Unity Software, a leading provider of videogame development tools, announced on Monday that it will lay off about 1,800 employees, or 25% of its total workforce, as part of a restructuring plan to focus on its core business and improve its profitability.
The layoff news comes after a challenging year for Unity Software, which faced criticism and protests from game developers over its pricing change in September 2023. The company decided to charge developers per-install fees for games created with its tools, which effectively amounted to charging royalties on each sale of a game. The move was seen as a betrayal of the company’s promise to never do so, and sparked outrage among the gaming community.
Unity Software partially reversed the decision in October 2023, after former CEO John Riccitiello stepped down and former Red Hat CEO Jim Whitehurst was named interim CEO and president. The revised policy stated that Runtime Fees only applied to games made using Unity Pro or Unity Enterprise, were also created or upgraded to the next major Unity version releasing in 2024, met a $1 million in last year gross revenue threshold, and garnered 1 million lifetime initial engagements.
However, the damage was already done, as many game developers lost trust in Unity Software and started to look for alternative platforms. Unity Software also faced increasing competition from rivals such as Unreal Engine, Roblox, and Godot, which offered more attractive features and pricing models.
Unity Software Announces Restructuring Plan and Layoffs
In November 2023, Whitehurst announced a “comprehensive assessment” of the company’s portfolio, and warned that it would likely lead to a reduction of the company’s headcount. He said that the company needed to “streamline operations, focus on the most strategic opportunities, and align resources with our long-term vision and goals.”
On Monday, Unity Software disclosed in a regulatory filing and an internal memo that it will lay off approximately 1,800 employees, or 25% of its workforce, as part of the restructuring plan. The company said that the layoffs will affect all functions and regions, and that it will provide severance packages and transition support to the affected employees.
The company also said that it will sever ties with Weta FX’s professional services, which it acquired in July 2022 for $1.6 billion. The deal was meant to expand Unity Software’s capabilities in creating realistic and immersive digital worlds, but it proved to be too costly and complex to integrate.
Unity Software said that it cannot currently estimate the total costs related to the layoff and the Weta FX separation, but it expects most costs will be incurred in the first quarter of 2024. The company also said that it expects to incur additional charges related to asset impairments, contract terminations, and other items.
Unity Software Hopes to Recover and Grow in 2024
Despite the layoff and the restructuring plan, Unity Software said that it remains confident in its long-term prospects and growth potential. The company said that it will continue to invest in its core products and services, such as its game engine, its cloud-based solutions, and its monetization platform.
Unity Software also said that it will focus on serving its customers and partners, and delivering value to its shareholders. The company said that it will provide more details on its strategic direction and financial outlook during its fourth quarter and full year 2023 earnings call, which is scheduled for February 10, 2024.
Unity Software’s shares fell 8% to $35.87 per share on Tuesday following the layoff news, though they have gained more than 15% over the past year.
