Why Unity Software Stock Dropped 12% This Week
What happened
Shares of Unity Software (NYSE: U) are down 12% this week as of Thursday's close, according to data provided by S&P Global Market Intelligence, after the company announced it would backtrack on recent impending changes to its pricing structure.
So what
For perspective, on Sept. 12, 2023, Unity announced plans to introduce a new runtime fee for clients starting in 2024 based on the number of game installs.
"We chose this because each time a game is downloaded, the Unity Runtime is also installed," Unity wrote in the initial blog post explaining the fees. "Also we believe that an initial install-based fee allows creators to keep the ongoing financial gains from player engagement, unlike a revenue share."
On Monday, Sept. 18, however, Unity stock fell hard after the company updated its original blog post with an editor's note apologizing "for the confusion and angst" caused by the runtime fee policy announcement. The company added that it "will be making changes to the policy," thanked its customers for their "honest and critical feedback," and promised another update in the coming days.
Now what
Unity still hasn't released official details regarding exactly how it plans to revise its pricing structure with the new runtime fees. But according to a recording of a Unity company meeting reviewed by Bloomberg, the changes will likely include limiting fees to 4% for games making over $1 million in revenue, as well as ensuring the game installs counted will not be retroactive as initially announced. Rather, the game install count will only include those generated after Jan. 1, 2024.
In any case, coupled with a broader market pullback this week that has dragged down shares of the video game stock even further, it's obvious investors and Unity customers are awaiting more clarity with bated breath.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Unity Software. The Motley Fool has a disclosure policy.
