Revenue margin? What is that?
This is referring to adjusted EBITDA, which I assume will be a major disappointment for investors. Until last year, they were still reporting “non-GAAP income (loss)” and “non-GAAP operating margin”—these are also adjusted, but at least they are further down the income statement. If they are providing guidance for adjusted EBITDA, what are they trying to hide? Depreciation and amortization are naturally on the rise following the IronSource acquisition.
Good correction, I’ll edit – all sorts of things happen when scribbling long posts on a phone 
That is definitely a good point; it gives a strong impression that they are trying to sugarcoat things as much as possible.
Of course, this could partially be due to merging the practices of two different large outfits or something similar, but maybe they are trying to make the situation sound better than it really is, etc.
Unity is having a third round of layoffs – this time approximately 600 people will be let go (8% of the workforce). On one hand, it’s a pity, but it certainly improves the cost structure and hopefully also reduces stock dilution from options.
Additionally, in the longer term, the number of offices worldwide is planned to be reduced from around 60 to 30.
I tried to have a look on LinkedIn, but it was quite quiet, at least with a quick search – so one could imagine those laid off received decent packages or similar, which will of course appear as one-off costs. I need to keep an eye on this and look more closely at which departments people might be leaving from, as that can also reveal something about the performance of different operations, etc.
In the long run, this is likely a good thing; as I understand it, Unity’s organization has bloated quite a bit in recent years, and as the number of offices suggests, there are certainly redundancies.
Unity has made the headlines: Unity is Canceling the Runtime Fee. In the future, basic tier subscribers will have to pay Unity $0.20 per installed game, if the game’s revenue has been over $200,000 for the last year and the game has been installed more than 200,000 times during its lifetime.
In practice, the change could hit popular indie games that have become “out of nowhere” hits (e.g., Among Us) hard. However, fees would not be charged retroactively.
https://kotaku.com/unity-engine-subscription-cost-unreal-godot-indie-dev-1850831032
This is likely a classic move: ask for way too much at first. Then, once the shitstorm hits, walk back the demands slightly and make the public happy in the process.
https://www.axios.com/2023/09/13/unity-runtime-fee-policy-marc-whitten
This was indeed such a massive shot in the foot that it’s clear they’ll have to backtrack somehow.
“Features” of the billing model:
If this is based on Unity’s analytics, the next “meta” will likely be that game developers start arranging blocks in offline games so that analytics no longer work if it saves money.
Amateurish mess from Unity. EA’s old boss is showing his “skills” in his new job. As is, this idea shouldn’t have made it past internal chatter…
This attempt to improve the company’s revenue side and thus bring value to shareholders is going well, based on just one day
Wait, no…
Additionally, it was revealed today how that billing model will track installs without GDPR concerns or complex systems to fingerprint machines and thus identify what is a unique install and what is a re-install
It won’t! Unity guesses. For real. They have their own home-brewed Absolutely Reliable model, based on which they can estimate the number of installs for every product using the Unity runtime.
And they imagine they can charge developers per-install based on estimated billing that cannot be truly audited in any way. You can complain if you disagree with the install numbers, but Unity reserves the right to decide what the reality is. After that, complaints apparently have to be settled in court.
How on earth do they imagine this will fly with any customer? How would it sound, for example, in an Activision Blizzard boardroom when the situation is explained to management? “Yeah, we have Hearthstone and Arclight Rumble here using Unity. Starting Jan 1, 2024, we have to start paying Unity an extra fee per install. Unity tells us how many installs they estimate occurred and sends an invoice. We have no way of knowing in advance how much the bill will be, and it’s not tied in any way to how the games generate money or what our own data says about install counts. Isn’t it a great deal? Oh, and our finance department is thrilled about the extra challenge this brings when drafting next year’s budget.”
This also looks like a very nice signal: Management has definitely known about the plans, and then conveniently, a few days before, the CEO cashes out a bit of “bathroom renovation money,” and a couple of weeks earlier, the President of the shop takes out a slightly larger renovation fund…
I’ve been bearish on Unity for years because they didn’t have any scalable component (except Unity Ads) in their possession. Now they do.
The problem here, in my opinion, is the implementation, which is poor, but above all, the level of monetization. Why anger all old and new customers if the benefit is negligible?
A hit game with 100 million installs generates about 1 million in billing. Per install, it scales quickly to one cent per download.
As a comparison, Unreal Engine takes 5% of everything. For example, Genshin Impact generated 1,560 million dollars last year, and if it were an Unreal Engine game, Epic would have earned about 78 million from it. The game had about 50-60 million downloads last year, so Unity would have earned just over half a million from the game with this hated model.
Exactly. It’s not really about the size of the bill, especially for large AAA players, but rather that the billing model is on a “trust me bro” level. Furthermore, the model strongly discriminates against certain types of games (essentially indie freemium products operating on very thin per-user margins, mainly on mobile) — if a game generates an average of 40–50 cents per user over its lifetime and Unity wants 20 cents per installation, your business model just blew up.
Genshin Impact, on the other hand, is an example of the other extreme — it prints money because whales pour ridiculous amounts into microtransactions. Unity gets nothing from these under a per-install model.
There are many games and business models, and situations vary. Unity’s new model effectively means that if you ever intend to make any money with a game, you have to buy the paid Unity Pro version with annual per-seat costs. This means all the goodwill you’ve built up with amateur indies just went down the toilet. Otherwise, your company could go bankrupt simply because Unity says, “trust me bro, there have been a lot of installs, send us a check.”
It’s a poorly designed model that was introduced in a way that is incredibly amateurish. Compared to this, UE’s “if you make over a million, then 5% of revenue to us, thanks” is clear, simple, and a “if you succeed, we succeed” arrangement. And UE is completely free, with no annual costs for pro/enterprise levels like Unity has.
Especially since UE5 makes significantly more money for Epic than Unity’s complex and unequal model. Why cause a shitstorm if you aren’t even raking in the gold with it.
Well that aged very well… 
SAN FRANCISCO–(BUSINESS WIRE)–Unity (NYSE: U) (the “Company”), the world’s leading platform for creating and growing real-time 3D (RT3D) content, today announced that John Riccitiello will retire as President, Chief Executive Officer, Chairman and a member of the Company’s Board of Directors, effective immediately
That’s what happens when half of the company’s market value vanishes while simultaneously alienating a massive number of “small customers” who run straight into the arms of competitors… I wonder if the major shareholders dropped a hint that they’ve seen enough of these leadership skills and it’s time to retire.
A good thing for Unity; I could imagine we’ll see some sort of bounce in the company’s stock price tomorrow.
“Timber…”
Q4 results:
The market doesn’t like it
Presumably for these reasons:
I.e., this growth company will not be a growth company this year.
Comments on the pricing (runtime fee) that sparked discussion in the fall:
Unity 6 is coming in the summer, where this runtime fee is in use. The runtime fee revenue brought by Unity 6 thus apparently explains the company’s view that revenue will grow more rapidly in the second half of the year.
Unity has now announced, almost exactly a year after the runtime fee was first introduced, that it is being canceled entirely. Pricing will return to the old model, but with increased prices for Pro and Enterprise customers.
https://unity.com/blog/unity-is-canceling-the-_campaign=RTF
Unity has been cleaning up Riccitiello’s mess for nearly a year now (layoffs, shutdowns of previous acquisitions, and now the runtime fee), and there is still work to do, at least in restoring their reputation and likely also in internal efficiency.
stock price performance has been quite terrible over the last few years; let’s see if the direction turns more permanently now.
Edit: At least momentarily, it seems to please the market as well.
Comments from an ex-Unity employee now working at Andreessen Horowitz that, at least to my ears, ring very true.
In Unity’s transformation, the role of artificial intelligence in game development and the expansion of the creative segment is particularly emphasized.
CEO Matt Bromberg has emphasized bringing AI more strongly into the company’s operations. AI strengthens the company’s core products and also positively impacts the advertising ecosystem. Artificial intelligence supports both innovation and Unity’s growth strategy.
Below is a link, which is in a tweet. 
https://venturebeat.com/games/unity-ceo-matthew-bromberg-is-a-gaming-and-ai-optimist-the-deanbeat/
https://x.com/JKeynesIonQ/status/1890866786045686225
