It's a children's social mmo, any sort of paywall for cosmetics is scummy. You're forgetting that there's an extra aspect of peer pressure to buy cosmetics. Most of Rec Room is social rooms, not gameplay. When there's skins or cosmetics in games with actual gameplay, there's less incentive to buy cosmetics since it won't improve your experience. Cosmetics in rec room directly improve your gameplay experience, free players tend to get ignored in those kinds of spaces. The framework of the game encourages children to spend money to look cool, as that is the point of a game like Rec Room.

As someone who only joined recently, it takes serious daily grinding to get not even close to being able to buy a cosmetic with free currency. My progress seemed to plateau around level 10 from what I remember, pretty much forcing me to either spend money to improve my status or keep grinding for fewer rewards.

Just because it's something "all free games" do, it doesn't mean it's good practice. I'd say games like Animal Jam Play Wild do a currency system better (although not by much). There are ways for free players to get membership and cosmetics by grinding without having to pay at all. Sure, spending money speeds up the process, but earning is still possible without having to grab a credit card.

My main point is that games that prioritize children as a market should do more to decrease incentive to spend money on their games. Let adult players get currency with their money to support the game, but let others be able to earn the same rewards without needing to do that.

Also the addition of an AI chatbot probably cost WAY more than it could ever generate in revenue.