> crunched the numbers and decided it's time to milk this one dry.
More realistically, they crunched the numbers and saw that they aren’t making enough money to keep the company going forever. It’s not a secret, because it’s a public company: They need to make more money to survive.
More monetization was inevitable. I know it’s unpopular public opinion, but Unity as it is today cannot exist forever on the monetization model they had in the past. The numbers didn’t add up. They had to change something.
They tried to take sustainable B2B middleware business and make new Google out of it. And they keep failing, but still paying exorbitant amounts to their execs.
According to their SEC fillings their staff almost tripled in just 4 years
> Dec 31, 2022 7,703
> Dec 31, 2021 5,245
> Dec 31, 2020 4,001
> Dec 31, 2019 2,715
Development of game engine is costly and take a lot of resources, but they already had a successful product back in 2019 and long before that. With all that hiring quality of their software was more or less constant (and not too high as always) which means all recent growth was not in their core business.
It's relevant to also add that the entirety of Epic Games is less than 4,000 people worldwide. That's not only for a vastly more advanced game engine, but also for numerous projects like Fortnite, a game store, just absurd amounts of educational material being published, and so on.
I don't really get why companies keep hiring themselves to death. It clearly does not translate to meaningful productivity gains, yet sends their labor and related costs skyrocketing. It's so alien to me from the outside.
In almost every large company the incentive structure is such that hiring is a "win" for everyone involved. It's a win for the HR team doing the hiring, often they have quotas. It's a win for the manager getting more headcount under their umbrella, adds perceived value and status which leads to promotions. It's a win all the way up the ladder, because it adds perceived growth (remember how many VCs used to tell startups to hire and spend fast?).
The decision maker at the top is usually too disconnected from the rank and file to see the bloat. And the ones that aren't tend to be ruthless about headcount.
That’s not at all now this works. It’s a convenient myth for senior executives to absolve themselves of their own failure to build incentives and sustainable culture.
Managers don’t get headcount without allocation. It needs to be budgeted and approved.
This is what happens when you are publicly traded. You become a slave of 3rd party Wall St analyst revenue expectations. Only a few CEOs like Jobs can effectively deal with that. Having a CEO like Riccetiello exacerbates the problem.
Most of their losses was in the last 1.5 years. They actually could have been profitable. They are not sustainable because of mismanagement and massively failed bets. “We got greedy but don’t worry, you’ll pay for it” doesn’t have the best ring to it.
I don't think that people realistically oppose monetization going up. The main complaint is adding retroactively a new form of monetization with a unverifiable metric that is not bound to revenue.
Sure people wouldn't have been happy with higher fees, but current clusterfuck is an order of magnitude worse.
That would have been a good thing, to not see "free" services, due to anti-competitive reasons.
Companies subsidize "free" by redirecting money from successful areas to fund new or unsuccessful areas. And in this case of "free" (advert, data collections) games, is basically a anticompetitive dumping ground and is a common trend with monopolists.
> The numbers didn’t add up. They had to change something.
This seems likely, but from what I've been hearing from game devs, the issue isn't the increased fees so much as the fact that they retroactively changed licensing. That they did this (again, after promising not to the last time) indicates that regardless of what the fees actually are, you'd be a fool to enter into a business relationship with them.
The lesson to be learned here is to never trust a "promise". Enter contracts that one party can't change on a whim. If a product you're using to run a business can pull the rug out like this, maybe move your business to one that can't.
Unity did have such a clause in their contract until 2019 when they removed it in a click through contract on an update.
So the moral here is "don't patch your software without having a lawyer diff the TOS?" I don't think that's the world we want to live in. I don't think that leaves consuming proprietary software as a feasible option in today's fast moving security landacape. It's fair to call out bad actors who muddy the water to make the world that way.
Sure, but thinking just because it's a publicly traded company "anything goes" is equally deeply misguided. Whoever owns your company or organization, we should always respect and try to do the best for our customers and everyone involved -- we don't get to destroy things in the name of profit.
This behavior is not only destructive of their legacy, the promises they kept, but of course of their own reputation as a game company... I don't see any independent developer choosing Unity from now on (without a radical change for the company) in their right minds.
I'm pretty sure this wasn't the only solution to the situation. If they're going to ruin the company anyway... might as well make it open source. Start charging a large amount for a license. Cut the company size (maybe competition for other open source software is too great, and they couldn't survive at that size!). We have the choice to do the right thing, although many times that isn't the easy thing to do.
This goes even to society at large. No social or economic system can exist without ethics -- to believe so is delusional. Not communism, capitalism, social democracy, or something else(and I think we need some other ideas in the mix... but that's another story!) can function well when individuals don't have a good grasp of ethics. Governments are made of people making decisions, and companies likewise. No matter how much structure you impose on top, if people don't generally cooperate, a good outcome is impossible (garbage in, garbage out). So, like a friend says, "Be excellent to each other, or else..." :)
All that said... Free Software is just a great idea. Why would you not use an engine open to collaboration, an engine that's a public resource, an engine that could never truly pull the rug on you? An engine that can be forked, go in different directions, copied, redistributed.
And we need to support free software too. If you use it, please donate :)
Unity (ticker symbol “U”) has a price to earnings multiple of negative —11.74 and a (quarterly) earnings per share of -$0.51 which was a decline of -26% year over year. That’s pretty much unacceptable for a company that’s as mature as Unity. Most companies are either growth or value stocks and Unity is neither.
Unity’s value was previously in the hype and now is possibly in the voting rights by shareholders. With enough voting rights, I bet you could vote for a 0% commission for your video game company and offer to vote out the CEO/COO/ECT or anyone overpaid if they don’t concede to your demands.
They are making a billion dollars loss a year. So with no vc cash available they need to get profitable if they want to survive. You can argue this is wrong way to go about it but they do need to get profitable.
They miscalculated, which is a risk with investments. Miscalculated badly and executed worse. They bet on ads and ads is not the growth market it used to be. They bought IronSource and their main competitor, AppLovin is kicking their ass.
The neglected the core product and have the gall to justify their retroactive change of terms (after sneakingly deleting assurances to the contrary from the TOS and deleting the github repro that tracked transparency after their last PR disaster) with rising costs of maintaining the runtime that’s been falling into disrepair.
Investments carry risk. Investors may dream that it’s ok to get made whole by the game industry they tried to take over using VC money to build a dominating position and then changing terms and extracting rent but this is such an open and shut case of corporate mismanagement, deceit and hubris, no point in even trying to justify that.
If they want to survive, they fire the CEO, claw back bonuses and shares from executives and shrink the company to a size that’s warranted.
Unity can die in a fire, anyone with a choice will know better than to get into a relationship with them now. There’s enough landlords in the industry already with platforms, there’s no room for another extracting value of the hard work of creatives.
Accepting their terms requires broad changes to the industry business models - back to old EAs dream of charging by the download. And it requires open eyes walking into a relationship with a company that every time their CEO makes a shitty gamble will extract the losses from developers.
They bought IronSource because the VC funds that owned IronSource offered a billion investment, they were still bleeding money before the acquisition.
And before the acquisition, AppLovin even offered to buy Unity for $17 bil. I'm skeptical it wouldn't have turned into a shitfest in that direction either given that they would have either focused on mobile exclusively or worked to turn normal PC gaming into adware.
Even now, Unity's quarterly statements are wtf, wth are they spending $500 million a year on "sales and marketing" for.
Valve maintains one of the biggest platforms, and their own game engine. Valve also developed CSGO, TF2, and Dota, all popular online games that need constant maintenance (and even big content updates sometimes). Valve also invested in VR and sells hardware.
Unity are currently asking for 4% of revenue over $1M for developing the engine and toolchain that game developers will use all day every day. Valve skim 30% of the retail price of the game for the priveledge of hosting a game on their storefront. This is why Valve makes money.
Valve delivers massive value equivalent to entire departments in a publisher through their steamworks system.
Distribution, Analytics, Multiplayer, Anticheat, Publishing Services, Anti Piracy, Storefront, Sales, Mods, Custom Content Integrations, Localisation, and most importantly discovery (things you pay for dearly outside on mobile).
They never had need to convince developers that the fee is worth it and they never had to retroactively change terms of service. They have continually invested into the system and built the trust.
Most of all, Valve chose the long term sustainable business model when everyone else in the industry tried to extract per download charges from gamers. So gamers chose the company that sold them their game collection, just in the cloud instead of nickel and diming.
And developers chose valve because they were infinitely more trustworthy and offered better tools than any of the legacy publishers. They never increased the fees because they made bad bets either (and they had a few like VR)
Yes there’s a case to be made that the 30% should be reduced now, but realistically few could compare Valve to Unity when it comes to execution and long term value balancing for developers and gamers.
I just find it really strange to think of Valve's 30% cut to be value, when its main advantage is being an oligopoly, but Unity's 4% cut to be rent-seeking, when it's the foundation and toolset for the software being made.
But I can't help but feel you're willing to twist the facts to defend Unity. I'll list some facts for the readers:
1. The 4% cut is a rumor at this point. It's not confirmed.
2. Unity didn't just announce a 4% cut at the first place. They announced a fee per install. It's an unprecedented business model. No other semi-popular game engine does that, ever.
I think the best argument you could make to say steam is a monopoly is to say that their plan is roughly:
1. Make a platform gamers love to use so much that they will still use it even if other stores are literally giving the games away for free
2. Build a brand that your target audience recognizes worldwide and trusts with their entire game collection.
3. "Exploit" the fact that your audience loves your product and brand so fanatically that you can charge the same amount on an open platform (PC/windows/linux) that other app stores need walled gardens (apple/android - literal lockin and literal near-monopolies/duopoly) to be able to charge.
I really struggle to find a way to frame Valve as the bad guy here. It's PC. There's literally nothing stopping you from just installing as many app stores / launcher platforms as you want. And it's not all-or-nothing - people DO use multiple launchers/stores. What gamer doesn't begrudgingly have Origin and at least one of EGS or the Blizzard/battlenet launcher installed alongside steam? And yet people still use steam, and spend the most money there by far.
Yes, tool makers just can't take the same margin as publishers/platforms do. It's nothing new. Microsoft Words can't take 80% (like a traditional publisher) of your book's retail price, nor even 30% (like Amazon).
I'm not "defending" Valve (actually I find it's very worrisome that they're a game developer and a platform at the same time.) I'm pointing out the fact in no way Unity can sustain 6x of employees than Valve.
I'm betting that Unity's customers, which includes a horde of mobile app developers, are a bit more demanding to have (and keep) than the few - if any? - outside Valve who license Source 2.
It would be great if you could be Valve. Everyone wants to be Valve. But you are not Valve. Especially not if you're publicly traded or a private equity rollup - things Valve has stubbornly resisted becoming.
Massive over hiring and random acquisitions are there main reasons why are they here. If they hadn't increased their headcount by 5k and continued focusing on their core products the company would already be profitable (even if revenue would be lower).
At this point it's too late to significantly cut costs, so yeah seems like they pushed themselves into a corner.
The sad part is that it was already perfectly obvious where were they heading after they IPO'ed.
Seems like they’re trying to fund their unprofitable acquisitions by harming their profitable core. They could have spent that money making unity better/more stable. I hope they make it out of this. The unity editor is pretty great.
It's not at all obvious to me investors who bought their stock after they IPO wanted any of this.
The board and upper management together with their VC backers (they also gave Unity a significant loan to fund the IronSource acquisition which will be exchanged to stock in a few years) seem to be the main driving force behind this.
The only way most public shareholders can express their approval is by buying or selling stock and looking at the share price over the last 1.5 years they don't seem to approve that much.
Well because profitability was just a few years away according to their prospectus.
Which to be fair wasn't that inaccurate. Had they stopped expanding like crazy for a year or so the company would've been profitable (with minimal damage to their core product, if not the other way around).
They can only get anything from it if the stock price goes up though. So far this isn't helping. Also it won't be several quarters until the additional revenue kicks in, by the time they might already be losing significant numbers of customers which the market won't like even if the financial start looking a bit better.
Unity is publicly traded: https://finance.yahoo.com/quote/U
Can’t blame private equity for this one.
> crunched the numbers and decided it's time to milk this one dry.
More realistically, they crunched the numbers and saw that they aren’t making enough money to keep the company going forever. It’s not a secret, because it’s a public company: They need to make more money to survive.
More monetization was inevitable. I know it’s unpopular public opinion, but Unity as it is today cannot exist forever on the monetization model they had in the past. The numbers didn’t add up. They had to change something.