Monday, April 22, 2024
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Unity's Just Not Into You, Indie Developer

There’s been a lot of furore about Unity’s recent announcement that it’s going to charge developers on a per-install-basis on games. Not on sales, but actually on installs. It’s even going to apply that retroactively to previously released games, unilaterally changing the terms of service not only for future projects, but for things that have been made and released under the presumption of a different business model.

Game developers at large were baffled to say the least. It’s upsetting to many business relationships, and it’s personally upsetting to a lot of indie developers who have invested huge amounts of time into becoming proficient with Unity’s engine and specialized in Unity’s engine-specific tools. There’s people who have made entire careers building tools and assets for Unity specifically!

The announcement has already done immense damage to Unity’s developer relations. How can you trust a business partner that will radically change the terms not only of your future relationship, but your existing one as well? So much destroyed trust, all over a change that has a sufficiently high enough threshold that – according to Unity – it will only affect 10% of developers using the engine.

So if it’s not even going to affect that many developers, what is Unity’s plan here? How does any of this make sense? Well, the answer is that Unity isn’t particularly interested in keeping developers of premium games as its customers, especially not small ones. In fact, Unity doesn’t really care. Indie developers are merely collateral damage to this change.

Following the initial announcement, Unity ”regrouped” and decided that multiple installs by the same user on the same device would not incur multiple fees. However, there’s every reason to think that this is a change to an initial plan rather than a misunderstanding. There’s also every reason to think that this is indicative of the future of Unity as a business.

To better understand who this was targeting, and why things are going to become worse in the future, let’s take a quick look at how free-to-play games work in the mobile market.

A Simplified Intro to Mobile F2P

In general, high-revenue mobile games work by first developing a game at as low cost as possible. Then you acquire users through an esoteric approach where you both advertise aggressively on social media, and pay people to install the game in order to manipulate charts on mobile storefronts.

Next you work on adjusting the game in order to A) keep people playing (checking metrics like whether someone played for more than five minutes the first time they opened the app, whether they come back to it after one day, or three days, or ten days, and probably request info from Apple Watch about how long it extends people’s toilet stays), and B) convert as many players as possible into paying for in-app purchases. That conversion rate is typically tiny. There’s little public data on this, but thanks to the effort of best friends Epic and Apple, we know that even massively successful games frequently have conversion rates below 5%.

So. In order to make money from the small portion of players who actually pay, you need a huge amount of players, which is often referred to in terms of number of installs. Keep this in mind, we’ll get back to it later.

An aside about mobile

[Feel free to skip this part if you’re not fascinated by the thrilling world of people in suits congratulating each other about .3% EBITDA increases. It’s not for everyone – sorry, Tim!]

There is one major “benefit” to this approach to game development and operation. (“Benefit” as defined by people who care more about making money than about making games, which… each to their own. Personally I’m “a fucking idiot”.) Far more so than a premium game business, a mobile F2P company can be run like a regular business.

You can look at the numbers to tell what is going up and down, and what kind of changes seem to affect what numbers. You can put money into user acquisition to see the player numbers go up, or you can put more money into the player conversion effort and hopefully see the conversion rate increase, all fairly linearly, predictably and data-driven.

While you need to make a game people are interested in playing, that problem is solved by continuous prototyping and low development costs. The last game didn’t catch on? Well, you have another one ready to go in two weeks.

This differentiates it from premium games, where you are entirely reliant on making a good enough game to resonate with an audience, but where there’s a ton of factors out of your hands that limit what you can do to reach that audience, and you rarely get second chances. This approach requires a studio to be run completely different to a “regular” business.

If you run a studio making premium games but you’re worried you’re too infected with Business Brain to run it correctly, I offer $5,000 consulting calls.

Sample picture of a CEO

How do mobile games fit into Unity’s business?

A lot of people, including a lot of game developers, have the impression that Unity is “the indie dev engine”. This was certainly true once, and it was certainly the factor that turned Unity into an initial success.

Small teams and aspiring game developers could make hits and build stable studios around making games in Unity. This slowly built up an ecosystem of tools, development packages and ready-made assets, which in turn strengthened other developers along with Unity’s market position. Unity made money from this by charging a license fee, with the most expensive “pro” licenses being required for every developer once your studio made more than $100,000 in yearly revenue. It also made money from sales on the asset store, etc.

This is the impression many have of Unity’s business, but it’s missing a key component that has not only been important, but actually dominant for many years.

Unity also provides what it used to call “Operate Solutions”. These were services involved in maintaining live games, for example with analytics and metrics, server management, etc., but heavily focused on monetisation, both through in-app purchases and advertising.

At this point, Unity is by far the most widely used engine for mobile games. According to its own stats, “70% of the top 1,000 mobile game developers choose Unity”. I don’t know for sure what metrics were used, but I think it’s fair to assume that “top” developers here are ranked by revenue.

Did you know that Genshin Impact was made in Unity?

Did you know that Hearthstone was made in Unity?

Did you know that the undying ghost of Subway Surfers was made in Unity?

These are games with massive install bases and years and years of operations, all tied together with Unity and Unity’s services, with massive revenue streams that Unity is eyeing with envy.

2012’s Subway Surfer, 2023’s #1 Action game

Some more numbers

Up until a restructuring at the end of 2022, Unity reported revenue (total income before costs have been subtracted, so not direct profits) separately between the business arm “Create Solutions” (ie. the game engine and its production tools) and the business arm “Operate Solutions” (ie. monetisation and advertising services).

In fiscal year 2021, the Create Solution revenue was $326M, while Operate Solutions revenue was $709M. So Unity’s monetisation services made twice as much money as its engine licensing business. Even if pure profit is relatively even (Overall, Unity hasn’t had any profits), Business Brain math tells you that you want the bigger revenue, because 0.6% growth from 1000 is bigger than 50% growth from 10.

(As a footnote for the sake of accuracy, the balance between “Solutions” branches evened out over the course of 2022, particularly with growth in the visual effects part of the “Create” business thanks to Weta etc., but Operate was still dominant up until the reorganisation in 2022.)

So here is where the disconnect comes in for a lot of indie developers.

Unity is not a game engine company that also provides operating services. It is a mobile F2P services company that also provides a game engine.

I’ve used Unity for a decade, and I don’t know what any of these are.

It’s all coming together

When they announced that they were going to charge for the number of installs, they were not “going after” indie developers releasing a premium game on Steam. They’re not even going after releases on subscription services such as Gamepass (even though they will probably be disproportionately hit – something that could encourage Microsoft to offer worse Game Pass deals to Unity games, considering they are the ones expected to pay up).

They are going after the publishers of hugely profitable, long-lived mobile games, for whom their cost to Unity (in the form of license fees) in no way scales with their ongoing revenue. Even talking about pricing things “per install” is a thing that sounds outlandish in premium game development, but is normal language in mobile user acquisition.

The real gotcha in Unity’s announcement isn’t that you have to pay a fee per install of “Unity Runtime”, it’s the fact that you can get a “Fee reduction for use of Unity services”. If you’re a big company concerned about the install fee, just use Unity’s advertising and monetisation solutions, rather than third parties, and you’ll get away for cheap. This way you’ll either put money in the pockets of the engine branch by paying the install fee on millions of installs, or you’ll put money in the pockets of the services branch by using their services.

This is the same lens you have to look at all of Unity’s decisions through, such as last year’s merger with ironSource (a monetisation services company). It is not making an engine, it is a company making money, and it thinks it can make more money through other services than an engine that supports indie developers.

Conclusions

When looking at these numbers, looking at the direction of Unity over the past few years, and looking at Unity’s management, it is quite clear that this is just the next step on the path Unity has been on for some time. It is a F2P services company that also provides a game engine as a service, and it is going to continue to develop in that direction.

It is also trying to develop its branches for VFX production and enterprise purposes such as architecture displays, but those goals are not particularly congruent with producing a good game engine.

The many indie developers who will be left by the roadside are completely incidental to Unity’s goals, and are not going to be a significant factor in its future decision making. As a developer, you have to assume that Unity will make more decisions like this that will harm you, because it just doesn’t care about what you do.

This is of course a Business Brained perspective which ignores the fact that Unity got to its current position by providing great tools for making games with small teams. If it doesn’t sufficiently invest in its engine, and if it drives students and independent developers away from it, it will also fall out of favour with mobile F2P developers over time. Unfortunately one of the symptoms of chronic Business Brain is an inability to be realistic about long-term consequences.

What can I, an indie developer using Unity, do?

If you’re already deep into a project… prepare to swallow that install fee cost!

I am sorry! I am also deep into one! If you’re about to start a new project, then start it in a different engine, even if you’re going to be slower to begin with.

Unreal will be the right choice for many, and already has a hugely successful and predictable business model. Unlike Unity, Epic maintains, tests and improves its engine by way of actual game development!

Godot has already overtaken Unity as the premier student and game jam engine. The fact that it’s open source means that it’s developing fast, with no moneyed interests derailing it, and work is being done to make it more viable for commercial releases.

There’s stuff like Bevy and Luxe out there, getting ready to hit full releases. Game Maker is still going strong, GDevelop just received 3D support, and all-time great puzzler Baba Is You was made in Clickteam Fusion of all things!

But I really like using Unity!

Take heed, the only incentive Unity would have for backtracking on this change is if its big clients – the targets of this change – start twisting its arm in some way. Indie developers denouncing them or threatening to switch engines isn’t going to change much in the short term.

Take comfort in knowing that you’re participating in ruining their business in the long term, I guess, by reducing the relevance of their engine. But you are absolutely going to have to make the switch. Look at Unity’s business and look at their leadership and tell me that they are going to act in your interest in any way other than by accident.

It will require a lot of relearning habits and basics, but your game dev experience is thankfully largely transferable, probably more so than you think. You’re going to take your design knowledge and your understanding of computer and game logic with you, and that’s going to be a net loss for Unity, not for you.

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