The Bigger Picture Behind Unity's Pricing Change: A Sign of Challenging Times for the Gaming Industry

Unity's recent announcement that it will begin charging developers based on the number of downloads and installs of their games, starting in 2024, has sparked outrage among developers. The introduction of this fee has led many to cry foul, questioning the fairness of the move. However, it's essential to consider the context behind this decision. Unity has been operating at a significant loss since its inception, despite posting a profitable Q4 in 2022. The current economic climate, with its high interest rates and investors seeking returns, has made it challenging for the company to rely solely on revenue growth. The decline of the gaming industry in 2022 has further complicated Unity's path to profitability. The company's clarification of the pricing nuances has eased concerns, as it excludes games demos and charities from the fee. While this change may cause headaches for some developers, it is unlikely to significantly impact the overall gaming landscape. Instead, it may serve as a wake-up call for developers with unsustainable business models. The gaming industry is facing a Perfect Storm of challenges, including a saturated attention economy, shifting KPIs from unit sales to time spent, high inflation, and rising interest rates. The number of games and developers is growing faster than industry revenues, which are increasingly tied to time spent. This shift has led to a situation where there are more developers competing for a limited amount of time, making it challenging for new entrants to gain traction. The rise of free-to-play, cloud gaming, and live operations has concentrated power and revenue among a smaller number of companies, making game production and publishing a lower-margin business. Unity's per-download pricing decision is a strategic move to de-risk against the impending consolidation of the gaming industry. Rather than being the cause of the industry's challenges, it is a symptom of the tougher times ahead for game developers and publishers. Developers should recognize that Unity's pricing tactic is a response to the changing landscape, rather than the driving force behind it.