Unity Lays Off 25% Of It’s Work Force, Is Having A Bad Time

Failures

from the yikes dept

The bad times for Unity continue, it seems. Or, at the very least, for the ostensibly hardworking men and women that called the company home. The bad times really began late last summer when Unity decided to drastically change its pricing scheme both for future projects that used the game engine, and, somehow, retroactively as well, all without any transparency or much notice. This led to massive fallout among game developers, with a ton of them swearing off the engine entirely, while associated dev groups around the internet just simply shut down. Then Unity CEO John Riccitiello resigned, the company walked back some portion of its new pricing plan, and an interim CEO was named in James Whitehurst, formerly of Red Hat.

All of that takes you up to October of 2023. And that’s when the layoffs began. In November of 2023, Unity laid off over 250 workers, or something like 4% of its workforce. That was part of a plan to shut down a division it spent over a billion dollars acquiring several years ago. And now, two months later, the company has announced that it is laying off another 1,800 workers, or a full quarter of its remaining employees.

“This decision was not taken lightly, and we extend our deepest gratitude to those affected for their dedication and contributions,” Unity Director of PR Kelly Ekins said in a statement to The Verge. Ekins added that the layoffs will be spread across “all teams,” and a company spokesperson told Reuters that this round of layoffs will be complete by March, with additional internal changes coming thereafter.

The massive staffing cuts come after over 1,300 layoffs already implemented across the company in multiple waves since June 2022 (including those November Weta Digital cuts). Despite that, Unity’s statement to the SEC says these further cuts are necessary “to position [the company] for long-term and profitable growth.”

We’ll see about that growth, but it’s going to be hard to come by given the massive hit in goodwill and interest the company has taken for its core business in providing the Unity game engine. This doesn’t smell like some kind of positioning for growth at all, in fact. Instead, it sounds like classic shareholder value generation by massively trimming obligations such that stock prices rise in preparation for a sale. And, when you couple all the layoffs with reports of the state of Unity’s financial books, well, it drives the point home even further.

The company’s recent financial statements show why such a drastic change is even being considered. Despite annual revenues measured in the billions, Unity has struggled to show a profit in recent years, reporting net losses of $859 million for the 12 months ending in September 2023.

Notably, while the stock price jumped after the layoffs were announced, its price is still way, way down from just three years or so ago. Still, it’s trending back up significantly overall since Whitehurst came on board and started really driving the cost-trimming. Again, all the hallmarks of a play to make the company as attractive to buyers as possible.

And it seems as though the company is still banking on the fallout over the new pricing scheme to subside and for developers to jump back on board.

Even with the massively reduced headcount and new focus on the engine business, Unity isn’t expecting its corporate fortunes to turn around any time soon. In his November investor letter, Whitehurst said, “We expect the impact of this [runtime fee] business model change to have minimal benefit in 2024 and ramp from there as customers adopt our new releases.”

If the company really is trying to make a new go of it after all of this reputational self-immolation, all I can say is: good luck, you’re going to need it.

Filed Under: layoffs, video games
Companies: unity