Unity CEO Matt Bromberg needed to end the ‘war’ against customers

Today, I’m talking with Matt Bromberg, who is the CEO of Unity, one of the leading video game development platforms. He’s been in the job for less than a year, and in many ways, he is the perfect Decoder guest.

Unity is one of those companies that we love here on Decoder because we interact with its products all the time, but the company itself is somewhat hidden from view. Unity doesn’t make or publish its own games. Instead, its core product, the Unity game engine, is what all kinds of games — especially mobile ones — run on. If you play games on your phone, which you probably do, you’ve used a product built with Unity. It’s not just on phones by a long shot, and you’ll hear us talk about that quite a bit, too, but Unity as a company is what makes a core part of the mobile phone experience work.

That’s a Decoder all by itself, but Bromberg took over the job of CEO in a moment of crisis, and he’s made significant changes to the company since. You’ll hear him describe Unity as being “at war with its customers” before he joined, and he’s not wrong. The former CEO, John Riccitiello, led the company through a major pricing model change, called the runtime fee, that was going to raise costs for many of its customers. The communication around that pricing model change was also, frankly, terrible. Unity developers were in open rebellion, leading to Riccitiello’s resignation and, eventually, the company’s decision to scrap the runtime fee altogether.

So you’ll hear me ask Bromberg about his decision to walk the fee back after he joined, because it was clear to him even before he took the job that he would need to make that choice if there was going to be a Unity left for him to run. And you’ll hear him explain that while deciding to make such a big change was easy for him, working out how to execute that change slowed him down a bit.

Bromberg’s in charge of Unity during a moment of contraction for the game industry overall — studios are closing, and some big bets on things like the Metaverse and live service games haven’t paid off. So we talked about all that and where he sees growth ahead: Unity isn’t just a game engine provider, but the platform for everything running those big live services and the monetization on top of that.

One note before we start, because it really grabbed me: Bromberg’s one of the first CEOs to come on this show and disagree with me about the importance of structure. I tend to think of a company’s org chart as a proxy for its culture and its tradeoffs. I’m always saying that if you tell me your org chart, I can guess 80 percent of your problems, and so we joke that Decoder is really a show about org charts. But Bromberg told me he thinks culture isn’t enabled by structure. You’ll hear what he means.

Unity CEO Matt Bromberg. Here we go.

This interview has been lightly edited for length and clarity.

Matt Bromberg, you are the new CEO of Unity. Welcome to Decoder.

Thank you so much for having me. It’s really my pleasure.

I am very excited to talk to you. This is a perfect episode of Decoder: You are less than a year on the job as the new CEO. You took over, you made a bunch of changes to the company, you restructured the company, you hired a new C-suite, you used to work for the old CEO — and then, Unity itself is a very core piece of technology that I think is under-covered. So, it’s like a perfect episode. Thanks for joining us.

Unity really is kind of under-covered. It’s on everyone’s phone: Everyone has games on their phone, and Unity is almost certainly powering those games. What is Unity? What are game engines?

Game engines are effectively the thing that developers use to build games. And maybe that’s obvious, but the technology is pretty deep and pretty complex. Unity is a platform where developers can aggregate all the tools, technologies, and content they need to build interactive applications. And yeah, to your point, it’s a really important tool in our world. About seven out of every 10 mobile games in the world are built on Unity. About 30 percent of the [top 1000] PC games in the world. Seven out of 10 best AR games were built in Unity. Last night, or two nights ago, at GDC, eight out of 10 of the top independent games that won awards were built on Unity. We’re an important partner in that ecosystem.

There’s a lot of history in game engines and investments in game engine development. A lot of companies that made popular games and then thought they could peel the engine out of those games and turn that into a business; that’s worked or, mostly, not worked in various ways. Unity is just an engine company. You’re not trying to make consumer-facing games.

That is correct. We do a little bit. It’s funny you should say that. Generally speaking, that’s absolutely true. We are not a game developer and a publisher. We have recently been doing more development ourselves on a couple of projects. But only to ensure that our tools are production-ready and dogfooding what we’re doing. We have an expert team that does some of that, but it’s really about feeding back into our development process more than trying to be a games company. I was the chief operating officer at Zynga for a lot of years —I know what it is to run a games company. I think it can be very hard and unnecessary to try to run a games company and an engine company.

I made that comparison explicitly because your biggest competitor is Unreal Engine, which is Epic Games. Epic is a games company, they’re the Fortnite company. They’re doing both, and then they’re expanding their engine into Hollywood, into automobile design, all this other stuff. You seem pretty narrowly focused on games still. What do you think about that competition?

There’s a lot to unpack there. First, there are increasingly lots of applications of Unity outside of gaming. And in fact, what we call industries is the fastest-growing part of our subscription business.

But we are, to your point, much more focused now than we were before. We were chasing sort of everything: Hollywood, architects, digital twins for building nuclear reactors, and all sorts of things. Right now, we’re really just focused on a few core verticals.

For example, most of the in-dash experiences in cars are built on top of Unity. If you think about the little computer that’s in the dashboard of your car, it feels a lot like a phone or some other small device. And that’s really our strength to be able to design and develop interactive experiences for those things. [We work in] virtual, retail, and lots of applications on the manufacturing floor, so we do a fair bit outside of gaming.

I guess the other thing to understand is that Unity as a platform is focused on making games, but we are the only company in the world that helps developers through the whole lifecycle of development. From prototyping through building, operating in life service, and then crucially to acquiring new players, monetizing, and inventorying your games. The big second piece for us is the advertising and marketing piece. It’s a piece that we think grows really organically out of our core business, which is about deeply understanding consumers, and helping developers build for those consumers. And then when they turn to that next phase where they need to acquire players, we’re also there to help them.

I kind of understand why all the car makers use Unity. They under-spec the processors in their cars, and the closest comparison to that is a mobile phone, which is power constrained. I don’t think a car is power constrained; I think they’re just cheap, but there they are. They’re just using under-specced mobile processors to drive their dashboards. Unity is a great engine for mobile phones. It makes sense that you just expand in that direction.

But that’s not games, right? That’s just another set of constraints that looks familiar, so you end up there. When you talk about games, we’ve just gone through an apocalypse of live service games recently. That industry doesn’t seem as predictable. It doesn’t seem like the games industry knows where its next set of growth will be, or how many people it should employ quite broadly. There’s some big change there that it feels like I can’t draw the line as quickly as I can to the expansion into cars, right?

Yeah, listen, there is a lot of consternation about the video game industry. I’m someone who shares that. I’ve been around long enough to know that towards the end of hardware cycles, everybody’s throwing up their hands and saying, “Gee, I don’t think gaming’s doing so well.”

I’ve been through this cycle several times. Here’s what happens: Creative people innovate, and they make new experiences. Those experiences explode into hits, and that drives growth. That has always happened. I think the pain that we’re feeling right now in the industry is principally a pain born of creative destruction, so I accept that there’s been a fair bit of pain. There’ve been a lot of layoffs and other really unfortunate things. I think that’s about folks reimagining themselves for the future. The explosion of new devices and new experiences is going to be the gateway to that innovation.

The thing about Unity is… It’s not so much that we’re optimized to run on low-spec phones, it’s that when you build any experience in Unity it can operate at a really high level of performance fidelity anywhere. And that’s where consumers are moving. We used to be in this world where, and I remember this… I worked at Electronic Arts for many years. We were in this world where folks believed that visual fidelity and high-quality visuals were the primary things that video game consumers wanted, and they were obsessed with it. And I think what we’ve realized now is: that’s not what’s driving the consumer. I don’t think it ever has been what’s driving the consumer. We’re really proud of the quality of our visuals, but what drives consumer adoption is gameplay innovation. And all that is what’s going to drive this industry forward. I’m hugely optimistic about it.

Keep in mind, again, web games, AR, and VR. We’re going to get a new Nintendo platform. We’re going to get new Sony and Microsoft platforms. Phones are going to become ever more powerful. You’ve got dual-screen phones. The form of games will change, and the nature of them will change, but the appetite for interactive experiences, to my eye, has not lessened in any way.

Just in the context of what a game engine is, what you’re describing here is: Let’s say I have an idea for a game. I see a market that’s changing. Unity is going to provide me with the physics engine that lets me build the game, with the ability to render the game in high fidelity across a number of platforms. And that number of platforms is important because a game needs to be everywhere now. You’ll operate the live service that lets people connect and play multiplayer, and then you’ll help me monetize the game by putting ads in it. Which part is the hardest right now? Because it seems like the games industry is “every part is the hardest,” and it seems like you have a much clearer view. What do you think is actually the hardest part?

My experience of making video games for many, many years — which is what I did before I came to Unity — is that generally speaking, especially for game publishers of any scale, there’s a really simple equation. At the end of every year, they look at their P&L and say, “How much money can I spend next year making new things?” They usually have a big life service or many, and that’s what’s kind of driving forward the business on a day-to-day basis. But the video games world is about hits and about new experiences, and you have to make investments. You also have to control and modulate those investments. The most important equation is people and time. If it takes me, if it’s 300 people and three years to make a game, versus 50 people and a year, that equation is very, very different.

The amount of innovation I can afford, the amount of new starts I can afford, and the amount of marketing I can afford, are very different in both equations. To me, when I think about Unity’s place in the world and where we can be the most help, it’s there. We’re a proud tools provider. We help video game developers make games, hopefully, as efficiently, quickly, and easily as possible so they can spend more time creating innovation. And if we’re really good at our job, they can have more starts, because they’re moving more quickly and they can do it more efficiently. And that’s the role I’d love to see us play there. And then to your point, as many new starts as we can get out there, great. Now we’ve got to go out and find new players. So, that’s the flywheel you want to see.

Let me ask one more kind of existential question. I want to get into the changes you’ve been making here. I feel like every industry, but in particular, the games industry got fundamentally confused by the combo platter of the pandemic in Fortnite. Meta was like, “We’re all going to wear headsets all day long in our house.” And I don’t know, it doesn’t seem like that’s happening. A bunch of companies thought, “Okay, we can see all these people playing Fortnite. The future of live music is going to happen in video games, and we’re going to build these huge live service multi-experience games, and everyone’s going to spend all their time in them.” And all that’s left from what I can tell, that’s sustainable, is Fortnite. There’s not another Fortnite, and that drives a lot of your competitor’s business. That drives a lot of Epic’s business. Do you see that as a mistake that the industry is correcting, or do you see other games being able to reach that level and then go even one step farther into, “Okay, we’re having true metaverse experiences”? Because I don’t see that anywhere right now.

I don’t think about it exactly that way. Listen, I think that the pandemic more than anything pulled demand forward. It pulled about a couple of years of consumer demand forward, and then we did see some natural slackening after having pulled all that forward. And I think that part of the dynamic is obvious.

Meta renamed the company, and they were like, “We’re not Facebook anymore. We’re Meta now.” And I don’t know if that’s paid off for them.

I was never a massive believer in the metaverse during that period of time. I’ll tell you why: Because, as a game maker, I experienced all those new platforms and just thought they were garbage. And I thought, “This looks like the games we tried to make 15 years ago. There is no way that’s a sustainable consumer experience.” All sorts of metaverse companies — I was completely confused by them. Having said that, I actually continue to believe, and I see the vibrancy of big live service platforms and communities as being fundamental to the games business. I mean, yeah, Fortnite, but Roblox, FIFA, and every game… Every major company has many enormous live services with millions or tens of millions of players. And in some ways that is the fundamental feature of the video game business right now — 80 percent of the people are deeply invested in this experience that they’ve been playing for years.

And I think one of the challenges now is, “Okay, how do I get those folks to move to something new?” I think that’s the push-pull that we’ve had. But I see platforms, communities, and interactive communities of gaming continuing to dominate and explode. And I do think we’ll see some new things. I think we’ll see innovation, some lighter experiences that will begin to challenge those. But I wouldn’t confuse the failure of the metaverse with some lack of sustainability in major life service gaming.

That’s a connection that has always been the most interesting to me. If you believe that the world is going to be big live service games, it’s not that much of a jump to say, “And we’ll all wear headsets all day long.” We’re spending time virtually which will just get more immersive. That’s a straight line. But it seems like we didn’t hit the first spot.

No, I think some of that has to do with — again, put aside the idiocy of some of the metaverse stuff… The future, to some degree, is going to be tied to massive consumer adoption of peripherals, or maybe that’s an old-fashioned word for it, but new devices. I’m an enormous believer in AR, for example. I think that one of the things that happened during the course of the pandemic and the couple of years since is we’re starting to get closer and closer with every rev to something that’s real here. I have no doubt that a couple of years from now everybody’s going to be wearing AR glasses. And how long has it been since Google Glass came out? But the combination of AI and voice, which enables really easy interactions with the form factor, the battery life that is now possible, and the ability to overlay information and services in front of your eyes, to me, is obviously going to explode.

And we’re going to look back and think about the time when we kept reaching into our pockets to pull out this thing for everything, it’s going to seem quaint. But it takes a long time to get true mass consumer adoption of these devices because it all has to be perfect. But once it hits, it explodes.

You’re a glasses wearer. I can see you wearing your glasses. I wear contacts. My theory is that you have to deliver far more value than is required to care for whatever you mount to your face. And glasses deliver an extraordinary amount of value. I’m horrible at maintaining my glasses; they’re very scratched, they’re very dirty. I wear them just to go to bed. I don’t have to care for them, but they deliver. I’m allowed to see, that’s a huge value amount.

But you go outside in the sun and you put on sunglasses, right?

But I only get value at that time. I don’t come back in and keep wearing my sunglasses, which is what I think Meta wants me to do. I think they want us to believe that transition lenses are going to be cool, and maybe they’ll pull that off. Who knows? Mark Zuckerberg’s wearing a chain. He’s got a haircut. Maybe he’s going to pull this off.

My point is, right now the most compelling AR experience is way down on the curve, right? It’s actually the Vision Pro, which is a huge thing that has an external battery and limited app support. Do you see, when you put on the Vision Pro, “Okay, I can get from here to there if the hardware improves on some curve?” Because when I reviewed it my conclusion was, “We’re racing down a dead end. This is the best pass-through VR that I’ve ever seen, and we should not keep doing this. It’s never going to get better than this.”

We partnered with Apple in the creation of that device. And I would say this, I would not… History is littered with first-generation devices that seemed absurd and then in another form became ubiquitous. And I do fundamentally believe that when the device form factors get right, consumers will adopt them. I do think it’ll be a mix though. I think one of the things we learned is that there’s a pretty high bar for folks wanting to isolate themselves completely from the world. And that’s why. When I think about AR, I think that the first mass-adoption devices we’ll see will be those that allow people to continue to be social and interact in the world while overlaying or enhancing that experience. Completely absorptive experiences have… I think folks will engage in those things, but there’ll be a time and a place for it. So, my view of that device was that it was a first swing. And also, by the way, Apple has a very long history of that as well. The first generation of devices is not necessarily the thing that takes off. So, I continue to be hugely encouraged by that.

Are you of the view, I think the cliche was, that this is a simulator for the thing they want to actually build?

I don’t know. I mean, I guess maybe that would be something you’d say after you’ve shipped it, maybe it didn’t go quite as well as you’d want to. But I applaud their willingness to put a stake in the ground, get out there with something, and then go back to the drawing board and continue to invest. At the end of the day, all of us making technology products need to do that. So, pushing the envelope for me is a good thing.

I ask this, because again, with the games industry as it is currently configured, we are at the end of a console generation. It appears to be restructuring, reconsolidating in some ways, and falling apart in other ways. It was just GDC. There’s just a lot of turmoil when you get the whole games industry in one conference center and talk about the future. And the big bets, like “We’re all going to play a bunch of AR games,” while Pokemon Go just got sold. A lot of the big bets seem to be structurally changing.

Unity obviously plays a part in that. But the sugar rush of the pandemic led Unity itself to make big decisions about how much demand there would be that fundamentally you’ve had to undo. The decision to charge the runtime fee feels like your predecessor as CEO was saying, “Okay, there’s going to be this much more demand for all this stuff. I can now extract a toll.” Do you see that in that framework?

I don’t. I don’t. By the way, I also don’t, fundamentally… I believe in the vibrancy and growth of the video game business, which, by the way, is still growing nicely and continues to be larger than streaming media, streaming music, and theatrical distribution combined. And this you will grow in high single digits, or maybe low double digits. I see this business as really vibrant. I don’t think the things that Unity has done in the past were sort of a … And frankly, the other folks were a direct response to demand… I accept it maybe as folks staffed up across the industry and then demand slackened a little bit. I don’t think that’s so much this year, but maybe in the year before — you had some dislocation.

But I think for us, the thing about Unity which is spectacular and fascinating, is that we sit at the intersection of so many powerful forces: 3D, digital advertising, interactive entertainment, AI, I could go on. And you could convince yourself that you have a meaningful role to play in all of that. Because we have this platform and this engine, this tool that is connected deeply to all those powerful forces. But you have to make choices in the world if you want to execute at an exceptionally high level. And the way we’re thinking about this business now is that we are going to make some really focused choices, hit the ball out of the park around those things, kind of re-earn the trust of customers, be better partners, and deliver at a much higher level. And that all good things are going to come from that. Which doesn’t… It’s great to be expansive, but if you want to deliver, you have to make choices.

I think this is a perfect transition to what I think of as the Decoder questions. I want to start with a quote. You gave an interview to IGN where you said, “We want to be a fundamentally different and better company. It is what we want. We have to have a fundamentally different relationship with our customers and our community. We want to develop and deliver products in a fundamentally different way. And that starts with you thinking about it differently.”

One of my ideas for the show is that structure is a proxy for culture. You have to build a corporate structure that enables the culture you want. You’re basically talking about totally transforming the company, in that quote. Everything has to be different, down from how you deliver the products to what your relationship with the customer is. You’ve been there less than a year. How have you restructured Unity to get to the culture you want?

It’s funny. Culture is a really interesting thing. And the way I think about culture is that I think it’s actually fundamentally backward-looking in a way. What I mean by that is, when we think about our culture in the context of a company, we usually, what we’re usually doing is saying, “Hey, we got together to do this thing and it went pretty well.” Now, let’s stop for a second and look backward and ask ourselves, “How were we behaving? What were our values while we were doing that? Because it went pretty well. Let’s write those down, and we’ll put them on a mug or a T-shirt,” and those are going to be … that’s how we’re going to talk about our culture. That’s not a criticism from my perspective. I just think that’s usually this thing where we look back to understand how we’re behaving. And because it’s worked.

And so, the way I think about transforming culture is about setting really clear expectations and communicating more than anything an approach and an expectation about how we’re going to behave with one another. What’s going to count as the way we do what we do? How do you know you work here? Because every great company feels that way. Like, “Hey, this is how we do.” When you unpack that idea, folks get clear on that, having a common view of it. But having that view be authentic to the actual experience is important. For example, on my first day there was a lot of pressure to do the kinds of things that you’d expect in a big company. “Hey, we should send out new values.”

I don’t do that. Because how do I know? I just got here, I haven’t met anybody, we haven’t done anything yet. How about let’s work together, let’s get to know each other. Let’s figure out how. And then we go back in an authentic way that’s actually connected, in a way that isn’t about mugs and T-shirts. Can we get to a short list of what we expect of one another? And that’s sort of how I think about culture.

It’s interesting you say that. It reminds me that when we started The Verge 13 years ago, we used to argue endlessly about what a Verge story would be. And now our audience knows, right? And that’s a backward-looking reflection of how we made some definitions and held onto them, communicated them. But you have also restructured the company. You have a new COO, you have a new CTO, you have a new CFO — that’s an entirely new C-suite. You’ve rethought how the company should work. What are the changes that you’ve made?

The first and most important thing for us was to reinvest in the relationship we had with customers and to be a better partner. We were at war with our customers, effectively, when I arrived. Folks were boycotting us. They were really unhappy with how we were charging them and how we spoke. And you can’t have a business where we’re your customers. That’s insane. The first thing was to take a breath and reorient ourselves around being good partners, around authentically trying to deliver, to listen to people, and authentically trying to deliver what they need as the primary touchstone of what drives our behavior. And I know that, in a way, that sounds obvious and like a cliche. But some organizations do that and some don’t. The process of coming to understand in an authentic, but also accurate, way what signals to listen to and respond to is more complicated than it seems. But the first piece was to be better partners.

The second piece, to your point, was I wanted us to lead differently. I wanted our organization to be different and to have different values. And in my experience, the fastest way to do that is to make changes at the top. Especially, by the way, if you think you might later have to change the rest of the organization, what is soul destroying for people is when somebody comes into a company that’s having a little bit of difficulty and they start restructuring the company and they leave the management layer intact and they think, “Well, hang on a second, who is responsible for all this stuff? How do we skip over the folks who were in charge?” And suddenly like, “I’m taking it in the neck. How did that happen?” If you want different outcomes, if you want different approaches, some of it’s changing culture, but a lot of it is changing people.

And especially if you want to do it quickly, you can’t be afraid, because you need alignment. You need instant and immediate alignment if you want really fast results. So yeah, we changed a lot of leadership. Then, I think about the other things we did… We did some important things in our business, which we can talk about if you want to, just in terms of we needed to make certain investments, especially in our advertising business and other things. But putting those aside for a second, the third big thing from a culture and a company perspective was that I think we went about trying to redefine how we do what we do. And honestly, that is my obsession. I am someone who believes that the what is a lot less important than the how.

If you have the how right, all the what’s will go better. And you have to ask yourself when you come into any organization, if that organization is not organically producing really high-quality answers all the time… What you should not do is run around trying to tell people what to do and ask them to do it differently. There’s no leverage in that. There’s no leadership in that. There’s no inspiration in that. What you need to do is ask yourself, “Why is that? How come this organism doesn’t produce good answers?” And start to get into the how and start to fix the how and then you start getting better answers. That’s the key to transformation.

Those ideas are in a little bit of tension. Let me just push you on that.

There’s the notion that you came into the company, you didn’t want to impose culture from the top down. You wanted to wait and see and diagnose the problem of how the company made choices. And then there’s a need to move fast in taking out all this old management, putting in new people, and you have to have a vision in order to go hire all those new people and change fast. Those ideas are in a little bit of opposition.

You’re right, you’re right. Totally fair. You have to listen. The truth is you have to do both. And you have to do both in a way that is authentic and effective. I am generally very, very clear and we as a team are very, very clear about what we want to do and what we think the right direction is. But here’s where they’re not in conflict: It’s the process through which you get clear about what you want to do, which is where all the action is. So, it’s not, “Hey, here I am, here’s what we got to do.” It’s much more about, “Hey, here I am, help explain to me how we got here.”

What do you do? What are the challenges? How do you guys see this? You fly all over the world, you talk to customers, you meet with everyone you can inside the company. You have hundreds of conversations, hundreds. Because in the beginning when you get here, you have no idea. If you’re being honest with yourself, you ought to have no idea what to do. Where you get that inspiration is through the coalescing of the hundreds and hundreds of conversations.

And at least what I experience is, I begin to understand where the areas of energy are and where the areas of opportunity are. And so then, when you show back up, and you stand up in front of people and you say, “Hey, here’s the direction I think we ought to go in.” It doesn’t feel like something you came up with by yourself in a room with a legal pad. It’s a reflection and an echo of what you heard from all the assembled people. It’s organic to what you’re doing, and it’s a byproduct of listening as opposed to stuffing it on top of people. And that’s why if you do it that way, it ought to be better.

You are the new CEO, but you also used to work for the old CEO: John Riccitiello was the CEO of Electronic Arts when you worked at Electronic Arts. Then he became the CEO of Unity, and you replaced him. What did you learn about what not to do or what to do from that experience working for the old boss?

John actually hired me in my first job in video gaming, back in — well, it wasn’t my first job in video gaming. He hired me at Electronic Arts in 2012. I learned a lot of what I learned about this industry from him, and have an enormous amount of respect and admiration for him, so I have really no inclination to sort of pick apart what he did or didn’t do.

The world is a new place now than it was four or five years ago. Unity is a new company and we’re pursuing a different direction.

All right, it was worth a shot! So, you made some changes to the top. I think this is the big Decoder question: How is Unity structured now?

Here’s the thing, and maybe you and I just won’t agree about this. I’m much less interested in structure than I am in behavior. And I’ll tell you why. I’ve worked in big companies, a lot of them over the years. My experience is that what people want to do, especially if they think they want to improve things, is they immediately go to an org chart. They go and they start moving things around. The truth is, if people are not properly oriented, if they’re not properly situated, if they’re not spiritually in the right place to do what you need to do, I don’t care what the structure is, it’s not going to work. And there is no right answer to structure. People think, “Hey, if I could just get it in the right shape, it’s going to be okay.” The truth is that some structures accelerate some outcomes and create different tensions, and other structures accelerate other outcomes and create other tensions. I tend not to think first about structure. I try to think first about the landing approach and behavior.

Once we get oriented around how we’re going to do what we’re doing and people start behaving differently, different things happen. If somebody comes to me, for example, and says, “You know the reason we can’t do this, it’s because this thing is over in this division and this thing is over in that division and they can’t talk to each other; they should be in the same division.” I have no time for that conversation. What do you mean? Do you have a phone for that person? Do you guys sit down and have a conversation about that? If we’re properly motivated, what difference does it make where it sits? Look, of course, I’ve restructured things and I’ve changed things, so again, I don’t want to, but in terms of orientation, I want to land one before the other because one I think is more substantive and more likely to fundamentally change things than the other, if that makes sense?

It does. My joke on the show is that I always ask that question, because to your point, if you tell me your structure, I can abstractly tell you 80 percent of your problems. I can identify the trade-offs that come with various structures. And it seems like you are making different trade-offs. You changed the structure, which means there’s something you wanted to change in the trade-offs you were making.

Yeah, I’d say principally the change in the structure… The only meaningful changes we made were around reducing layers and making sure that everybody was communicating, and that we could quickly escalate any issues, make decisions, and move on. We always had the right folks in the room to operate in a unified way. And if ever there were issues, we insisted that they get escalated and resolved quickly. So if there was some organizational thing that made it impossible for us all to sit together, or if there were too many layers and I couldn’t see, we made some of those changes. And I do think those have been important, but again, not as important as the behavioral changes.

Obviously, part of restructuring is shrinking. You’ve had a few rounds of layoffs now; last year, in January, 25 percent of the company was let go. You just had another [round]. Is that all to get smaller to reduce those middle layers, or is there something else going on there?

I wasn’t at the company for that really, really big one, but I will offer my strategy and my approach to these things. And I can already anticipate you’re going to tell me there’s a tension in them.

Welcome to Decoder. The producers, by the way, joke that that is what the tagline is.

Yeah. And by the way, that’s life, right? Nothing is black and white where it’s a Zen thing. But I never… We as a management team do not think about trying to get financial leverage by doing layoffs. I hate that. I think it’s nonsensical. What you have to do is make decisions and try to be really disciplined about the very few things you think you can do really, really well, and be a little bit ruthless about stopping the other things. And so for me, those kinds of restructurings are about putting your money where your mouth is as it relates to investing in the things that are important and ceasing the other things.

The thing I think that most leaders miss is, when they stand up and they talk about things that are important, what they don’t realize is that all they’re doing is adding another thing to people’s to-do lists. Because last week you said something else was important. The week before you said something else was important, and folks drown in those priorities. And nobody ever tells you what to stop doing, because that requires courage, and you probably wouldn’t be doing them if it wasn’t a pretty good idea at some point.

There’s a reason why people do things, but if you want organizations to perform really well, you have to be really, really clear about what you’re not doing, and then you have to put your money where your mouth is with respect to that. And sometimes there’s real pain associated with that, and it’s the unfortunate part about it, but in my experience, you come out the other end in much better shape.

Here’s the other big Decoder question: How do you make decisions? What’s your framework?

I’m a big believer in full transparency, context, sharing with people, and having them share with me everything they understand about something. And then holding that up and making a call. And so, for me, it’s about engaging in a really deep conversation, being sure we’re talking about the same thing that we understand at the same level. I expose all the thinking I have on a topic, I’d like you to do the same thing. And we balance the pros and cons and then we make a call and we move on. For me, it’s much more important that we make a decision, than it is what that decision is. And it goes back to what we were talking about before. I believe in the how more than the what. If it turns out that decision was wrong, we’ll make a different decision. But the thing that kills companies, especially large companies, is a lack of courage and clarity around making decisions. So, my thing about decisions is, mostly make them.

That one comes up a lot. You are an interesting person to ask that question, because you came into the company and one decision that you had to make was obvious, I think, right? You said you came into a company that was at war with its customers, and that is because of the runtime fee that your predecessor had announced, which has shifted the pricing model of Unity to a per-install fee. Every time someone installed the game, the developer would have to pay, which would skyrocket costs.

I don’t know why that fee was instituted. It was obviously a problem. Here you are, you’re the new CEO. You knew you were going to walk that back, right? But you’re saying the how was really important. Walk me through how you made this decision, where the outcome seems so clear.

You’re absolutely right, and I appreciate you asking the question because I do think it’s a good example of what we’re talking about. I absolutely knew I was going to roll it back before I even took the job. The important part was not that I was going to roll it back, and not even so much how we were going to roll it back, but in the way in which we’re going to roll it back. For me, the most important thing, as I said, was, “Hey, I wanted to get back into a place where we were being partners with our customers.” And so, what I did was get on an airplane and started flying around, meeting with customers, and saying, “Hey, between you and me, we’re going to repeal this fee. I have some ideas about how, what do you think of them? Here’s what they are. If you want to vent about how upset you are about the old thing, that’s why I’m here too.” But I prefer to say, “If I did this, how would that strike you?”

And we started an open conversation. You have to select the folks you talk to because it is confidential. It’s important, you have to trust people. But we consulted and what we heard again and again was, “Hey, I accept that we’re not paying you enough. I actually think you’re delivering more value. I just hate the way you ask for the money. I don’t like the structure, I don’t like the tone. And by the way, if you’re going to raise prices, I need you to deliver better and execute better, because the two together strike me as aggravating.” And so, by the time… It took a little while, but it wasn’t a very long time. It was a few months and people were saying, “How come it took you so long?”

But it’s because I wanted to be sure we heard people and I wanted to be sure they understood that we were going to do things differently. We’re going to be disciplined, we’re going to communicate, we’re going to execute at a high level, and we’re going to listen. What came out of it was pretty sharp increases that, by and large, and listen, nobody likes to have prices raised… But we came out of it with a stronger bond with our customers, and the way we talked about it internally was equally important. Because to your point, we made this decision which was really ruinous for the company. You have to ask yourself, “How did that happen?” And so, how we make the new decision, how we have that conversation, who’s at the table? What kind of analysis do we do? What kind of feedback do we take? Getting into that and using that exercise to fix the organism and fix the process was equally important. It’s like, again, it was less about the thing and much more about using the thing to get healthy.

Can you just, in a sentence, diagnose how the decision to impose the runtime fee was made since you looked into it? And then how the decision to pull it back was made since you made that one differently?

I see Unity as a product company, and I’m a big believer that the way we create value is by delivering product value, and then folks will pay us for the value that we create. The thing about the runtime fee was that it was a business model. We were thinking about dynamics and how you can get people to do this versus that. If we raise one price here, then they’ll be forced to do that. That has nothing to do with creating value. That’s a trick. It’s a business model trick. It’s a hack. I don’t believe in that. I believe you create value by building better products. And so, the runtime fee decision was about, “Hey, we’ve got an engine business and we’ve got this ad business and we can’t exactly figure out how those two things would leverage one another and work together really well.” Okay, here’s a way. “I think we can structure a fee that brings them together and sort of encourages (which would be a kind word) folks to spend in one area if they spend in another.” I think customers found it more coercive than encouraging, but whatever.

My point is that, no… The way those two things come together is that both the developer part of our business and the ad part of the business depend on a deep understanding of consumer behavior. And just as folks who are building games need to understand how consumers are behaving in those games, in order to effectively acquire users, they also need to understand how consumers behave and that we can create product linkages and value there. That’s how we’ll drive value, and that’s substantive. I think that was sort of the distinction between the two approaches if that makes sense.

When you rolled back the runtime fee, you increased prices on some of the tiers of Unity. It seems like those could go up independently if you think you’re delivering more value there. But they did go up pretty steeply as you mentioned. And then there’s a monetization side where you’re making investments in ad companies to help you deliver more monetization. There’s a tension there. You can see that increasing ad monetization helps you get more money if there are more installs, so you might want to lower the price on the engine to get more market share and compete there. But if you increase the price on the engine, you might just make more money upfront against this ad thing that you have to keep developing. How are you reconciling those things?

I agree that there is a tension there.

We’re going to make a Decoder game in Unity called There’s a Tension There.

Any ad business at a high level thrives by opening the top of the funnel as broadly as possible. That’s what drives so that you’re left with something at the bottom of the funnel. That’s what ad-driven businesses do. And you’re right, there is some tension if you charge for the product, then presumably fewer people will use it, and then that’s not good. I think the important thing to understand about our structure is that Unity is free for everybody if you make less than a couple of 100,000 dollars in revenue. The top of the funnel is really big and broad. And there are millions of developers of Unity, and that’s why in the aggregate we have something like eight billion DAU (daily active users). It’s not deduped data. Cut it in half, say four billion people who are touching that Unity runtime in some way. So, it is hugely distributed.

I accept that if it was completely free, maybe you’d have more people using it, but again, keep in mind that you’re only paying us once your game is really successful. And as a percentage of what you’re making it’s not… it ought not to negatively impact you.

That’s interesting because I’ve seen that dynamic play out on other platforms, particularly the app stores. Where you’re free to a point and then you tick over into the next tier of success and suddenly you’re paying a penalty — or what developers perceive as a penalty — for success, right? You’ve tipped over into the amount of revenue it would cause you to pay. And you actually have an incentive to stay just under a certain level of success in order to stop paying more money, in order to prevent paying more money. Do you see that dynamic in Unity?

Listen, I think that, in general, our customers and the community understand that in order to invest in the engine, it’s important for us to be able to charge folks. And engines are very complex beasts and there’s a lot of engineering there, and there’s a lot of investment we make every year. And in general, I think there’s an understanding about that.

The hard part of the ads business, particularly on mobile, is that you’re up against the platform vendors. Google is particularly interested in ads in various ways. Apple is not interested in ads in various ways. The mobile ad business, particularly in iOS, took a big hit from app tracking transparency.

Apple is interested in their own ad business. Just to be clear.

They’re definitely interested in their own ad business. They’re not interested in anyone else’s business. I think that’s a good call out.

But they made the ad business on iOS much harder with app tracking transparency. I think I would argue that they made the correct trade-off. They made it harder to track people across apps and platforms, the web, and mobile. I don’t know that anyone perceives that that has gotten better. I still feel awfully tracked. But it had an impact on, for example, Meta’s business to the tune of billions of dollars. Is that a challenge that the ad industry has overcome? Is that a challenge you’re still working on?

I think it’s a challenge that largely the industry has overcome. It certainly had a meaningful impact. Different folks could be more or less cynical about what Apple’s motivations were or not. I don’t know. But I think now it’s largely in the rear-view mirror. And that in general, the systems have adapted.

You mentioned Apple is interested in its own ad business. The other thing they’re particularly interested in is in-app purchases. Their services revenue line is the one that’s growing as iPhone sales taper or even decline. I look at a show like Severance or Ted Lasso and I say, okay, that’s the shiny face on a huge revenue line that is mostly in-app purchases and games, right? Candy Crush whales are the growing business, and we just get Ted Lasso for free because we don’t want to talk about in-app purchases and games in that way.

I think 60 percent of the app economy is actually the game economy.

How much pressure do the platform vendors put on that? Because across the non-game iOS app ecosystem, the developers we talk to are basically just in full outrage mode, right? Apple calls them, they call it a shakedown. You can see various developers argue loudly for and against Apple. Sometimes the rules change. Sometimes all of Europe’s issues or regulations change the app store. The games industry has not been as loud, right? The game makers… In-app purchases make everybody money, and it seems to be left alone. Do you see that same conflict or that same angst there?

Well, I think Tim Sweeney at Epic has been exceptionally loud, in fairness.

But listen, I think that there’s a tension there, Nilay.

Are you all just following behind him? Are you just letting him take the heat?

Apple and Google are incredibly important partners to the industry. And they’re incredibly important partners of ours. They’re platform partners. They’re partners to our customers, and so there’s a tension. I think it’s probably a brilliant flash of the obvious to learn that folks would rather pay less. But I think what you’re seeing in the industry is tension between folks who are relatively small in the scheme of the world, have important partnerships, and probably don’t have a lot of interest or incentive to be at war with their biggest platform partners.

Right, that’s why I’m asking about Tim. I was going to come to that. Most game makers are not willing to be at war. He is, because he has Fortnite, and that’s just a weapon that he can wield or shield, I suppose, from attacks he might face. No one else has that as far as I can tell. Is the industry just waiting to see what happens with Epic, or is there anything else concerted going on? Because I would say the pressure from the platforms is coming in different ways, particularly as different countries around the world regulate their fees and how open they have to be. They’re going to seek that revenue and games are already the largest portion of the revenue.

I think your description of the landscape is accurate. There are clearly pressures, significant pressures, regulatory pressures in Europe, regulatory pressures in the U.S., lawsuits, alternative app stores, and new devices. These are all pressures. And I do think that that is a feature of the world we’re in right now, and I’m sure Apple and Google are feeling some pressure around those things.

At the top of the episode, you were saying you perceive that there’s a lot of growth yet to come in the industry. You mentioned the Switch 2. There’s a new console generation, there are new form factors, and potentially there’s new hardware that’s coming.

All of that is up against those pressures. That’s the escape valve. Apple can keep squeezing gaming on the iPhone for fees, but if you can escape and the business is actually on the Switch 2, that’ll relieve the pressure. If the business Ray-Ban AR games — let’s say that works — maybe relieves the pressure, you get some competitive relief there. What’s the number one relief valve that you see as being viable in the near term?

Well, one of the things that’s really interesting in the most recent version of Unity we shipped has support for web GPU. I think web gaming is a really fascinating, really fast-growing part of our world, and it’s maybe a little bit back to the future. But I think that’s a great example of what you’re talking about.

I see the web as an out for a lot of app store problems, and then there’s a lot of pressure on, are the browsers good enough? Are they being held back by the mobile vendors in particular? Do you see the browsers being held back? Is there something you want to do in the browser that you can’t do on a mobile phone?

I think that as it relates to tools and standards there’s progress we need to make. But I’m optimistic about that, and again, I see web gaming exploding. I think we’ve largely got what we need, and you’re going to see more of it.

Do you think that web gaming is on a phone, or on a desktop?

I think principally you’ll be on your phone.

So, you see people playing more games on mobile Safari.

I think Apple at least thinks it’s “Why not?” That’s the problem.

They might, well… I just think that the consumer will ultimately push people and partners where they have to be pushed. I think that. And I don’t know exactly how that’ll play out, but I don’t see Apple and Google as preventing web gaming.

I’m curious because the other thing I see from our audience is, boy, people love building gaming PCs, and actually, that’s a relief valve in a way. People love the Steam Deck; that’s another relief that way. But it doesn’t seem like those are flickers of growth that would give you some relief from the pressure.

I am much more optimistic in a generalized sense about the industry than you are, so I wouldn’t say flickers and you’re making me feel sad about it. I don’t see it that way.

I think the scene is real, but it’s not.

It’s real. It sort of seems to be, it is what it is. It’s a sizable audience. I don’t know that it’s going to suddenly become more massive, a place of more massive consumer adoption. I think that we have… Gaming happens on your TV. It happens on your phone and happens on your PC. There’s overlap in some of those places. But we continue to be, I think, more of a lean-back society in the living room and a more on-the-go society than we are a sit-down-at-your-desktop society. I think you’ll see those two probably grow more quickly than the third.

I want to be very clear for you and the listener, The Verge as an organization is very high on the Steam Deck. I feel like if I didn’t assign other stories, we would only write about the Steam Deck. That might be the only thing that happens in our newsroom, but I also know who we are.

We’re usually supportive of PC gaming too. As a tool, what we mostly think about is how can we ensure that whatever the new platforms are, we’re supporting them on day one so that developers can push to those platforms. We don’t have favorites. We don’t choose. We want to be everywhere, and that’s mostly how we think about that.

The one thing that would change that is another idea that I think flashed really brightly, particularly during the pandemic, and then has maybe come back to Earth, which is the idea that we would stream the games. Unity would run on big data centers operated by Netflix or Microsoft or someone, and really what we’re doing is live-streaming video, which maybe requires a total re-architecture of the entire industry. Everyone loved this idea. This idea has not, I would say, panned out in any realistic way. Do you think it has a future?

I don’t see it. I think the hurdles were a combination of technical, really hard problems to solve there. And I think it was a consumer solution looking for a problem that people didn’t have. It was like, “Well, I don’t know. I’m playing this game on my PlayStation or my PC. Why do I need to use my phone as a controller or get some other controller, because you want to delivery the game? I mean, okay, I downloaded the game last month. What are we talking about here?” I just don’t think consumers cared.

I think there was some desire to play the games everywhere. I agree with you, it obviously didn’t happen. But the thing that really prevented it was that you couldn’t install a game streaming app on a mobile phone, which would have been, I think at least one thing to market as opposed to however the platforms wanted you to do it. Do you think if they opened that up it would become more viable?

I don’t think, I don’t. Again, I think that the input device is maybe more important that people understand in this context. I don’t want to play Call of Duty on my phone with an external controller. And I want to pick a mobile version of Call of Duty, which is a different experience. I think different platforms should be developed as unique experiences. So, this idea that it was going to be this one version, which, I get it at a high level, at a technical level, but I don’t think consumers wanted it.

I feel like I’m required by law to ask you about AI to wrap up this conversation. I have to say it’s been a relief to not be mostly talking about AI with a CEO. I appreciate that.

I would never force you to talk about AI if you don’t want to.

I appreciate it. If you listen to some other episodes of Decoder, you can see, I’m just fighting it for an hour.

The games industry, like almost every creative industry, is in turmoil because of AI, right? The creatives are upset. We see video game voice actors putting out Instagram Reels about having their voices cloned by AI for AI characters. You see entire games being made in AI. Actually, there’s a very funny video where someone claims a game is AI, but it’s actually just Elden Ring. That’s deeply amusing to me.

But you see this happening. I generated some simplistic game using AI. I vibe coded it here. I shipped it, we’re ready to go. And then you see the creatives in the industry really worried that their jobs will be taken over by AI. I know Unity is somewhat agnostic to this. I think that’s actually the phrase you used. “The Unity platform is agnostic to the derivation of the 3D asset,” but then there’s the actual making of the game. Then there’s who gets paid. There are layoffs across this industry for a variety of reasons and rethinking of cost structures. How do you see AI playing out?

Yeah, this is a big topic and we could probably spend longer than you’d want to talk about it. I would say this, first, you’re right. We are agnostic with respect to where and how 3D assets get created because Unity is an assembly point. And it’s always been a place where you ingest or build the assets you want to build. You assemble the tools you want to assemble, and then you build these deep systems around them, which become fully formed games. I actually don’t think that any of the layoffs we’re seeing in gaming are driven by AI. I don’t think that. I think what video game developers and publishers will do, as we talked about a little bit earlier, is if they gain efficiencies in the making of games, I think they’ll make more games. And that’s where they’ll use that extra wiggle.

What we sort of believe will happen at the end of, maybe not the end, later in this process, is that there’ll be human creators sitting in the middle of the process of creation of these games, using a platform to create them. And they will have vertically oriented agents that are helping them do so. An agent that specializes in physics, an agent that specializes in sound, an agent that specializes in I.O., whatever it is. And there’ll be multiple people in that loop, and they will have those tools at their disposal, and they will need to bring them together in an interactive experience. We would like to continue to be at the center of that, and we think there is a need for a platform to be there. I think that it’s sort of a slightly Grognardian, boring point to make, but it’s critical. The biggest problem with either the creation of assets or even the full imagining of games, this hallucination of full game experiences, is that there’s no connection to workflows.

Games are massively deep systems, successful games, that need to be built around some of these assets and even some experiences. I think AI will be a really important part of putting those things together, but the systems, workflows, connections, how you manage large teams of people doing those things, and how we output and distribute those things — those are likely to be a part of this process for a really long time.

We have talked about a lot of things that are pressure on the industry, and you’ve pointed out that you’re more optimistic. What are the things that are making you excited about the future of games right now?

There almost isn’t anything that’s not making me excited about the future of games. Again, I see the difficulty we’re experiencing as this moment of creative destruction. One where the industry is going to have to reimagine itself to some degree, and that reimagination is going to take the form of innovation and gameplay, innovation and distribution, innovation and business models. And just we’re going to rethink. Just to take one example, because I think we haven’t talked about it, think about how meaningful game-related and actual property has become in the broader entertainment industry. That, by the way, was never true, until very recently, right? There had been a million unsuccessful movies and things that related to games, very few good ones. Now, suddenly there’s this whole other life. We’ve talked about some of the new possible distribution platforms, the shifts in the business models, and platform partners. All these things are opportunities. And yeah, we as companies… You feel pain and then you respond to that pain, and I think the history of the industry is that we innovate through those things.

Do you agree with me that Uncharted would’ve been better as a long-running series instead of a movie?

This is my thesis. Adaptations got good when we started making TV shows out of them, not movies.

It’s easier. Yeah. I mean, even though I think The Witcher was good as a series, at least initially.

I know. I know. I’m sorry. I enjoyed it.

Fallout was great. Listen, I think there are a lot of things that are better in that form than a full movie form.

All right, well, Matt, we’re going to have to have you back and only talk about video game adaptations for a full hour. That’s my next pitch to you. This was great. Thank you so much for coming on Decoder.

It was my pleasure. Thank you for having me.

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