Unity's September 2023 announcement of a new runtime fee caught developers off guard. The fee would apply to games that passed certain revenue and install thresholds, with developers charged $0.20 per install. The move sparked immediate and severe backlash.
The proposed fee applied to games earning over $200K in the trailing 12 months with over 200K lifetime installs. Unity framed this as aligning pricing with success, but developers saw it differently. The fee would be retroactive, applying to existing games and owing fees for installs that had already happened.
One example that illustrates the impact is a game that earned $150K in a year with 250K installs. The developer would owe Unity $50K in fees, even though the game's revenue was less than the fee. This situation would be disastrous for a small studio with limited resources.
The retroactive application of the fee was a fatal mistake. A licensing fee on future usage is one thing, but a fee on past usage is an unexpected liability imposed after the contract was signed. Developers who had shipped games with Unity had done so based on the licensing terms in place at the time.
When evaluating pricing changes, companies should consider the concept of 'total cost of ownership'. For Unity, this would involve assessing not only the new revenue generated but also the potential loss of trust and business from existing customers. In this case, Unity's estimated $200 million in new revenue was likely not worth the damage to their reputation and relationships with developers.
The result was that some developers calculated they would owe more in Unity fees than their games had ever generated. Games with thin margins would be hit hardest, owing more money than they had earned. This created an untenable situation for many developers.
In contrast, companies like Amazon Web Services have successfully managed pricing changes by implementing gradual changes and grandfathering existing customers. For example, when AWS changed its pricing model for S3 storage in 2023, it provided a generous grandfathering clause for existing customers, allowing them to adapt to the new pricing without incurring unexpected costs.
Platform businesses depend on developers building on them, and trust is a critical component of that relationship. Developers build on platforms when they trust that the economics they optimise for today will hold long enough to recoup their investment. Unity's move fundamentally violated that trust.
The subsequent backtrack and CEO resignation did not restore the trust. Developers had already learned what Unity was willing to do when growth slowed. The damage had been done, and other platforms began to benefit. Godot, the open source game engine, saw a surge in new users, while Unreal Engine reported increased interest.
This story is not unique to the game industry. Enterprise software, cloud services, and developer tools face the same dynamic. Developers and enterprises build deep dependencies on platforms over years, and pricing changes can have existential consequences for those building on top of them.
Companies that build durable developer ecosystems price transparently, change pricing slowly, and grandfather existing use cases when they do change. This approach acknowledges the trust and investment that developers make in a platform, and it helps to build a stable and sustainable ecosystem.