Rooster Teeth Shutting Down

Devastating news for fans of pioneering online studio Rooster Teeth, and for its many employees and contractors in Austin and beyond: the creative force behind Red vs. Blue, RWBY, gen:LOCK and more is closing.

The company is part of Warner Bros. Discovery, which has become notorious within the entertainment industry for cost cutting and layoffs. Staff were informed of the decision this morning at an all-hands meeting. The Roost podcast network, home to shows including F**k Face, Tales From the Stinky Dragon, and the original RT Podcast, will continue operations. On the streaming side, the studio will wrap up with the final season of the show that started it all, Red vs. Blue.

Discussions are also ongoing to find homes for the company's biggest shows and their archives.

Rooster Teeth general manager Jordan Levin said that the decision had been made "really recently." However, he added, "It would be misleading to say it hasn't been an option." However, due to the rapidly shifting media landscape, "we could not find a sustainable path forward."

Levin said he had already broken the news to the founders, and they did not seem shocked. "They all thought it would never last a year, never mind 21 years."

Rooster Teeth was founded in 2003 by Burnie Burns, Matt Hullum, Geoff Ramsey, Jason Saldaña, Gus Sorola, and Joel Heyman, and became an overnight success due to Red vs. Blue, its action-comedy machinima series using footage from the game Halo to create the animation. Originally run out of Burns' apartment in Buda, it expanded rapidly, building on the support of a devoted and large fanbase. The company moved into games, podcasts, films, live events like its annual RTX convention, and most especially its animation division, and the runaway success of the anime-inspired RWBY.

On the business side, Rooster Teeth pioneered so much of what is now commonplace in online content creation. Early on, it streamed its shows for free and then made money off DVD sales of shows, then switched to a subscriber model, and then a hybrid subscriber/ad-supported model. Creators, talents, and behind-the-scenes staff were often actives participants in its online community. The company set an Indiegogo fundraising record for its 2016 sci fi comedy, Lazer Team, helping further legitimize the idea of crowdfunding as a viable alternative funding mechanism for movies. Moreover, gaming-based shows like Let's Play and Achievement Hunter were ahead of the curve on livestreaming games, presaging the success of platforms like Twitch in the same way that Rooster Teeth beat YouTube to market for streaming video.

Yet the writing has arguably been on the wall. Fans of RWBY had become increasingly nervous and vocal that the show had not been picked up for season 10, and last December the company announced it was canceling its annual RTX convention due to financial considerations. Levin said, "We've tried to be as honest and direct as possible. The industry that we're in is very dependent on patronage and direct consumer spending, and advertising."

In fact, Rooster Teeth's finances have been an issue since before he joined the company in 2019. Like many tech firms, Rooster Teeth was built on a growth model. Levin explained, "On and on through all the different iterations of ownership ... the company was always requiring investment." The big bet was that the original patronage base of roughly 40,000 "sponsors" at the time of the original acquisition by Otter Media in 2018 could be expanded and stabilized. However, Levin said, "It would have required millions upon millions upon millions of people." Moreover, advertising was not going to close the gap, with ad revenues across the board dropping, and the technical complexities of scaling individualized advertising.

However, Levin was quick to point out that this was not a Rooster Teeth issue, but one affecting the entire online entertainment industry. "You're seeing the space respond to these changes," he said. "It's the reason we're in the news today, and the reason all these other companies are going through shutdowns and closures."

The last few years have seen cost cutting efforts. When Rooster Teeth first merged with Full Screen in 2014, it had around 75 employees. Soon after Otter bought them in 2018, that number rose to around 400. However, between attrition and the closure of the gaming division, as well as a move back to using contractors for individual projects, that number has dropped to around 150 full-time employees, and around two dozen contractors.

There are major practicalities still to be considered, such as terminating a long-term lease at Austin Studios and moving out two decades' worth of props and wardrobe (Levin noted that this hopefully will not impact Austin Film Society, which runs Austin Studios, too much). Those plans also includes finding a potential buyer for the Roost, and it's not impossible that shows like RWBY could find a life elsewhere. "We continue to hope there will be light for some of these properties and what these creators want to do."

As the company winds down, Levin said, "We want to celebrate how Rooster Teeth changed the internet, changed social media ... so much of it was invented in Austin, started in Buda."