What Does Unity Do?
Unity (U) builds software solutions for game developers, with its main product being a game engine that developers use to build their own games on. It enables developers to be able to build and deliver games on multiple platforms, get access to data on player activity with their games, and helps developers monetize their games. The company does this through the delivery of both subscription-based and direct-sales software that it provides to its customers. The company has also started to provide AR and VR solutions for game developers.
History of Unity
Unity was founded in Copenhagen by Joachim Ante, David Helgason, and Nicholas Francis in 2002. The trio met through a post on OpenGL by Francis to create an open-source shader-compiler for Mac-based game developers, which he was at the time. Ante was a high school student at the time and responded with an inquiry to help. The company was officially incorporated in 2004 under the name Over The Edge Entertainment. They changed the company’s name in 2007 to Unity Software Inc.
The technology was unique and became a success because it was developed with different platforms in mind. Unity’s game engine is now used to make games and other types of software experiences for more than 25 platforms. These platforms include desktop, consoles, VR, AR, and mobile. Unity games can be deployed online, and the system can be used to monetize the games that are developed on its platform.
Unity Ticker & Stock Price
Unity Software Inc. is traded on the New York Stock Exchange under the ticker symbol U. The company has a market capitalization of over $12 billion and the stock price has fluctuated over the past 12 months from over $200 to barely over $30. The stock saw new highs in both 2002 and 2021 before coming back down to pre-COVID levels in 2022.
How Unity Makes Money: 3 Ways
Unity makes money from game developers who are looking for a game engine that enables their games to be built off of and helps deliver playability onto multiple platforms, such as PC, Mac, and iOS. The company only receives revenue through the sale of software and tools and through subscriptions to its primary game engine.
Software Subscriptions
Monetization Tools
Game Developer Tools
1. Software Subscriptions
Unity’s primary revenue stream is through the subscriptions the company receives from developers who pay to use its game engine software. Its customers pay for the pro game engine, even though they can develop on the game engine for free, in order to get advanced features and to get access to taking Unity’s name off of the game they are creating.
2. Monetization Tools
Unity also provides operational tools and software. It sells software directly to developers to help them operate and monetize their own gaming apps. Anyone who develops on the Unity engine uses these operational software tools to monetize their games through either ads or in-app purchases. These tools are an add-on to Unity’s main engine and Unity makes money through a revenue-share with its customers.
3. Game Developer Tools
Unity also creates and sells software solutions for developers that cover analytics, content delivery, or player communication. These are things that some games might need in order to play effectively online and to help developers continually update their games that are built on the Unity engine.
Overall, the company is a software business that develops software to sell to game developers. All of its revenue streams and its entire business model are based on that notion.
Unity’s Profit & Valuation
Unity Software reported revenue of $320+ million in the first quarter of 2022. This puts its expected yearly revenue north of $1 billion. However, during the same Q1 of 2022, the company also reported a negative net income of $177+ million. The market capitalization, or potential valuation, is sitting at just north of $12 billion.
It’s difficult to rely much on a valuation, however, when a company is reporting a negative net income. Unity is hoping that its dive into both virtual reality and augmented reality provides a customer base both in and out of game development. These markets could be more profitable than its current business model and client base, even though it currently is one of the most widely used game engines on the planet.
Bottom Line
Unity Software builds software and tools for game developers to create and deploy games on a multitude of platforms. The company makes money by selling its software either through direct sales or via a subscription platform. The company is looking to diversify its product portfolio by offering tools for augmented reality and virtual reality and is currently in development to do so.
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Jeff is a writer, founder, and expert that focuses on educating readers on finance. From investments to small business loans, he has the expertise needed to guide you down a better understanding of things that are difficult to grasp. He's been writing for 10+ years on a variety of financial topics and has been featured on sites like Forbes, Investopedia, The Balance, Yahoo! Finance, USNews, The Week, The Street, Nasdaq.com, and more.
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
