John Riccitiello, the CEO of Unity Technologies, recently found himself in the midst of a maelstrom of outrage that sent shockwaves through the video game development community. Unity, a cornerstone for over two million game developers, has long provided professional software tools under a fixed annual licensing fee. However, Mr. Riccitiello’s proposal to switch to a pay-per-install model triggered a crisis that Unity is now striving to resolve.
Friend to Foe
For years, Unity’s software engine had been a trusted ally for developers worldwide, enabling them to create immersive gaming experiences. The sudden pricing shift, though, ignited a firestorm. Game developers feared that the new model would spell doom for their businesses if their games achieved widespread popularity, leading to threats of class-action lawsuits and even security concerns at Unity’s headquarters.
The backlash from developers was fierce, with many feeling betrayed after dedicating years to mastering Unity’s proprietary programming language, C#. Critics argued that Unity was exploiting its dominant position, engaging in digital rent-seeking behavior. Unity’s dilemma is a cautionary tale for businesses attempting to balance community satisfaction with revenue growth. Trip Hawkins, founder of Electronic Arts, likened Unity’s move to charging a carpenter for every nail pounded into a wall after selling them the necessary tools, highlighting the moral dilemma at play.
In an effort to mitigate the crisis, Unity made concessions. They increased the revenue threshold for pay-per-install charges and allowed developers to choose between the new fee structure or a percentage of their monthly revenue, opting for the lower of the two. Nevertheless, Unity is determined to implement the revised fee model. In an interview with The New York Times, John Riccitiello expressed his humility in the face of the uproar and emphasized Unity’s vital role in the developer community.
Unity’s software engine is one of a few dominant development toolsets in the gaming industry, providing developers with the means to create complex 3-D games and immersive environments. While most engines charged a fixed annual fee, Unity’s new approach disrupted this predictability. Developers felt penalized for their games’ success, leading to concerns that Unity could significantly increase its share of their revenues.
Unity’s origins in a Copenhagen forum dedicated to coding underscored its mission to democratize game development tools. Its inclusive community and accessible resources attracted developers from all backgrounds. John Riccitiello joined Unity in 2014, bringing a reputation for monetizing games effectively. Under his leadership, Unity went public in 2020, though its share price subsequently fluctuated. Despite generating $533 million in revenue, the company reported a net loss of $193 million and initiated layoffs in May.
While Unity has a thriving advertising business, generating two-thirds of its revenue, it faces challenges due to restrictions on data collection imposed by Apple’s mobile software. Mr. Riccitiello asserted that the pricing changes were unrelated to the ad business’s difficulties and were designed to ensure a fair exchange of value with customers.
However, the pricing change caused internal dissent, with some employees departing in protest. Unity has acknowledged the need for better communication and has issued apologies, but it has not reversed the pricing shift. The long-term impact on Unity remains uncertain. Developers like Tomas Sala, creator of The Falconeer, still rely on Unity but welcome concessions made in response to the outcry. Switching to another engine could entail months or even years of learning, creating an operational risk for many.