A few days ago, the industry’s buzzing Unity new pricing model event finally came to a close.
On September 23rd, Marc Whitten, Senior Vice President and General Manager of Unity Create, released an “Open Letter to the Community” on the official website. In the letter, he expressed Unity’s team’s apologies and announced changes to the previously announced new pricing model.
The main points are as follows:
- Unity Personal will remain free, and games developed using this version will not require “Royalty.”
- The eligibility criteria for free usage of Unity Personal will be expanded from the previous 12 months’ revenue or fundraising of up to $100,000 to up to $200,000. Additionally, the requirement for the “Made with Unity” splash screen will be removed.
- Developers with revenue below $1 million in the past 12 months will not be subject to “Royalty” fees.
- The “Royalty” policy will only apply to Unity’s new versions released after 2024. Projects in development and games already released based on the current version will not incur “Royalty” fees.
- Entities required to pay “Royalty” can report two sets of data: the amount calculated based on the number of new users and a 2.5% revenue share. Unity will execute the option with the lower amount.
In simple terms, Unity has introduced several significant changes to its previous policy of charging based on revenue and installation thresholds for all versions. Now, there are additional conditions such as requiring an annual revenue of over $1 million and the use of the latest engine version. Regarding the most controversial aspect of the new rules, which involves cases where download numbers far exceed revenue for large Daily Active Users (DAU) or small independent products, Unity has provided an option to calculate “Royalty” based on revenue sharing.
Although when comparing the old and new Unity pricing schemes, it may seem like developers are benefiting in any case, there is a clear underlying trend behind this pricing controversy: the necessity for Unity to reform its pricing strategy.
Why do I say this?
Previously, Unity had a long-standing pricing strategy of offering a “Free” version, a subscription model, and a perpetual license model. This strategy emphasized Unity’s strengths in being free and having a low barrier to entry, helping it rapidly gain dominance in the early engine market. However, as industries like gaming and automotive, among others, evolved rapidly, this fixed pricing strategy became less cost-effective for Unity. Additionally, Unity had to continually invest in researching new technologies and features to maintain its market position.
Publicly available information indicates that over the past decade, Unity Pro’s subscription price has increased from just $75 to $185. Through these incremental price hikes, Unity’s fixed pricing strategy has started to show signs of becoming less attractive and less sustainable.
In this context, even though Unity has been raising subscription fees every one or two years, the magnitude of these increases still struggles to offset its rapidly growing research and development costs. Since going public in 2020, Unity has seen a continuous rise in operating costs while remaining in a state of financial deficit.
In comparison to Unity’s fixed pricing strategy, Unreal Engine has opted for a proportional fee strategy of 5%. While this approach may result in lower initial revenues, it has the advantage of keeping pace with industry growth and providing a relatively stable return on investment.
For example, consider a company with a product that generated $100 in revenue a decade ago. Using Unity, they would have paid $10, whereas using Unreal Engine, they would have paid $5. Now, with the company’s product revenue in the tens of thousands of dollars, even if Unity increases fees to $25, it still falls short of Unreal’s 5% fee, which would be $500. This illustrates the advantages of a proportional payment strategy and may be one reason why Unity introduced the “2.5% revenue share” option in its new pricing scheme.
However, while Unity’s intent to pursue growth and change its pricing strategy may be understandable, the announcement of a completely new payment model without prior consultation has drawn negative public attention. What has angered developers is not only the economic pressure of the new payment model but also their dissatisfaction with Unity’s attitude and behavior.
As a result of the escalating controversy, Unity’s stock price has fallen to $31.6, with a total decline of nearly 16% since the new rules were announced, translating to a market capitalization loss of approximately $2.3 billion.
At the end of the open letter, Marc Whitten expressed his intention to host a live session after the blog post to answer developers’ questions to the best of his ability. He hopes that through this process, Unity can engage in constructive discussions with developers and bring an end to this controversy.
Here is the full text of the Unity open letter:
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