Shares of Unity Software (U -5.50%) gained 38.2% in September 2024, according to data from S&P Global Market Intelligence. The game engine and 3D platform maker scrapped a massively unpopular fee for some of its customers on Sept. 12. The stock rose nearly 16% over the next two days as investors embraced Unity's return to its roots.
That silly fee had to go away
Recently installed CEO Matt Bromberg removed the so-called runtime fee for customers in the gaming category, lowering the economic bar to becoming a Unity-based game developer.
Users in that community saw the fee as an inconvenient and costly barrier that only applied to a narrow range of independent game writers. The company's soaring revenue growth ground to a halt as developers flocked to alternative platforms such as Unreal Engine from Epic Games or the open-source Godot system.
So it wasn't surprising to see Unity's stock soar when Bromberg reversed his predecessor John Riccitiello's controversial idea. The runtime fee still applies to other customer types such as filmmakers and metaverse experience developers, but adding a small fee per installation of the Unity-based software is less burdensome in those cases.
Bromberg announced the simplified fee structure in a blog post. Beyond ending the runtime fee for game developers, Unity also doubled the revenue threshold for free accounts from $100,0000 to $200,000 per year and locked down an annual review of professional fees. The new fee structure seems more sensible, raising fees for deep-pocketed clients in a controlled fashion.
"We want to deliver value at a fair price in the right way so that you will continue to feel comfortable building your business over the long term with Unity as your partner," Bromberg wrote.
Unity's improved leadership team
Matt Bromberg brings a wealth of industry expertise to Unity's C-suite with 20 years of leadership roles at Zynga and Electronic Arts under his belt. I'm also convinced that executive chairman (and former interim CEO) Jim Whitehurst had a hand in correcting the fee scandal. Whitehurst's former tenure as CEO of open-source software giant Red Hat must have inspired Unity's more sensible pricing structure.
All things considered, Unity appears to be back on track after an unfortunate period of negative market momentum. Only time will tell how deep the scars of the runtime fee might run and how many developers made a permanent switch to other platforms. But you have to start somewhere, and Unity is pulling all the right levers at the moment.
