Unity kills runtime fee, layoffs persist, Fed rate cut gaming impact – Games Growth with Upptic

In this episode of Games Growth with Upptic, hosts Warren Woodward (CGO, Upptic) and Xander Agosta (Marketing Director, Upptic) discuss three critical topics impacting the gaming industry: 1) Unity’s decision to cancel their controversial runtime fee, 2) a roundup of industry-wide “scary stories” as Halloween approaches, and 3) the potential effects of Federal Reserve rate cuts on gaming. Here’s a deeper dive into each topic.

Unity cancels runtime fee: Rebuilding trust and adjusting course

After a year of controversy, Unity announced it would cancel its unpopular runtime fee. Initially introduced in September 2023, the runtime fee imposed a charge on developers for each installation of a game built on the Unity engine. The backlash was fierce, with developers arguing that the fee disproportionately impacted emerging markets and games with lower monetization models. A year later, Unity’s new CEO, Matt Bromberg, has reversed this decision, and the company’s stock has seen a surge in response.

However, the damage to Unity’s reputation lingers. Unity has had to retool its pricing models, including raising the cost of its Pro package by 8% and its Enterprise package by 25%, alongside increasing revenue thresholds for free-tier usage. Despite these changes, Unity remains unprofitable. The company continues to adjust its strategies to achieve long-term profitability, recently bringing in industry veteran Jim Payne as Chief Product Officer.

Scary stories in gaming: A roundup of recent turmoil

As Halloween approaches, the games industry is facing more fear-inducing turmoil. Three notable “scary stories” from the past few weeks highlight struggles across different segments:

1. Midnight Society’s troubles with Dead Drop: Midnight Society, the studio behind the NFT-based game Dead Drop, founded by Dr. Disrespect and other industry veterans, has announced significant layoffs. Dead Drop has faced challenges due to its association with NFTs and a competitive genre, making it difficult to stand out. With Dr. Disrespect, who was essentially the face of the game, being forced out of the the project due to serious accusations, the future of Dead Drop looks uncertain.
2. Kabam shuts down Disney Mirrorverse: Disney Mirrorverse, a mobile game by Kabam, will be shut down in December 2024 after 2.5 years of operation. Despite generating over $20 million in revenue and amassing 10 million players, the high costs of running live service games and licensing Disney’s massive IP may have contributed to its downfall. Kabam has faced internal struggles since its acquisition by Netmarble, further complicating the game’s sustainability.
3. Activision Blizzard Layoffs: Activision Blizzard recently underwent another round of layoffs following Microsoft’s $69 billion acquisition in 2023. Approximately 650 employees were affected, primarily in corporate and supporting roles. While these cuts are part of a broader industry trend of downsizing after mergers, it’s still a blow to the workforce, particularly for teams working on high-profile games like Call of Duty and Warcraft Rumble.

Federal Reserve rate cuts: What it means for gaming

In brighter news, the Federal Reserve’s recent decision to cut interest rates by 50 basis points could have ripple effects throughout the gaming industry. While Games Growth with Upptic hosts Alexander Agosta and Warren Woodward aren’t economists, here are some potential outcomes:

1. Increased consumer spending: Traditionally, rate cuts can lead to an increase in consumer spending, which may benefit the gaming industry. However, with U.S. consumers already grappling with high credit card debt and low savings, it’s unclear whether this extra cash will flow into gaming.
2. Mergers & Acquisitions (M&A): Lower borrowing costs may fuel more M&A activity in the gaming sector. As interest rates decrease, larger companies may have more incentive to acquire smaller studios, leading to consolidation in the industry.
3. Investment in game development: Cheaper capital could encourage more investment in game development, both from large studios and startups. However, the scale and speed of this increase will depend on how quickly rates continue to decline.
4. Stock market impact: While rate cuts often trigger a short-term rally in the stock market, the looming possibility of a recession could dampen long-term enthusiasm. For gaming companies, stock prices may see incremental gains, but broader economic uncertainty remains a concern.
5. UA (user acquisition) funding costs: A niche but important consequence of rate cuts is the decrease in UA funding costs. As rates decline, game developers may find it easier to secure funding for user acquisition campaigns, allowing them to grow more aggressively.

Ultimately, the gaming industry continues to experience a mix of highs and lows. While Unity’s reversal on its runtime fee offers hope for developers, the ongoing challenges at companies like Kabam and Midnight Society remind us that the industry is still on uneven ground. Meanwhile, the Federal Reserve’s rate cuts may provide a much-needed boost, but the full impact of that remains to be seen.