Unity’s latest earnings report reveals the company is planning to lay off more employees and cut certain products.
Unity posted its Q3 earnings report recently, which revealed that the company is still making a loss, although not quite as much of a loss as in the past.
Revenue was up 69 percent to $544 million, while the company made a loss of $125 million, down from a loss of $250 million last year. Revenue in the ‘Create Solutions’ division – i.e. the division that handles the Unity engine – was flat. But revenue from the ‘Growth Solutions’ division – which handles ads products and services – was up by 166 percent.
The disparity between the flat engine division and growing ads division perhaps explains the Unity management’s focus on its LevelPlay platform for placing advertising and monitoring performance. Anonymous sources inside Unity recently suggested that the introduction of Unity’s infamous Runtime Fee was a ploy to boost LevelPlay and “kill AppLovin”, one of LevelPlay’s biggest rivals, since LevelPlay users would be exempt from the fee.
Speaking of the Runtime Fee, Unity’s earnings report acknowledges that its introduction “created friction with our customers and near-term headwinds”, which seems like a bit of an understatement. After the fee’s announcement in September, droves of developers vowed to quit Unity, the company was forced to backtrack – agreeing to limit the fees to only the latest version of Unity, among other concessions – and CEO John Riccitiello resigned “effective immediately” around a month after the Runtime Fee was announced.
As a result of the concessions, which mean developers will only be charged the Runtime Fee (or a 2.5 percent revenue share) if they upgrade to the latest version of the Unity engine launching in 2024, Unity has said the Runtime Fee will have little effect on its finances next year, with income only ramping up “as customers adopt our new releases”.
But the biggest announcement in the earnings report was that Unity plans even more job cuts in the near future. The company has already laid off 900 people this year – 600 back in May, and 300 in January – which came on top of 200 job cuts in June 2022.
At the same time, the company is looking to reduce the number of products it offers. “Several weeks ago, we started a comprehensive assessment of our product portfolio to focus on those products that are most valuable to our customers,” said interim CEO Jim Whitehurst in the earnings report. “We are also evaluating the right cost structure that aligns with the more focused portfolio. We are acting quickly and expect to make final decisions over the next few weeks. We expect to start implementing the plan within this quarter and expect to complete all interventions before the end of the first quarter of 2024. This will likely include discontinuing certain product offerings, reducing our workforce, and reducing our office footprint.”
Crucially, the report doesn’t specify which products might be cut, and Unity is involved in all sorts of businesses, from car manufacturing to defence contracts. But if those product cuts affect the core Unity engine itself, Unity could potentially be faced with another backlash from game developers next year, just as the Runtime Fee begins to kick in.