Unity Software Undergoes “Company Reset,” Cutting Off 25% Workforce for Long-Term Profitability

By Moon Harper

Jan 09, 2024 12:03 AM EST

Unity Software, a videogame software provider, is cutting off around 25% of its workforce, amounting to 1,800 jobs, as stated in a regulatory filing and internal memo on Monday.

Largest Layoff in Unity

While Unity, based in San Francisco, may not be widely known outside the gaming industry, its software toolkit is essential for over 1.1 million game creators each month, including those behind popular games like "Pokemon Go," "Beat Saber," and "Hearthstone."

Unity is undergoing its largest layoff, slated for completion by the end of March, that will impact all teams, regions, and business areas, as informed by the company to Reuters. These layoffs follow the announcement of a "company reset" in November.

"We are reducing the number of things we are doing in order to focus on our core business and drive our long-term success and profitability," Whitehurst wrote in the memo to Unity employees on Monday.

Whitehurst didn't detail specific structural changes, but a company spokesperson confirmed that more changes are coming. This marks the fourth round of layoffs since July 2022 after a challenging period for Unity.

"Runtime Fee" Policy

Last September, the company attempted to introduce a new pricing policy called "runtime fee," which imposed additional charges on game developers when specific revenue and install thresholds were reached. Due to a backlash from developers and a significant decline in the share price, the company revised and modified the new fees.

After the controversy, then-Unity CEO John Riccitiello retired. The company then appointed former IBM president Whitehurst as interim CEO and president, and Roelof Botha, a partner at Sequoia Capital, became the board chairman.

"Company Reset"

In November, Whitehurst revealed the initial phase of the company reset, which involved ending a contract with a visual effects company founded by the director of "Lord of the Rings," shutting down offices, and no longer requiring employees to work from offices. The layoffs on Monday represent the second part of this company reset.

Unity, Well-Known for its "Game-Engine"

Established almost 20 years ago by three Danish engineers, Unity became well-known among game developers for its "game engine" that simplifies developing and publishing games on mobile and virtual reality. Beyond gaming, Unity's influence extends to film and automotive industries for 3D visualization and virtual reality. Following its IPO in 2020, Unity's stock peaked at around $200 in November 2021 but dropped below $30 last year.

Although the shares increased by over 40% for the year after Whitehurst revealed the company reset, Unity experienced a nearly 50% decline from July to the end of October, according to its third-quarter earnings report, where Unity fell short of analysts' expectations and refrained from providing quarterly guidance.

"Our results in the third quarter were mixed," Unity said in a letter to shareholders. "While revenue came in within guidance, we believe we can do better."