Unity, the company behind the game development engine of the same name, has just announced that its president, CEO, and chairman John Riccitiello “will retire” effective immediately.
“The Board will initiate a comprehensive search process, with the assistance of a leading executive search firm, to identify a permanent CEO,” reads the press release, adding that James Whitehurst will step in as interim CEO, president, and board member. “Mr. Riccitiello will continue to advise Unity to ensure a smooth transition.”
Notably, Unity’s new interim CEO is an outsider: Whitehurst is an advisor at Silver Lake, a private equity firm that owns about 9 percent of Unity. (He also spent 12 years as CEO of Red Hat, an IBM subsidiary known for a specific flavor of Linux.)
While the press release makes no mention of it, this is happening amidst a giant game industry controversy after Unity introduced a new pricing model and retroactively changed its Terms of Service, breaking trust with many game developers in the process.
Some threatened to never use Unity again, or even switch to a new platform in the middle of developing their next game, because of the fees Unity planned to charge every time their games were installed — regardless of whether those installs were legitimate new purchases or whether their games were developed under a different previous agreement with Unity.
In addition to fears they might get hit with huge bills when the changes took effect, game developers pointed out malicious actors could band together to protest marginalized developers by repeatedly downloading and re-downloading their games. And, they were none too happy to see that Unity had removed its Terms of Service from GitHub, preventing developers from easily tracking changes there.
Unity has since changed its pricing scheme — it will now let developers pay them a flat 2.5 percent of a game’s revenue if they’d prefer not to pay based on “engagement.”
Many were quick to point the finger at Riccitiello personally for the disastrous pricing changes, given his history of making controversial statements and decisions around monetization in the past. Here’s my colleague Tom Warren:
Riccitiello is almost certainly responsible for some of Unity’s growth too. He ran the company for nine years, nearly half its existence, into an era where half of the world’s top games were built using its engine (according to the company’s IPO filing in 2020). But the company has never made a profit, losing hundreds of millions of dollars every year. From the company’s most recent quarterly earnings report:
Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $2.7 billion as of June 30, 2023. We expect to continue to incur operating losses on a GAAP basis for the foreseeable future due to the investments we will continue to make in research and development, sales and marketing, and general and administrative. As a result, we may require additional capital to execute our strategic initiatives to grow our business.
Perhaps Unity finally felt forced to turn the dial to profit, like so many others, now that it’s more difficult to borrow money. Perhaps a new CEO will turn to cost-cutting instead.
On September 25th, Unity’s Marc Whitten repeatedly apologized for the pricing incident, saying that he was “committed to making sure that we continue to work as hard as we can to earn your trust,” but some developers have decided that they simply don’t trust the company anymore.
“I don’t know of anyone formally retracting their ‘I won’t use unity ever again’ statement,” my colleague Ash Parrish, who’s been reporting on this Unity saga since the beginning, tells me. “I think folks will still use it for in-flight projects but increasingly look for ways out for their next ones.”
Unity says it will release third-quarter results on Thursday, November 9th, and its 2PM PT webcast may be a chance for the company’s interim CEO to begin to address the panic.
Update, 6:15PM ET: Added additional context, including how Unity has never made a profit.