The chaos at Unity

Employees at Unity are on edge after intense backlash of the company’s pricing changes for developers culminated in a death threat by one of their own colleagues, leading the company to temporarily close two offices and cancel a planned all-hands meeting with CEO John Riccitiello. Internally, I’m told that a bunker mentality has set in, with managers telling their teams that they can stay home even if their office hasn’t been closed.

A memo sent yesterday morning to employees says that a “credible” threat led to the office closures and that the company is actively working with law enforcement. While the memo didn’t acknowledge that the threat came from inside the house, the San Francisco police department later issued a statement saying that Unity reported an “employee” who had “made a threat towards his employer using social media” and that said employee worked “at an out of state location.”

Naturally, the situation is extremely stressful for Unity employees. “Hey all - the threats are getting out of hand,” Eric Pvncher, an engineer there, posted on X yesterday. “We’re all people trying to navigate this situation together.” Another employee, Paul Georges, posted: “Signing off for a while everyone. This is just too overwhelming and difficult.”

How did Unity, whose ubiquitous game engine powers everything from Pokémon Go to Vision Pro apps, find itself in this unfortunate position? Earlier this week, the company announced that, effective January 1st, developers will be charged per install of their game above a certain threshold, in addition to the yearly subscription it already charges. It’s a big shift for the hundreds of thousands of developers that use Unity, and the move quickly led to swift condemnation, prompting Unity to already backtrack on some key details.

Riccitiello, the former Electronic Arts CEO who took Unity public in 2020, has certainly had his fair share of PR blunders to date, such as when he called game developers “some of the biggest fucking idiots” just last year. But the handling of this pricing change may take the cake. (As for the lazy stories out there noting the suspect timing of his recent stock sales, SEC filings show they were done through a run-of-the-mill 10b5 trading plan, which is prescheduled to avoid that very kind of insinuation.)

“The games industry is super toxic generally but the rollout of these pricing changes was an absolute shitshow,” a well-connected investor in the gaming industry told me this week. “Just utterly incompetent. Devs are freaking out because they can’t even calculate what their incremental costs will be, and their investors are breathing down their necks to assess impact.”

While I obviously hope that whoever made the death threat is held accountable, Unity still has to contend with its angry developers. A letter signed by 18 mobile game companies with combined downloads of over 3 billion says Unity “threatens to destabilize this ecosystem.” The developers represented by the letter say they will turn off Unity-powered ads in their games — which would deprive the company of significant revenue — unless the changes are rolled back.

When Riccitiello was blasted last year by game devs for his “fucking idiots” comment, he apologized by saying, “I am listening and I will do better.” But according to the letter, Unity’s pricing change was “made without any industry consultation.” Perhaps he should listen more.

Earlier this summer, I reported that Epic Games was looking at raising a new round of funding. I noted at the time that the Fortnite and Unreal Engine creator would likely have to raise at a lower valuation than its last $31.5 billion price, given how its business has been trending.

Epic recently told investors that it’s now no longer raising another round, I’ve learned. Perhaps that decision has to do with this next tidbit: after cutting back on hiring earlier this year, the word inside Epic is that a significant round of layoffs is on the near horizon. Bringing costs down could be a prerequisite to raising money on more attractive terms later, but that’s just my guess for now.

A spokesperson for Epic declined to comment. If you know more about what’s happening, please get in touch.

When Big Tech is faced with antitrust scrutiny, it loves to make antiquated analogies.

To Apple, its 30 percent App Store cut is like when developers used to pay retailers commission from their sales in exchange for physical shelf space. To Google, the billions a year it pays to be the default search engine on Apple devices is also like “the way a supermarket might charge a cereal brand to promote its products at eye-level on a shelf or at the end of an aisle.”

This analogy, made in a recent corporate blog post by Google president Kent Walker, is meant to overly simplify the nature of its deal with Apple to an audience that doesn’t know any better. Google is just paying for prominent shelf space here, like Liquid Death was doing in my local Whole Foods earlier this summer.

That is, of course, a gross oversimplification of Google and Apple’s relationship, which is finally being put under the microscope by the Department of Justice in the biggest tech antitrust trial since when the US sued Microsoft over 20 years ago. The reality, as anyone who actually knows anything about the deal will tell you, is that the two companies have created a complex arrangement spanning more than just “paying for shelf space.”

It’s perhaps the least understood, most impactful deal in the history of Silicon Valley, and it deserves to be scrutinized. I mean, when you have to tell your employees to avoid using terms like “market share” and “bundle” internally, you just may be engaging in monopolistic behavior. I also got a kick out of Google’s lawyer being unable to provide data on how many people change their default search engine setting when he was asked in court this week.

With week one of the trial now over, I recommend reading this analysis of the takeaways from the trial so far from my colleague Adi Robertson, who has been in the courtroom watching. The trial has nine weeks left, and here are the specific testimonies I’m looking forward to the most: Apple services chief Eddy Cue, Mozilla CEO Mitchell Baker, and former Google ads exec Sridhar Ramaswamy.

A roundup of what else happened in the tech industry this week that you may have missed:

Some interesting career moves I noticed this week:

Thanks again to those of you who took the time to submit questions for my mailbag issue last week. While I don’t like to pat myself on the back, I’m sharing this response from a former Facebook executive in the spirit of encouraging more reader interaction:

“You are a truly brave human for suggesting Cambridge Analytica was not the destruction of all that is good and noble in the world. Your writing continues to be smart, thoughtful and nuanced. I view that as an endangered species worthy of federal protections.”

Okay, now I’m expecting more of you to tell me what I’m doing wrong. Don’t let me down!

That’s it for this week. Thanks for subscribing.