The massive layoff season that hit the video game industry last year appears to have spilled into 2024. Archiact and Bossa Studios have already announced layoffs. On Monday, January 8, 2024, Unity announced that it would lay off 1,800 employees before the end of this quarter as part of its company-wide reset.
The development was disclosed through a regulatory filing and an internal company memo. Interestingly, the announcement had a positive impact on the company’s shares which jumped by nearly 5% in after-hours trading.
“At this time, Unity cannot reasonably estimate the costs and charges in connection with this reduction, which it expects will be substantially incurred in the first quarter of 2024,” the company wrote in the regulatory filing. “The charges will primarily relate to employee transition, severance payments, and employee benefits.”
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This is Unity’s largest layoff ever, and one of the largest in the video game industry to date. It is estimated that 1.1 million game developers rely on Unity’s software toolkit to build their games. Popular titles like Beat Saber and Pokémon Go were all created using Unity’s toolkit.
According to a Reuters report, the layoff announced by the San Francisco-based company will affect all regions, teams, and areas of the business. The layoffs are in line with the “company reset” pronouncement made by the interim CEO Jim Whitehurst in November. The interim CEO promised to streamline the services offered by Unity to focus on the core of the business.
“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,” read the memo sent by Whitehurst to all the company’s employees on Monday.
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Although Whitehurst did not reveal detailed structural changes, a company spokesperson confirmed to Reuters that more changes are on the way. The Monday announcement is Unity’s fourth layoff since July 2022.
Last year was rough for Unity
Unity was founded in 2004 by Danish engineers David Helgason, Joachim Ante, and Nicholas Francis. It began in a small apartment in Copenhagen, but its game engine quickly gained popularity among game developers. This is because Unity’s game engine made it easier to develop and publish games across multiple platforms.
Although Unity’s software toolkit is also useful in the automotive industry for 3D visualization, it remains more popular among game developers. Last September, the company tried to implement a new “runtime fee” pricing policy which charged additional fees to game developers if they hit certain revenue and install thresholds.
A group of game developers protested against the new runtime fee which they said, in an open letter, “jeopardizes small and large game developers alike” and was “made without any industry consultation”.
The company was forced to revamp the new fees following the backlash and a steep dip in its share price. Eventually, the then-Unity CEO John Riccitiello retired and was replaced by Whitehurst as interim CEO and president while Roelof Botha, a Sequoia Capital partner was named chairman.
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Since coming on board, Whitehurst has embarked on a company reset. In November, Unity terminated its agreement with Weta FX, a visual effects company, closed offices, and removed the mandate that compelled employees to work from offices.
The company’s share value has jumped almost 40% since the announcement of the company reset. However, the company lost nearly half of its value between July and the end of October. In its third-quarter earnings report, Unity failed to meet the expectations of analysts and did not issue quarterly guidance.
“Our results in the third quarter were mixed,” Unity told shareholders in a letter at that time. “While revenue came in within guidance, we believe we can do better.”
