Unity Software Inc (NYSE:U) is considering changes to its new install runtime policy after drawing the ire of video game developers last week.
The company, which makes the engine many video game developers use to create their games, posted an apology on X/Twitter saying it plans to announce changes to the policy in the next couple of days.
As it stands, the policy would charge developers $0.20 each time a game is installed, once it reaches a certain number of installs, starting in 2024. In response, developer teams such as Facepunch Studios said they won’t make games in Unity going forward, and Massive Monster even threatened to delete its Unity built game Cult of the Lamb on January 1.
We have heard you. We apologize for the confusion and angst the runtime fee policy we announced on Tuesday caused. We are listening, talking to our team members, community, customers, and partners, and will be making changes to the policy. We will share an update in a couple of…
— Unity (@unity) September 17, 2023
“We have heard you. We apologize for the confusion and angst the runtime fee policy we announced on Tuesday caused,” Unity wrote in a post. “We are listening, talking to our team members, community, customers, and partners, and will be making changes to the policy. We will share an update in a couple of days. Thank you for your honest and critical feedback.”
That doesn’t mean the fee is going away, according to analysts at Wedbush.
“We don’t expect Unity to eliminate the Runtime Fee completely, but instead expect it to decrease the charge per install at the high end (likely from $0.20 to something closer to $0.05), and we expect the company to increase the threshold for a fee to be triggered,” analysts wrote.
Unity is also expected to offer developers cheaper fees in exchange for purchasing its premium services.
“Independent developers are currently disproportionately affected by these changes with Unity Personal and Plus subscribers getting charged $0.20 per install after 200,000 installs. Unity Pro and Enterprise subscribers benefit from a tiered system with Runtime Fees reaching as low as $0.01 per install,” analysts wrote. “On top of that, install thresholds are considerably higher at 1 million installs.”
Shares of Unity are down more than 6% Monday and 12% since its announcement on September 12.
Impact on competitors
Meanwhile, shares of rival video game engine maker AppLovin are up over 4% Monday.
“AppLovin launched its AXON 2.0 machine learning engine in Q2, contributing to faster QoQ growth for AppLovin’s Software Platform business (at 14%) than was seen for Unity’s Grow Solutions (at 9%),” analysts noted.
“Q3:23 is the first full quarter of contribution from AXON 2.0, and we believe that its success may have factored into the timing of Unity’s announcement of the Runtime Fee, as well as the decision to tie in Runtime Fee credits with customer adoption of LevelPlay mediation (a direct competitor to AppLovin’s MAX mediation) and other services.”
On Friday, AppLovin CEO Adam Foroughi called on Unity to drop its proposed changes and lay out a more transparent pricing system. He even addressed Unity CEO John Riccitiello personally.
“John, There was a time when I would’ve texted you this, but the actions you’ve taken seem too targeted at us for me to do that, so I’m voicing them here,” Foroughi wrote. “Our jobs are to help this community expand while also running our businesses. The decision you made doesn’t help the community, and the backlash you’ve seen is reflective of that.”
“...Here’s my recommendation: retract these changes and shift to transparent price increases for seats for your Pro and Enterprise customers. Don’t make this about advertising. Don’t make this an attack on indies. Go back and rethink the choices you’ve made, revert your decision to a much more simple and sustainable price increase model, and communicate with your developers better.”
The post really stood out to analysts at Wedbush.
“The blog post was noteworthy in that investors rarely see a high-profile company and CEO directly calling out a competitor by name in a public forum,” the analysts said. “In addition, Mr. Foroughi’s language was foreboding, with the executive warning that Unity’s approach could eventually ‘tear our industry apart.’”
“We wonder to what extent Mr. Foroughi’s tone was impacted by Unity’s decision just over a year ago to reject AppLovin’s unsolicited proposal to combine. Regardless, the blog post was passionate, did portray AppLovin as the good guys in gaming ad tech, and it worked if it was only just a very minor part of Unity’s subsequent change-in-course.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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