The metaverse isn’t as hot as it was just a few months ago. That’s bad news for Roblox (NYSE:RBLX). But that’s hardly all of the bad news for RBLX stock.
My assumption is that Roblox has entered a period during which it will face increased scrutiny. Investors will likely be interested in the narratives around its fundamental performance as well as its social impact in the coming weeks and months.
In particular, there is one recent headline surrounding the company which will all but ensure this scrutiny happens. It’s hard to predict how the masses will react to a story, but there are surely some real problems ahead for RBLX stock.
RBLX Stock and the Child Labor Issue
In January, an article from The Guardian amounted to a tell-all about the seedy underbelly of Roblox, particularly its culture surrounding kid creators. That article — titled “The trouble with Roblox, the video game empire built on child labour” — highlights the darker side of the game marketed to teach programming and 3D modeling to inexperienced users.
The first story in the article was about a girl who built her first game on Roblox at the age of 10. The girl — given the pseudonym Anna in the article — caught the attention of programmers with her work, who then made her an offer to join their fledgling team. They offered her 10% of the profits the game would earn for her contributions.
By 16, she was earning some $300,000 per year from the game. The funding for that game came from game makers who owned the account on which she worked. She hadn’t signed any formal contract, instead depending upon the account to distribute her 10% accordingly.
Then one day the game makers decided they were going to pay all of the independent contractor children on a fixed salary. Anna said that the change amounted to a 40% pay cut. Anna quit the day the change was announced. She also argues that she had no recourse in the matter and didn’t file a lawsuit because of the costs.
Other negative stories about Roblox include one detailing sexual harassment by a forum administrator toward an underaged girl. The alleged abuse went unaddressed by the company as reported in the article.
The stories continue, but the underlying theme here is adults manipulating children on the Roblox platform. No doubt, that’s not good for the company, its users or RBLX stock.
Not Many Make Money
But there’s more. It probably won’t surprise you that few Roblox creators manage to make a serious income. In fact, in 2021, only 1,000 games made more than $30,000 according to The Guardian.
That’s not inherently bad. But at the same time, Roblox has adopted the motto “Make Anything. Reach Millions. Earn Serious Cash.” Ultimately, RBLX stock investors should be aware that this is the kind of publicity that could harm Roblox as much as an earnings disappointment.
Still, many companies continue to look to see how their respective brands can use the Roblox platform to connect with younger demographics. The NFL is one of the latest examples.
Recently, the NFL announced that it has launched NFL Tycoon on the Roblox platform. In the game, players get to act as a team owner and build their franchise to then compete against others. It’s fair to say that the NFL is aiming to introduce its product to a younger demographic with this project.
What to Do with Roblox
Like I said before, it’s hard to predict how society will react to a given piece of news. Sometimes articles like the one from The Guardian about child labor and Roblox’s various issues take off. Other times, not much comes of them.
Still, it’s something for investors in RBLX stock to keep in mind. Especially when investing based on more than earnings.
On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.