Fall Guys in August 2020 generated 185 million dollars in revenue in PC alone. One of the most famous games made with Unity Software is a game called Fall Guys. This can easily double Unity’s revenue in a very short period of time. Once a certain level of growth is reached, Unity Software, like Unreal Engine, will switch to royalty-based revenue models. Thus, Unity is simply sacrificing its current revenue for growth. Also, because Unity and Unreal engine use different languages, both services are sticky.
This will allow Unity to generate continuing subscription fees while growing its customer base for operating revenues.
So, Unity Software is only operating this subscription business to gain more users and enterprises. However, no matter how much Unity’s customer makes, Unity charges a fixed subscription fee.Īs you can clearly see, this subscription model is too cheap. Unity’s rival Unreal Engine, for comparison, charges customers 5% of total revenues for products that make more than 1 million dollars in gross revenue. As you can clearly see, it is far too cheap. The bottom chart shows the pricing plan for Unity Software’s engine. Currently, operating solutions make up about 60% of Unity’s total revenue, and this is why Unity’s revenue seems extremely low. Create solutions is a subscription-based business model where Unity charges customers making more than 100,000 dollars in revenue a fixed subscription fee while the operating solutions is where Unity makes revenue by monetization services.
Because strategic partnership makes up only about 9% of the revenue, I will focus on operating and creating solutions. Unity Software makes revenue in three ways: operate solutions, create solutions, and strategic partnership. I will first start with an argument why Unity seems overvalued. The AR & VR software market will come faster and larger than most people think. Unity’s business model is focused on growth, not revenues. I believe that Unity Software has tremendous growth and a chance for unimaginable profitability in front of them for the following reasons: I will have to strongly disagree with these arguments. Many investors are bearish in Unity Software because of extremely high valuation and slow growth that is not justifying the current valuation. Unity Software allows developers to develop a range of programs faster, cheaper, and better. Unity Software ( NYSE: U) is a software developing engine used for a variety of applications like gaming and architecture.
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