Thread by @tkexpress11

I worked on an early, very different iteration of the @unity pricing changes ~1 yr ago

My thoughts:
1. Unity strategically had no choice but to make changes
2. Devs are upset, but it isn't quite as bad as it seems
3. Unity's comms & implementation wasn't great

More below 👇

If you missed it, Unity announced a massive change to its business model/customer pricing where in addition to the SaaS-based seat licensing they will also start charging a "Runtime Fee" based on per game install

Unity's dilemma:

It's extremely expensive to build/support an engine used by millions of devs, across 25+ platforms (+ multiple device generations), producing 100K+ games/yr across various art/render styles

Unity has a small army of 3K+ engineers working on it

~80% (est.) of Unity users don't pay anything for the service. Unity's ads business (highly profitable) funds the engine business

The engine business is not profitable standalone

It's not sustainable

The strategic question for Unity was always: assuming the low cost of the engine, what other developer services can we provide to developers to increase average revenue per user (ARPU)?

The runtime fee was a shock to me: only a year ago this option was completely off the table

So what changed for Unity and why now?

1. The macro enviornment has resulted in hiring freezes. For a seats license model like Unity's, this means poor revenue growth

2. GenAI will result in smaller teams building AAA quality games. Smaller/efficient teams = great for studios' profits but bad for Unity's seats model

3. Apple privacy changes (ATT/IDFA) pushed game monetization towards IAP and away from in-game ads. Hurts Unity's ads business

4. Dev adoption of Unity cloud services like Unity Gaming Services, DevOps, etc likely hasn't been strong enough to make the engine biz profitable

Thoughts on pricing changes:

Objectively, its not crazy to think that a game dev making a living building games on an engine should have to pay some amount of $$ for the service

Other platforms charge significantly more for arguably less value:

Apple/Google/Steam = 30%

UGC platforms = ~30% (sure, Apples to Oranges)

Even mobile attribution platforms (e.g. AppsFlyer, Adjust) demand more than engines, charging today on a "Per Install"/Conversion basis

Of course, Epic/Unreal already charges a "Runtime License" in the form of a revenue royalty (5%)

Therefore, it's hard to argue it's unreasonable for Unity to transition its biz model in that direction

Especially considering the structural problems with its seats model today

Unity's execution and poor communications made this situation worse for developers than it had to be

There was never going to be a situation where Unity devs were HAPPY to pay more

But devs need to be able to understand the changes and plan for them

If you look a bit closer, a "Per Install" license is actually more developer friendly than a "Royalty" model

Below I show that across a number of game biz models, categories and lifecycles, "Per Install" pricing at Unity's terms generally equates to <1% of revenue

The problem with the "Per Install" model is it's complicated and can introduce some downside risk

Where it breaks down are games with high #s of downloads but low ARPU:
A) Hypercasual games (i.e. Bridge Race)
B) Viral hits (i.e Among Us)

Scaled hypercasual games will be spending UA via UnityAds/LevelPlay and therefore the Runtime Fee likely doesn't apply (or is GREATLY negotiated down)

Among Us is really an edge case (once in a decade type viral hit!) and undoubtedly would be negotiated closely with Unity

Also worth pointing out:
- These Runtime fees only come into affect IF the game passes $1M rev in the last 12 months (AND surpasses 1M cumm. installs); on par with Epic
- The Runtime fee + seat licenses combined still equates to way less than 5% of revenue (i.e. Epic's royalty)

What could Unity have done differently for its community?

1. Unity should've offered developers an option for "Per Install" OR "Rev Royalty"

While in 95%+ of cases "Per Install" is cheaper than "Royalty," the model still creates heartburn for developers and edge cases do exist

2. Devs feel betrayed and a violation of trust

The decision came out of left field for most devs and goes into enforcement in <4 months. They feel trapped & fear more changes

IMO, the change should've been announced ~12 months ahead to give devs time to plan for their business

3. Largely speaking, these changes affect only a small % of Unity's customer base
- Indie devs are mostly unaffected unless they are commercially successful
- I know Unity has already had 1:1 conversations ahead of public announcement with most highly impacted developers

Main point: while it's reasonable for Unity to charge 1-3% of rev (across seats + runtime fee), the new pricing model requires close studying & spreadsheets to figure out

It should've been:
- simpler
- better commumicated

Provided more:
- dev options
- time for implementation

So what do I think will happen to Unity?
- The change mostly impacts AA/AAA studios. The amount of $ in question is not enough to push them to another engine (+alternatives are currently insufficient)
- A % of current Free users will leave the Unity ecosystem. Unity plans for it

In the short/medium term, Unity will likely see a healthy rise in ARPU. Perhaps Unity will extend the implementation timeline so devs have time to determine impact

Meanwhile, founders building next-gen game engines (cloud and/or AI-native) found some new wind in their sails 🏁

None of the above should be taken as investment advice; please see for more information.a16z.com/disclosures