Unity lays off an additional 25 percent of its staffers

When Unity laid off 265 Weta Digital engineers in November, the company warned that more layoffs would be necessary in the near future as part of a plan to “refocus” on the company’s core game engine business. A large chunk of those changes became real on Monday as the Unity Engine maker told the SEC that “it plans to reduce approximately 1,800 employee roles, or approximately 25% of its current workforce.”

“This decision was not taken lightly, and we extend our deepest gratitude to those affected for their dedication and contributions,” Unity Director of PR Kelly Ekins said in a statement to The Verge. Ekins added that the layoffs will be spread across “all teams,” and a company spokesperson told Reuters that this round of layoffs will be complete by March, with additional internal changes coming thereafter.

The massive staffing cuts come after over 1,300 layoffs already implemented across the company in multiple waves since June 2022 (including those November Weta Digital cuts). Despite that, Unity’s statement to the SEC says these further cuts are necessary “to position [the company] for long-term and profitable growth.”

Hemorrhaging money

The company’s recent financial statements show why such a drastic change is even being considered. Despite annual revenues measured in the billions, Unity has struggled to show a profit in recent years, reporting net losses of $859 million for the 12 months ending in September 2023.

Unity’s stock price, which jumped nearly 4 percent in the immediate wake of the layoff news late Monday, is back down to its lowest level since mid-December as of Tuesday morning. That stock price is currently down nearly 40 percent from its late 2020 IPO and off over 80 percent from its peak in late 2021.

But Unity stock is now up over 40 percent since interim CEO Jim Whitehurst (who was the former CEO of Red Hat) announced a “company reset” in a November shareholder letter. At the time, Whitehurst warned that Unity “will likely include discontinuing certain product offerings, reducing our workforce, and reducing our office footprint” as the company implements plans “to increase our focus on our core; the Unity Editor and Runtime, and Monetization Solutions.”

Recovering from Riccitiello

Of course, Whitehurst was only in a position to make that kind of statement after October’s abrupt resignation of Unity CEO John Riccitiello after nine years heading the company. Riccitiello departed amid the announcement and significant rollback of a developer-enraging plan to charge “per-install” fees on all Unity Engine games. That botched rollout—which has since been scaled back to a capped runtime fee for successful commercial projects—contributed to a sense of widespread joy over Riccitiello’s departure across the game development community.

Riccitiello oversaw Unity through an expensive wave of corporate acquisitions after the company’s IPO, including cloud gaming service Parsec, mobile ad giant Ironsource, and 3D collaboration company SyncSketch, to name just a few. Those ancillary products and services may be in particular danger as Unity plans to “reduc[e] the number of things we are doing in order to focus on our core business and drive our long-term success and profitability,” as Whitehurst wrote Monday in a company memo obtained by Reuters.

Even with the massively reduced headcount and new focus on the engine business, Unity isn’t expecting its corporate fortunes to turn around any time soon. In his November investor letter, Whitehurst said, “We expect the impact of this [runtime fee] business model change to have minimal benefit in 2024 and ramp from there as customers adopt our new releases.”