September 19, 2023
The games industry has been turned on its head by news that one of the industry’s largest engine providers has announced its shift towards a “per-game install” pricing model. The industry has voiced significant resistance to the change, and on Monday morning Unity signalled a willingness to re-evaluate the policy. The sands are shifting quickly on this one, but this note provides a quick recap of events to-date, the main concerns, some of the legal issues at play, and steps games businesses might want to take right now.
On 12 September 2023, Unity announced a new “Unity Runtime Fee” will come into effect on 1 January 2024. The Runtime Fee is on top of Unity’s existing subscription fees for its various plans, which are charged on an annual, per-seat basis. Once a game passes certain eligibility thresholds (see below), the new Runtime Fee would be charged each time a game is “installed”.
What are the eligibility thresholds?
The thresholds vary depending on which Unity licence a business holds:
- Unity Personal and Unity Plus: if a game generates over $200,000 in the last 12 months and has at least 200,000 lifetime installs; and
- Unity Pro and Unity Enterprise: if a game generates over $1,000,000 in the last 12 months and has at least 1,000,000 lifetime installs.
What are the new fee rates?
Once a game meets the eligibility thresholds, the Unity Runtime Fee will be calculated using a rate that varies based on quantity of installs, the install’s country origin, and the subscriber’s Unity plan. The applicable rate is then multiplied by the number of eligible installs. The rates range from $0.01 – $0.20 per install.
When do these fees apply?
Unity has clarified that the changes are “not retroactive “, noting it will only “charge once for a new install” made after 1st January 2024. However, while the Runtime Fee will only apply to installs after 1st January 2024, it will apply to games released before that date (if they meet the eligibility thresholds above).
Are discounts available?
It seems Unity Pro and Unity Enterprise subscribers will be eligible for volume discounts. Unity has also stated that some customers may be eligible for credits on the Unity Runtime Fee based on the adoption of Unity services beyond the Editor, such as Unity Gaming Services or Unity LevelPlay mediation for mobile ad-supported games.
Why are games businesses concerned?
Some complaints simply revolve around the manner in which the changes were messaged and communicated. However, there are also a number of significant open commercial uncertainties, including:
- How Unity will calculate the fee: Developers have raised concerns around how the fees will be calculated. For example, it is not yet clear how the nuances of such a complex industry (such as giveaways, bundles, subscription services, offline games, installs on multiple devices, demos etc) will be accounted for. Unity has also not disclosed how it plans to prevent fees being applied to pirated games, or in instances where excess installs might be carried out maliciously (e.g. install-bombing).
- How Unity (or games businesses) will verify game data: Unity has revealed developers will be charged based on Unity’s own internal assessment of what it believes to be an accurate number of new installs – as determined by a “proprietary data model” that is not disclosed. There is currently no provision for developers to audit or verify this data.
- Who is responsible for fee payment for subscription deals: Unity’s FAQs state the party responsible for the new fee is “the entity that distributes the runtime“, suggesting that for subscription deals, this is the platform (e.g. Microsoft for Games Pass). However, it’s not yet clear how or why platforms would agree to this, or how the cost would be passed on to developers and publishers.
- Who is responsible for fee payment for regular sales: Who the “distributor” is for regular sales remains unclear, and could be anyone from the platform, publisher, or the self-publishing developer.
- How exclusions will be implemented: Unity has said that charity giveaways and (some) demos are excluded from the fee, but it’s unclear how this will be implemented in practice. For example, EU-based developer LizardFactory, who was donating proceeds to non-profit organisation Planned Parenthood and C.S. Mott Children’s Hospital was reportedly told by Unity that these were not “valid charities” but “political groups“.
What are we seeing from the industry?
A lot. A number of prominent studios have made public declarations against the move. Some have vowed to boycott the engine and swap to other engines for future projects. A group of some of the largest mobile games businesses (including Voodoo, CrazyLabs, TapNation, and Azur Games) penned an open letter, encouraging developers to turn off IronSource and Unity Ads monetization until Unity reviews this policy.
What are the legal concerns?
Legal concerns surround Unity’s new fee model, with some viewing it as potentially anti-competitive due to Unity’s prominence in the industry (particularly mobile). Trade bodies TIGA and the European Games Developers Federation have called upon their regional competition regulators, urging them to examine the game engine industry more closely. The games industry is already under heightened scrutiny from competition regulators in various parts of the world, such as the UK’s Competition and Markets Authority (“CMA”), which either recently concluded or is actively investigating matters including subscription practices, mobile app store terms and cloud gaming distribution services.
There is also concern over the enforceability of Unity’s changes. On the whole, it’s not uncommon for SaaS companies to unilaterally update their terms, which users are deemed to agree to by continuing to use the product. This is usually explicitly permitted in their terms of service. However, this right isn’t legally absolute (at least in some jurisdictions), even in B2B arrangements. For example, under UK law, if a clause in a service provider’s standard terms of business permit them to provide a contractual performance substantially different from what is expected, that clause would only be enforceable if it passed a “reasonableness” test. We expect that the significance of the shift, and relatively little prior notice, would likely be core grounds of contention. One additional complicating factor here is that Unity’s terms are governed by Californian law and mandatory arbitration. Also, while Unity has announced the new fee structure, it hasn’t actually updated its licence terms yet as far as we can tell.
Various reports suggest some businesses are even considering potential class action lawsuits in the US due to these concerns.
What should games businesses do?
- Engage with Unity to provide feedback and seek clarification on remaining uncertainties.
- Check when your Unity licence renews, and what version of the Unity terms of service you’re on. This is because some historic terms of service had additional LTS (long term supported) provisions baked-in, enabling users to remain on historic terms in certain circumstances. However, this may not be as straightforward as you’d expect.
- For those pitching new Unity games to publishers, be prepared for some tough questions (anecdotally, we’ve heard reports that some publishers are not willing to sign new Unity projects).
- Start factoring these new fees into forecasts and cashflows now. A complete policy u-turn from Unity is possible, but probably unlikely at this point.
Unity’s Monday announcement teased further details within a couple of days. However, potential changes to the plan have already started leaking online as of Monday evening, with reports suggesting that Unity is expected to limit install fees to 4% of a game’s revenue for customers making over $1m, that installs pre-Jan 2024 will not be counted towards eligibility thresholds, that developers will be able to self-report install numbers and a cap on potential fees in general. We’ll be watching the space closely for further official developments.