Unity’s IPO filing shows how big a threat it poses to Epic and the Unreal Engine

Unity, maker of the popular Unity Game Engine, has filed to go public at an incredible moment in time. Its chief rival, Epic Games, is currently busy arguing that Apple is holding the Unreal Engine hostage, and Epic will appear in court this very afternoon to demand a restraining order so Apple can’t cut off access to developers.

What’s more incredible, though: the numbers revealed in Unity’s new S-1 filing show the company is far more of a formidable rival to Epic than we thought.

We knew the early surge of interest in Unity may have forced Epic’s hand, first when Epic drastically dropped the price of Unreal Engine in 2014, and in 2015 when it started letting developers build with Unreal for free.

But despite those moves, Unity says that in 2019, over half of the top games on mobile, PC, and consoles were made with Unity — including 53 percent of the top 1,000 games in the iOS App Store and Google Play.

Unity says as of June 30th, it has a “global reach” of 2 billion monthly active end users (read: consumers, not developers) adding up to 8 billion hours of gameplay per month, as well as 1.5 million monthly active creators. Those creators developed 8,000 apps and games each month with Unity in the six months prior to June 30th.

And while surely many of those 8,000 apps and games are tiny projects (the charm of game engines like Unity and today’s Unreal is that anyone can try), Unity says it had 716 specific customers that contributed more than $100,000 per year to its bottom line — 60 of which are using Unity for something other than games.

The S-1 suggests Unity is continuing to grow, too, both in terms of revenue ($542 million in 2019, up from $381 million in 2018) and employee head count — from 2,715 employees in December to 3,379 in June.

It’s not all good news financially, though, as Unity admits it’s never made a profit since the very beginning. It lost $163 million this year, up from $131 million the year before that.

Obviously, Unity would like you to think it’s continually growing revenue could make up for that loss, but like any IPO filing, it includes plenty of reasons (aka “risk factors”) as to why it might not happen.

I won’t bore you with all of them here, but this one stuck out:

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.

In some cases these requirements may not be clear and our interpretation of the requirements may not align with the interpretation of the operating system platform provider or application store, which could lead to inconsistent enforcement of these terms of service or policies against us or our customers, and could also result in the operating system platform provider or application store limiting or discontinuing access to its platform or store.

Sound familiar? These are the sorts of things Apple and Epic are fighting about right now.

Unity also spends a considerable amount of time discussing how any changes to how China treats intellectual property, game software, and corporate ownership might impact its business.

Unity is planning to trade on the New York Stock Exchange under the symbol “U,” which, frankly, is a little surprising. I didn’t know you could still call dibs on a single-letter ticker symbol.

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