimme more money.We want you to earn more money. That is our goal. It makes us happy to see creators getting nice big checks every month. We want to keep writing you big checks, and we want those checks to get bigger over time.There is no percentage we can choose that will 10x your earnings.There is a scale we can grow to where you’re earning 10x or even 100x.That’s what we’re focused on, and what we want your help with. The bigger the community, the bigger the financial reward for creators.