Unity's big gamble: The PocketGamer.biz Mobile Gaming Mavens on Unity 4's new EULA
Featuring CEO David Helgason himself
The PocketGamer.biz Mobile Mavens is our panel of experts drawn from all sectors of the mobile gaming industry.
Last week saw news of Unity's approach to the new wave of gambling games hit the headlines.
Games that employ gambling will now have to sign up to an additional agreement determined on a "case by case basis", with one developer telling us that the firm is after "six figure sums".
Though CEO David Helgason has since replied to said claim, many of the details of the new agreement are yet to be made clear, but is Unity right to make the distinction in the first place?
So, we asked the Mavens:
Does the potential of real-money gambling to bring in large amounts of revenue mean it's right for Unity to ask for more cash, or does it risk other developers adding gambling elements to their games for fear of being hit by an additional charge?
Andreas Vason, machineworks
I think Unity is entitled to do what it wants with its tech – it has to support it, upgrade it etc.
Multiple terms for different usages are pretty common in the third party tech industry as well, so I don't think this wrong at all.
However, it clearly brings home the dependencies that come with the territory. If you use third party tech and build your empire on it, you are inviting a "ball and chain" scenario into your dev environment.
Volker Hirsch, RIM
I don't know about the pricing; I don't think there is anything out there other than wild rumours.
On the merits, I find it pretty obvious that a company would carve out specific high-risk sectors - of which gambling is one. For a mass market platform, it is impossible to effectively control if everyone is within the boundaries of all applicable laws.
So what if a small gambling provider misbehaves and someone decides it might be a good idea to sue Unity? A small provider might well not even be good for recovering legal fees, not even mentioning actual damages and the huge potential backlash of public opinion.
Bear in mind that, once people have Unity's tools, there are no more direct touch points for the company: Unity's only recourse would be to sue in contract, and this is really the last thing you want to do when you try to run a business.
So Unity basically made a call: is the risk from such potential mishaps in the gambling space bigger than the revenues for licenses to gambling providers? Its answer was - for its regular pricing model - apparently "no", and that doesn't surprise me.
The right thing for Unity to do was, hence, limit the use cases for its tools.
You may raise half an eyebrow at the fact that Unity's only done this now and not before, but bear in mind that this is a young, incredibly fast-growing company. Whoever here has had all bases covered from day one may now stand up.
Ah. I see we are all still sitting...
David Castelnuovo, Bolt Creative
Unity has the right to do whatever it wants with its SDK.
It seems like the mission statement ffrom Unity is to help out teams of all sizes build quality games and especially provide smaller teams with a reasonably priced opportunity to develop their content. Online gambling is an entirely different beast though.
It's usually backed by larger companies and it's pretty risk free. If I owned Unity I would want a larger chunk out of gambling related projects as well. A six figure sum is nothing compared with the upside of online gambling.
I guess the thing to be careful of is how gambling is defined in the EULA.
Is it purely cash gambling where you can withdraw your winnings in your local currency directly from the game? Does it cover gambling with in-game non-cash currency? With the way virtual property law is going, would it cover the ability to win some kind of virtual good that could be later converted into currency through an unofficial marketplace?
Seems like the language is pretty broad.
Another thing to consider with any third party platform is that those behind it can change the rules at any time. Look at GREE.
Maybe the current owners are trustworthy but, let's face it, all these third party platforms are either looking for an acquisition deal or to go public.
It's guaranteed that there will eventually be new leadership at every one of these companies and they might want or be forced to completely change how they do business. If you are too tied in with a platform, it has the ability to completely turn your world upside down without much notice.
David Helgason, Unity
Yes, we realised that the way we'd defined gambling in our EULA was unclear bordering on scary, and managed to get lots of people worried that way. So as we went and fixed it today.
First off, we naturally don't intend to interfere with even the most refined virtual currency businesses. What we are talking about is real money gambling, of the regulated sort.
Gambling is a heavily regulated industry and we've found that the real companies in this space are very excited about Unity - we have some of the biggest ones as customers, and are signing more on as we speak.
But also that it's quite complex to engage with them and that their needs are specialized and very different from the games industry. So we created a team to focus on this, and are investing heavily into making Unity awesome from them.
We also charge for this, but don't want to mix it up with the rest of our business – Unity should still be extremely affordable for game developers and we intend to take most of the proceeds from all sides of the business and re-invest into making Unity better.
Scott Foe, GameFace.me
Do you understand the kind of wear and damage that constantly popping your collar out does to your shirts? Are you even cognisant of the kind of degrade that can cause?
Somehow, some way, David Helgason MUST find the funds for shiny new shirts - can any of you here look me in the eye and with sincerity say that you want the Unity boss to go shirtless?!
David Helgason, Unity
Another way of saying this would be: making the worlds most democratic and cross-platform game engine costs a lot of money, and someone's got to pay.
We hate charging the small companies, so have basically kept our pricing static since 2005. However we have along the way found that we create massive amounts of value for many big companies and have learned to sell them more expensive products.
This is great for everyone, and amongst other things allows me to have around ten cut-out collared shirts in rotation.
Sandy Duncan, YoYo Games
I think you need to step back from the EULA issue to understand why Unity would be doing this.
In the past three years Unity has deservedly grown at a fantastic rate and is the clear leader in the games dedicated tools space. However, there are a some issues here :-
1. There are a finite number of developers and companies who can afford the cost of a Unity license and the cost of the additional tools and support required to complete a game and get it published.
Unity's advantages in providing fast development and cross platform capabilities don't come cheap. It's all very well saying it has held their basic prices, but growth has also come from royalties/sales in the asset store, and have now taken the form of expensive upgrades to Unity 4.
I can only guess, but I presume Unity's average revenue per developer has increased substantially in the last year or two.
2. The growth opportunities in the market for Games Development don't necessarily provide a good fit to attract new customers to Untity3D. I see these as :-
a) Mobile. Clearly it continues to expand, particularly if you include tablet computing in the mobile category.
The majority of the content in this space remains 2D for many reasons. This limits Unity's ability to expand even if there are more developers, there are more flexible, less complicated and cheaper alternates for them to create cross platform 2D games.
b) Web. There are few certainties in technology, but the eventual demise of Flash and rise of HTML5 - 2D, and no plugins - means that Unity doesn't have a valid product or strategy in place for the web.
By the way, there are 6.7 million of them according to Adobe. Unity could deliver here, but it's much more likely to be an opportunity for a 2D engine.
c) Living Room. I'm not trying to fire up a debate here about what's happening with consoles, but I think there may be new opportunities for Unity if the next generation of consoles herald the end to the limited publishing opportunities in the current restrictive publisher model.
For me however, Unity's growth will not come from console, but form new products like the Android based Ouya and smart TVs. Apple will be a player here, no doubt. However, the first wave of content in this space will be based on existing mobile and tablet computing, not an area where Unity is as well suited.
So how do Unity meet the expectations of its investors? It has taken $17.5 million in two rounds of funding, so there's external pressures to deliver on business plans).
One solution is to start looking for revenue share opportunities with the existing developer base. However, another option is to start looking for new opportunities altogether, like gambling.
Here's a model that allows Unity to provide value added services to gambling developers in return for a very small percent of a large amount of money - this could be a huge opportunity.
There is one rather large catch, however. The gambling companies don't want their competitors to have access to the same tech and certainly want to keep the cost of entry very high.
That flies in the face of what Unity stands for. There's no more "looking after the little guy" here. I expect that Unity will do one or maybe two BIG deals here and exclude everyone else, hence the EULA changes.
Good luck to them - those shirts must be expensive to maintain!
Oscar Clark, Applifier
I launched one of the UK's first gambling services on 3 about seven years ago and I constantly hear about the huge potential and sums of money that gambling generates.
However, my experience is that much of the hype is based around turnover.
The profit margin per transaction for fixed odds games is generally quite low. The games which garner the best audiences also tend to have the best payout levels - typically 95-98 percent. So a player spending £100 on a game will get back first £98, then £96, etc.
As many will continue to play until they run out of money such a game may have generated transactions on paper in the region of around £5,000, but only £100 of actual money was spent.
I'm not trying to suggest its not a good business or even that it won't be huge - just that we should calm down a little about what the numbers mean.
The other issue is that gambling games attract a different audience and leverage different psychological triggers.
Gambling is about the highly charged moment of not knowing between the result of the wager being concluded and the player finding out whether they have won or lost. It's about the deep tension/excitement that results and is then being released in a very intense way.
They also leverage real money, something which has a visceral risk associated with the action, a risk that has the potential to impact our lowest needs states like shelter and food. No wonder people can become addicted - although if I read the material right its only usually about 10 percent of the population who are susceptible gambling addition issues.
This means that, to do it well and professionally, we need to build in safeguards and best practice. Things that are unnecessary for classic games - and I argue social games - because they are drawing on less vulnerable psychological triggers of pattern matching and higher need states of entertainment.
They aren't usually going to threaten your underlying security.
So with this context, I believe it makes sense for Unity to demand a separate license. But the issue for me is (well was) the lack of clarity in the new wording. That seems to be something David and the team have addressed which is great news.
Regarding the Unity charging structure more generally I can see both sides and of course I respect that its Unity's choice how it wants to distribute their technology.
However, its clear that for some the cost of the license upfront is prohibitive; for others the idea of charges based on revenue share are unthinkable. That's not something any business can please everyone about. Perhaps offering both pricing models as options might be an interesting thing to consider in future.
Jas Purewal, Osborne Clarke
A few points following on from the previous comments - in particular Dave's:
1. The new Unity licence restricts 'gambling Activities' that are defined in the licence as meaning:
"Any product or service that is used to accept, record, or register bets, or carry on a policy game or any other lottery, or play any game of chance, for money or other thing of value, or any activities that otherwise constitute gambling or gaming under applicable law, regardless of whether such activity is legal."
So this is a pretty wide definition of gambling that would, in theory ,cover both skill games (if they are "used to accept, record, or register bets") or "games of chance". In either case if they involve winning either real money or "other things of value".
In practice, I suspect the focus will usually be on whether there is a real money outcome.
What about games which don't have a real money reward, but instead reward you with something else of value, like virtual goods or real world rewards?
This is an issue that is only beginning to be explored, but there's a good argument that those kinds of games couldn't (or shouldn't) constitute gambling unless they're open loop, i.e. they permit the real world value to be traded.
This is one reason why most mobile and social games wouldn't constitute gambling even if they involve game of chance mechanics, because you can't actually realise real world value even if you're given a real world thing.
On the other hand, as Dave says, there are developments in virtual property law which are just beginning to point the other way. It'll be a while (if ever) before there's any consensus on that front, however.
2. Stepping away from the legal analysis, the more general point is that a lot of interactive entertainment businesses are looking at gambling as a new revenue source (and gambling businesses are looking at games in the same way).
The problem is that gambling law is structured around gambling games, not interactive entertainment games – which is going to cause problems for both gambling businesses and interactive entertainment businesses alike as they continue to converge with each other.
It's an area which lawyers like me are being asked to advise upon more and more.
3. In practice, this is only going to be of real interest to some European (especially UK) and Asian businesses, since online gambling of any kind is either a no-go, or seriously difficult, in virtually all of the USA and large parts of mainland Europe right now.
That will change in time, but right now there is little point in a developer paying anyone for a licence to help develop gambling games if legally they aren't allowed to sell that game in the first place.
This is one of the main reasons why the UK is at the forefront of games and gambling right now, because its regulatory regime is friendly enough to permit it.
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John Little | 18:18 - 16 November 2013
As a consultant for desktop and mobile casino and social game develeop to 5 of the UK household gaming company names in Gibraltar, I can say this change in EULA is devastating.
Firstly, 2 of the most well known gambling companies did not make an operational profit for 10 years. They have impressive turnovers, but have had to borrow heavily. Two new gaming companies have burnt through £5m and £10m investment capital in the last 2 years respectivly, and it will be some time before they are profitable, if ever.
Its a big risk industry where big names dominate.
Recently, I have developed some casino game prototypes using Unity for these gaming companies in order to persuade them to consider this new 3D type technology. Most of the companies are still relying on Flash, and their big selling games are pretty poor graphically.
However, with this EULA change, I can no longer recommend Unity for 2 reasons.
Firstly, margins are very tight, and paying an unknown and potentially variable percentage to a tool provider is a show stopper for all but the richest.
Secondly, they sneaked in this change in V4. Who knows what they will sneak in in V5, perhaps they will target social games, or perhaps games over a certain revenue.
To develop a suite of Unity type games is a huge cost and a significant risk - you have to build a team, get up to speed, then hope you can produce something which performs well enough on older handsets, works across all platforms (they have been burnt with HTML5 here), and whose per seat costs are already very high. And who knows if customers will like the 3D look over the older style?
So the risk of starting with Unity is high: the initial license and developer cost is high, and now, even if the company manages to make money out of it, they may be held to ransom at any new version release, even for games which are not currently covered (such as social games), may be targeted next.
If I was an indie developer or small game studio, I would think twice about starting or continuing with Unity, as any game I build now may become worthless if its suddenly the target of a prohibitive and unknown licencing cost.
Way to go Unity.
What they should have done is made a new and transparent model. E.g. if you have a gambling (real money prize) game, and it makes over X in net profit (e.g. defined as gross profit - 10%), then it will attract a Y% fee. That way you know up front what the rules are, and can make a business case for or against starting with Unity.
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