(Unity the company, not Unity the engine)

Unity have recently announced their third recent round of layoffs, and pretty much everyone is blaming CEO John Riccitiello for persistent mismanagement.

There may be some truth to that, but the fact is that Unity has a bigger problem than its CEO, or its technical flaws. A problem rarely mentioned that explains most of the rest.

It’s the competition. Mostly from Unreal Engine (UE). For the last few years, Epic Games has owned an infinite moneyspout called Fortnite, and they’ve been pouring the proceeds into their engine.

This includes:

• Hiring a top notch technical team
• Reducing their royalty fees
• Offering a ton of free assets, under the condition they are used in UE

Unity cannot compete with this, even under ideal management and development. It’s close to classic “price dumping“.

Godot is also a serious problem for Unity at this point. Unity cannot compete on price with Godot, and they are increasingly evenly matched technically. Unity had a substantial moat in the form of console and phone support, but Godot is now making inroads there as well.

Between UE and Godot, there’s almost no niche left for Unity, and it shrinks every year. Most of the value remaining in Unity for game development is from the large base of developers, who are reluctant to switch engines, and the large community. 

But those are shrinking resources as new developers are less and less likely to pick Unity. Riccitiello likely thinks he can only wring a few years more profit from the game developers market. What is a CEO to do when the facing such an unwinnable battle?

Well, the answer is not “make the best game engine you can”, and really has more to do with business and finance than anything else.

Mergers and Acquisitions

This is a classic move for companies that are overvalued, and have poor future prospects. By exchanging your still pricey but doomed stock for another non-doomed company, you have made a great deal.

Finding new markets

I’m sure Riccitiello looks at the accounting figures of his company. It’s got to be a bleak sight, but there are some rays of sunlight – Unity’s ad teams are still doing well. It’s an area that Godot and Unreal have almost no stake in too. So it only makes sense to focus the company on what remains that is profitable. Some of Unity’s mergers have brought them closer in this direction.

This also explains Unitys interest in real-time SFX for film/tv. This is a new market, and holds some possibility. But Unreal is trying this one too, and they are better poised technically, so I don’t think it’s likely Unity will win.

Shrinkage

When facing doom, sometimes it just makes sense to reduce the size of a company. There’s no point investing in their engine if those costs are never going to pay themselves back, no matter how loyal your community is. It’s better to acknowledge internally that the battle is lost, and engage in cost saving exercises to preserve what value does remain in the company.

Of course, you never say this out loud. That would be counterproductive. Instead, it’s better to spout nonsensical ideas like laying off jobs is good for growth.

If that causes people to think the problem of Unity is a deranged CEO (temporary, fixable) , rather than structural, then all the better.  I’m sure the layoffs are discussed differently in the privacy of the boardroom.

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I too honestly wish I could blame Riccitiello for the collapse of Unity. I’d love to see the situation turn around. I was on one of the last lifeboats out of the collapse of Flash under Adobe’s actual mismanagement, and it’s an experience I’m not keen to repeat.

Perhaps the situation will turn around. Fortnite’s supremacy won’t last for ever. Godot has yet to weather some of the issues of being a seriously large engine with a need for backwards compatibility. But if Unity Engine does recover, it’s almost entirely beyond the control of Unity the company.