On Tuesday 12th September Unity announced via their blog post 'Unity plan pricing and packaging updates' that from January 2024 they intend to charge developers a new "Runtime Fee" that’s based on how many times the developers game has been installed. This announcement was met with immediate and 'unified' backlash from the game development community who were quick to question it's legality and upon running numbers for certain games - found some troubling possibilities.
But before we go any further - there's been a lot of confusion about how this new runtime fee will work so let's first take a look at exactly what we know.
Unity's New Runtime Fee Explained
Unity plans to charge the new runtime fee to game's that have exceeded both of the following. The figures for each of these depends on the Unity licence the developer is holding.
1. Exceeded lifetime install count (200,000 for Unity Personal/Plus. 1,000,000 for Unity Pro/Enterprise).
2. Exceeded yearly revenue count ($200,000 for Unity Personal/Plus. $1,000,000 for Unity Pro/Enterprise).
This means that these fees do not effect any game with less than the lifetime install threshold. After installation threshold has been surpassed a fee of $0.20 or less depending on Unity license is charged per installation when the developers earnings within that calendar year exceed the corresponding revenue threshold.
Running the Numbers
The proposal sounds somewhat reasonable at first glance. The 200,000 installation threshold is high and developers can upgrade their Unity license to Pro to further raise this threshold to 1,000,000. To be eligible for the runtime fee at this stage they'd also need to have made $1,000,000 in the past year.
So let's run the numbers. If you're game costs $5 and you sell 10,000,000 copies you've made $50,000,000. Now let's say you sell your game on Steam who take 30% of sales. That leaves you with $35,000,000. Then you pay tax at a rate of 40% leaving you with $21,000,000. Finally you now owe Unity $1,500,000 leaving you with $19,500,000. But hey you're still a millionaire.
Well the numbers don't always add up. What if 15,000,000 users download your free to play game. Even if you run ads or use micro-transaction you'd need to earn over $2,250,000 just to pay Unity the runtime fee.
Then there's the problem of tracking these installations. Unity has stated quote - "All determinations, calculations of installs, and revenue related to the Unity Runtime Fee will be made by Unity in its sole discretion"
How they are going to go about doing this is unclear. If they're using Unity Runtime to make the determination then how will they avoid re-counting additional installations of a game on different machines, what about free weekends, charity bundles, GamePass or even worse - pirated versions of the game?
Unity has since stated that charity bundles, demos and pirated installs won't be counted but failed to elaborate on how they are suddenly able to detect piracy. They also indicated that GamePass installs will not be charged to developers. Does this mean
If Unity are charging developers based on numbers they calculate themselves we can only hope these numbers are transparent and allow developers to refute numbers that don't match true sales.
Many game developers have begun to question whether this new fee, which will retroactively apply to all existing Unity games is even legal. Developers agree to certain Terms of Service when they install a build of Unity. In fact these original terms of service state that users of Unity 2022.x or earlier can elect not to be affected by the newer Terms of Service which introduce the Unity runtime fee.
However, it's since been revealed that Unity has silently removed these old terms of service and updated them with the new ones. Fortunately the old terms were archived and it would be near impossible for Unity's new terms of service to hold up in a court. This means developers using Unity 2022.x or earlier may avoid the incoming runtime fee.
In the USA the switch of TOS may come under 'Breach of Trust' law which states that if you change contracts while a member of the contract is expecting the outlined terms, they might lose their time and money. This change of TOS would then invalidate the contract entirely in this case. If a class action lawsuit is brought against Unity for these changes in Terms of Service it's extremely unlikely they could defend it in court.
Why have Unity introduced a Runtime Fee?
Unity shares have been on the decline for the last five years. In 2017 Unity held a 48% share of the game development market, this is down to just 29% in 2023. In comparison Unreal Engine had just a 13% market share in 2018 and has risen to over 30%.
Epic who own Unreal and made Fortnite which has received $26 billion in revenue to date have near unlimited resources to develop their engine at a blistering pace. The the new runtime fee is perhaps a desperate attempt to generate much needed revenue to help Unity stay in the race. But after the press release on Tuesday Unity lost nearly $750 million in market cap.
In fact, many people have speculated that Unity executives carried out insider trading ahead of the announcement as it was revealed CEO John Riccitiello sold 50,000 shares this year, 2000 just last week according to Yahoo Finance. President of growth Tomer Bar-Zeev sold 37,500 shares ahead of the news while Shlomo Dovrat sold 68,000 shares just two weeks ago.
Over the last few days Godot and Unreal have received almost as many mentions as Unity has - just in a more positive light. For many studios and indie developers, Unity's new runtime fee combined with the loss of trust in Unity as a company is a motivating factor to swap to Godot or Unreal. Others have suggested porting games currently in development to another engine ahead of release.
Several game studios including Landfall, Agro Crab, Innersloth and Mega Crit which currently use the Unity game engine made statements yesterday explaining that they are considering changing engine unless the runtime fee policy is reverted.