Interim CEO Jim Whitehurst explains Unity's product-led path to profitability

Unity interim CEO Jim Whitehurst seems to know the company has a lot to answer for. Since September the company has been rattled first by a horrendously unpopular "Runtime Fee" that would have charged developers every time a game was installed. Then after modifying it into a fee that developers can either calculated based on revenue or "engagement," it revealed to investors it would need to lay off employees and adjust its financial guidance to account for the dip in expected revenue.

Then the layoffs came. Unity spent the last quarter laying off 1,800 workers in a process Whitehurst said in an interview with Game Developer is now "complete."

Former CEO John Riccitiello was already out the door before they took place, alongside a number of IronSource executives that joined the after the two companies bonded in a $4.4 billion merger.

Change is inevitable at any organization, but it's fair to say Unity's changes have been dramatic. The turbulence drove many developers to consider switching engines, with many exploring the possibilities of open source engines instead of turning to one of Unity's corporate competitors like Epic Games. It will need to make more changes in the months ahead as it attempts to regain the trust of the game development community.

According to Whitehurst, those changes will be led by a bid to make Unity a "product-led" company, instead of a "finance-led" one. He and chief product and technology officer Marc Whitten said they're leading Unity to become a "more focused" company that will focus on supporting video game creation, rather than a number of splintered products.

Whitehurst says the "passion" of Unity users made him want to accept the interim CEO role

When Unity's board of directors reached out to Whitehurst to offer him the role of interim CEO, he said he was inclined to say "no thanks." The former COO of Delta Airlines and former CEO of Red Hat didn't have video game industry experience. But he said after he received the offer, he looked up recent news about Unity and was surprised by the backlash to the Runtime Fee.

"If this inspires this much passion, there's something really cool here," he remembered thinking. He said he learned that lesson during his time at Red Hat, the open source enterprise software company. He said he was used to the "very, very passionate people" invested in the mission of open source development. The backlash seemed "familiar." He said took the offer to work on a product that "inspires as much passion" as Unity does.

Whitehurst gave off the energy you find around many executives in the traditional corporate world, but his words grew sharp when he described how most companies are "big, dull, beaurecratic things." It was here he seemed to cast a critical eye back at the Runtime Fee fiasco, warning how companies that build great products, become "sales-led," start not building great products, and then become "finance-led."

That's a sentiment you probably wouldn't have heard from Riccitiello. In fact he once exhorted developers who didn't consider monetization early in development "fucking idiots," words he would later apologize for.

He and Whitten painted a picture of where the company is headed. That picture involved a reshaped focus to the core product and knocked down walls between Unity Grow and Unity Create, so developers think of them as a series of interlocking tools that can be pulled out of the same box. To achieve that, the company had to shut down certain ends of the business, like its agreement with visual effects studio WetaFX (laying off 265 workers in the process) and selling its digital professional services division to Capgemini.

Unity's military contracts were not mentioned in this cost-cutting discussion.

"A lot of those things...we've shed to get back down to our core, which is 'how do we obsess about creator success, whether that is building, operating, or monetizing games?'", said Whitehurst. Whitten noted that his job title shift from "vice president of Create" to "chief product and technology officer" was meant to partly communicate that his role is about Unity as an entire product, not one side being the beloved, approachable engine, and the other being the monetization end that brings in an overwhelming percentage of revenue.

He alluded to his days at Microsoft during the launch of Xbox Live, remembering how when players signed up for the service, they had to navigate through three EULAs to begin using it. Those three agreements existed because the company structure demanded users acknowledge when they were entering a part of the software governed by a different division, but it added friction to the experience.

"It's about breaking those barriers down and saying, 'let's not worry about how how we lay out our financial statements or how we organize these people, but instead let's organize around the problems our customers have or the ways that we can serve them value,'" he said.

A streamlined, developer-focused Unity that understands how it's turning a profit would be good news for some who've lost faith. But during our visit to the San Francisco office during the 2024 Game Developers Conference, the impact of the layoffs still hung in the air.

Unity will finally be profitable, but workers paid the price

Unity's 1,800 layoffs in the first quarter of 2024 was the culmination of two years of cuts that ended with it laying off a little over 3,000 people.

That slash-and-burn process led to "hundreds" of layoffs in the summer of 2022, 300 layoffs in January of 2023, 600 layoffs in May of 2023, and the aforementioned 265 layoffs in November.

The net reduction in workforce is likely lower, as the company did hire for new positions through the last two years.

Over half of those happened under Whitehurst's watch—admittedly, this was after the company faced a reckoning of the business decisions made by his predecessors that grew the company without obtaining any profits after a $1.3 billion IPO.

Whitehurst said he hopes the company doesn't need to lay anyone else off for the rest of 2024 (wouldn't he have the power to make that a mandate?). But the cuts were needed, he said, to create a sustainable economic model that could finally make Unity a profitable company.

He referenced Unity's previous guidance that it was expecting to reach margins of 25 percent. "What I've said internally is, hey, this isn't 'a let's cut some more and then pray revenue increases to the point that we're profitable' situation," he said, seemingly hoping to put the cuts into context.

"We are getting the company to a size where we are proudly profitable. We have...'pretty normal' margins for a software company and now we're going to scale from there."

When pressed on what accountability there was to prevent future layoffs, Whitehurst wasn't what you'd call conciliatory, saying a broad focus on profits was still needed to prevent another massive contraction. "Building and committing to an economic model that is profitable—then [we need to] hold ourselves accountable to delivering against that model."

He did say the path to that profitability isn't based on "hope." With headcount locked in and predictable costs, he said he and his colleagues have "hammered on" the revenue plan. "We have plans against every dollar of revenue. We know where they're going to come from," he said, before explaining the next step was for him and the senior team to "hold our teams accountable for delivering those [numbers.]"

He challenged Unity-watchers to watch the company hit those goals—and if it doesn't, he said he wouldn't be the right one to lead the company going forward.

Whitten said Unity hopes to be "transparent" about its goals with employees, to create a "loop of accountability" that can help employees respond quickly if a decision isn't working out. "When something's not working out or some mistakes are being made...it's the learning you want coming after [those mistakes] at any level of the organization," he said.

"You want to reward that and you want to hold people accountable to that on both sides."

"You ship your org structure"

Speaking with Whitehurst and Whitten was a fascinating compare-and-contrast with an executive who'd been around video games for many years, and one new to the industry who seemed sincerely invested in its success. Whitten spoke to the nuts and bolts of where Unity is looking in terms of its roadmap, development trends, and its relationship with "creators" (how Unity identifies its customer base), and Whitehurst spoke deftly about a larger corporate strategy.

Whitehurst at one point alluded to "Conway's Law," a production theory often shortened to the phrase "you ship your organizational structure." It refers to the idea that the organizational structure of the group that ships a product correlates to the nature of the product. (A Unity spokesperson clarified that Whitehurst was alluding to Conway's law in reference to its previous method of presenting its Create and Grow divisions, and that it is now speaking with developers about 'the tools they need to be successful' like Runtime, Editor, and Monetization.)

In the wake of so many layoffs, Unity's organizational chart has changed dramatically. Those bullish about the company's future can look at the org charts, projected revenue, and expected costs, and likely feel confident in the direction Unity is headed.

But "you ship your org chart" is an abstract way of saying "people define the product," isn't it? And plenty of people who made Unity the company it is today—who were tasked with impossible goals of reaching beyond the company's grasp—are gone.

Wherever Unity lands this year, the product-focused org chart it will "ship with" isn't just the headcount of the current company, it's the gaps left behind by people who (for better or worse), are no longer part of its operations.

That will indeed inform the state of Unity's game engine, tools, and services for years to come.

A previous version of this story incorrectly stated the value of Unity and IronSource's merger, and misnamed one of Unity's divisions. It has been updated to correct these facts and adjust additional wording for clarity.

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