Unity Software, creator of the widely-used Unity game engine, announced plans to lay off 1,800 employees on January 8th, 2023, representing around 25% of its total workforce. The layoffs come as part of what Unity is calling a “company reset” to refocus operations amid a turbulent period.
Lead-Up to Layoffs Points to Financial Difficulties
Unity went public in 2020 with an opening share price of $52, quickly rising to over $200 per share at its peak in late 2021. The company has struggled recently, however, with its stock price plummeting to around $30 amidst missing earning expectations over the last two quarters.
Several factors contributed Unity’s financial difficulties over the past year:
- Failed acquisition attempt of ironSource for $4.4 billion in 2022
- Rollout and subsequent reversal of increased fees for real-time 3D content
- Broader economic conditions impacting the gaming and ad tech sectors
Facing slowing growth andloadModel declining revenues, Unity likely saw layoffs as an inevitable and necessary step to cut costs.
Details of the Restructuring and Layoffs
The layoffs stand to impact employees across all levels and regions, though the company has stated that no further reductions are expected after this initial 25% cut.
| Attribute | Details |
|---|---|
| Number of Layoffs | 1,800 |
| % of Workforce Impacted | 25% |
| Timeline | By March 2023 |
| Departments Affected | All departments and regions |
| Additional Cuts Expected? | No, per company statements |
In a letter to employees, Unity CEO John Riccitiello stated that the company grew too fast in recent years and that a “reset” is required to build a profitable business. Unity expects to incur $105-115 million in restructuring charges from the layoffs.
The broader restructuring aims to reorient Unity’s focus solely toward areas showing the highest customer traction and future opportunity. This likely points to a reduced investment in research divisions working on emerging technologies.
Impacts Across the Gaming Industry
With over 60% market share, Unity’s engine powers nearly half of all mobile, console, and desktop games. The extensive layoffs stand to directly impact studios who rely on Unity’s tools and technical support.
Smaller gaming companies in particular may struggle with the loss of support channels they have come to depend on. Larger studios like Electronic Arts, Ubisoft, and Tencent will also feel ripple effects but likely have more internal resources to smooth the transition.
Across the board, experts expect companies to accelerate plans to build out their own in-house engines rather than relying solely on third-party solutions. Unity’s recent stumbles may also benefit competitor Epic Games and their Unreal Engine, which one analyst expects to overtake Unity’s market share by 2025.
What Comes Next?
In the immediate future, Unity employees prepare for a turbulent couple months as the full force of the layoffs take their course. Unity plans to complete the process by March, softening the blow by offering severance pay.
Longer term, Unity faces immense pressure to maintain existing revenue streams while identifying new opportunities for growth post-reset. Success likely hinges on doubling down on monetization of its core engine through premium products and services tailored to the needs of large-scale game studios.
If Unity stumbles again, analysts warn it risks leaving the door open for competitors like Epic to challenge their long-held dominance over the game engine space. With so much market share at play, the coming year stands as pivotal not just for Unity’s future but for the landscape of tools powering the modern gaming industry.
Conclusion
Unity Software’s plan to reduce headcount by 25% caps a tumultuous couple years for the gaming tech giant. While necessary to quell spiraling costs, the extensive layoffs usher in a period of uncertainty across Unity and the developers who rely on it. Successfully navigating this reset remains critical to Unity upholding its position as the world’s most ubiquitous game creation engine.
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