Unity Software, the company behind the popular Unity game engine, announced major layoffs on January 8th, 2023, letting go of 25% of its workforce. This amounts to approximately 1,800 employees that will lose their jobs over the next two months as Unity looks to restructure and cut costs.
Background
Unity Technologies was founded in 2004 and its Unity game engine quickly became one of the most widely-used engines for building 2D and 3D video games. The simplicity and accessibility of Unity made it popular among indie developers, while its powerful features also appealed to larger studios.
In 2020, Unity held an Initial Public Offering (IPO) and went public, capitalizing on the booming gaming market driven by the COVID-19 pandemic. However, Unity posted losses in 2022 as demand cooled, prompting cost-cutting measures.
In November 2022, Unity announced the end of royalty-free licensing of its engine for games with over $100k in revenue. This caused significant backlash in the game developer community. While Unity later withdrew the change, the damage was already done.
Layoffs and Company Reset
The January 8th layoffs are part of what Unity is calling a “company reset” to achieve profitable growth. In a letter to employees, CEO John Riccitiello stated:
“To set up the company for future success, meet market opportunities and fuel growth we have to focus our resources on the areas that will contribute most to the long term health of Unity.”
The 25% staff reduction will impact Unity employees globally over the next two months. Additionally, several high-level executives will be departing, including SVP & GM Create Solutions Marc Whitten.
Unity expects one-time costs between $65 million and $80 million associated with the restructuring during Q1 2023. However, they anticipate $55-65 million in annualized cost savings once complete.
When announcing the layoffs, Unity leadership emphasized the difficulty of the decision:
“We are extremely grateful to each person impacted – these are incredibly talented people who contributed greatly to Unity’s success…This is a painful decision because it impacts excellent Unity contributors and teams.”
| Department | Approx. Number Laid Off | Percent of Dept. Workforce |
|---|---|---|
| Create Solutions | 300 | 30% |
| Operate Solutions | 450 | 25% |
| Other departments | 1,050 | 20% |
Table 1: Approximate unity layoffs by department
The Create Solutions department, focused on products for game creators, faced the deepest cuts at 30% of staff. Meanwhile, other departments saw only 20% reductions.
Developer Community Reacts
The response from Unity engine users and game developers on Twitter expressed both sympathy and frustration. Many noted this seems an ongoing pattern for Unity:
“It really does feel like Unity has no real leadership, just stumbling from one catastrophe to the next, shedding staff every 12-18 months.” – @JoeyPrink
Others were saddened to see talented colleagues and friends lose their jobs:
“Crushed to hear that a lot of my friends at Unity got laid off today. Talented folks who deserve better from leadership.” – @DMC_Ryan
Some users pledged to move away from Unity to competitor game engines like Unreal as a result:
“Whelp, I think this clinches it — for new projects I can take the perf hit to not rely on Unity.” – @ethangach
However, many developers feel “stuck” due to Unity’s dominance and the high cost of switching game engines mid-project.
What Comes Next?
In their messaging, Unity leadership has emphasized that though layoffs are unfortunate, they are necessary to focus resources and ensure profitable growth.
Industry analysts expect Unity will invest more in its Operate Solutions department, which deals with monetization technology. Tools to help studios maximize in-app purchases, ads and other revenue streams are seen as more lucrative than the core game engine.
Additionally, there is increased pressure on CEO John Riccitiello to prove the long-term viability of Unity’s business model after several missteps. Some feel that under different leadership, Unity could stabilize itself. However Riccitiello retains the backing of Unity’s board for now.
For laid-off employees, Unity has promised severance pay and career transition support. But many skilled game programmers and engineers may still struggle in the cooling tech industry job market.
The impacts on the future video games built with Unity remain to be seen. Some analysts worry innovation could slow due to weakened staff expertise in key engine areas like graphics and physics. For now Unity remains committed to support for its massive developer community. But user trust has eroded over Unity’s rocky year, and competitors await in the wings should adoption of the ubiquitous Unity engine begin to wane.
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