August 28, 2020
Earlier this week, Unity Software filed its intentions to offer an initial public offering with the SEC.
As a game development platform, the company has benefitted from the current boom in gaming. People are expected to spend an estimated $159.3 billion on video games globally, a 9.3 percent increase from last year, which was fueled by stay-at-home orders during the pandemic.
Unity had two billion monthly active users as of June 30, and 1.5 million creators using its platform, according to the filing. More than half of console, mobile, and PC games utilize its technology, per the company.
While the majority of its use is in the gaming space, other industries, including the medical field and automotive manufacturing, have been able to take advantage of its technology. The company said it has 716 clients paying over $100,000 towards its revenue, 60 of which were not in the gaming space.
However, it doesn't mean Unity has turned a profit yet. While it narrowed its losses in 2020, it lost $54.1 million on revenue of $351.3 million during the first half of the year. Those figures are a marked improvement from 2019, when it lost $163.2 million on revenue of $541.8 million, as well as 2018 when it posted a loss of $131.6 million on revenue of $380.7 million.
There's also trouble looming ahead because the company relies on games being put out by third-party marketplaces like the Google Play Store and Apple App Store. Unity rival Epic, which runs the Unreal Engine game development platform, is currently suing Apple over alleged antitrust violations. The tech giant removed Epic's game Fortnite from its store because it claims Epic was in violation of its policies. Apple requires a 30 percent payment for any in-app purchases or subscriptions, but Epic sold Fortnite game packs directly to consumers without giving Apple a cut.
Unity addressed the potential to run into that conflict in its S-1 when it wrote: "If we or our customers were to violate, or an operating system platform provider or application store believes that we or our customers have violated, its terms of service or policies, that operating system platform provider or application store could limit or discontinue our or our customers' access to its platform or store."
Unity also has a robust ad platform, but could also run into issues when Apple restricts the collection of user data known as IDFA on iOS14. IDFA is a unique device ID number that lets brands and agencies track ad effectiveness and target appropriate users based on activity and location. Without this information, it will be more difficult for advertising platforms to find the best candidates for marketing materials.
Still, with gaming on the rise, the future could be rosy for Unity. Newzoo believes the industry could be worth as much as $200.8 billion by 2023.