Unity Software with a 'company reset' walks away from film VFX and the Wētā Deal
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I was there when the acquisition happened and it was both “yay” and “what?”
There was so little communication with the overall staff - even at the M9 level - and the management seemed to be doing their own thing.
My prediction: Unity is going to be BedBath&Beyonded
But think about it: they have a good business that has better strategic value for a platform holder. Amazon spent a fortune trying to emulate their business to advantage AWS. That was an incredibly poorly managed endeavor. If they had bought Unity they wouldn't have needed Lumberyard.
I can think of a lot of companies that would want Unity for the right price, or if the US govt would let them buy it. Can't say that about Bed Bath and Beyond!
Given the controversy over the Activision acquisition, acquiring one of the major engine platforms, having a major game studio, and already owning the XBox platform might make for great end to end strategic alignment / platform control - but I think it would also be a big regulatory/political fight to get done.
Amazon Lumberyard always seemed like a strange idea. Yes, AWS, Twitch, and other integrations might be cool, but those should all have public APIs.
As far as I know, there have been many attempts to make a non-mobile MMORPG in Unity and they've all ended in failure.
Why do so many big box stores seem to follow the huge growth -> saturation -> quick implosion and bankruptcy script?
Surely their margins don't materially change? Low per store sales from bad stores? But the first step seems to be closing stores, and that doesn't resolve the issue. It seems weird they'd be able to attract capital for expansion, but then implode so quickly.
That's why capitalism is so great, right? Creative destruction.
Debt financing.
Zigging a bit, my family has been watching The Foods that Built America: https://www.history.com/shows/the-food-that-built-america It seems that about half the episodes tell the same story: Somebody built a new food concept, or polished an existing one in some very useful economic way. They're super ambitious and pretty much as soon as they proved out their base restaurant or sold to a few stores, they immediately opened a couple dozen new restaurants or built a huge new factory. Which they do by loading up on huge, huge amounts of debt. Most of the rest of the human interest portion of the episode talks about the stresses of pulling in enough money to pay the debt. Many of them get acquired or end up getting so much external investment that it amounts to an acquisition.
Of course it's a survivor bias situation; we're not getting told stories about the companies that did the same thing but failed utterly.
While the past 20 years of ~zero interest rates have made this even easier, it isn't necessary. It has quite often been possible to go to some banks with what looks like a good idea and end up in debt up to your eyeballs while expanding your business size possibly by entire factors of magnitude virtually overnight. It ends up very similar to the venture capital pattern we're familiar with in our industry even if isn't exactly the same forces. The result is basically a bimodal distribution; either you manage to pay down the debt to some reasonable level and you end up with a large money-printing business, or you don't, and you have to liquidate everything.
Basically you're seeing the failing side of the bimodal distribution of this pattern. Since a business always works to project strength, you never see them visibly ailing; it's just, there's this big edifice that looks invincible and then virtually overnight it's gone.
A further elaboration relevant to BB&B is that when you're in debt trouble, you become extremely vulnerable financially. You need to pay off that debt, and that opens you up to corporate raiders who supply you with enough to keep you afloat, but then have a lot of options to do things useful in the short term but that kill the company in the long term. With clever structuring, they can keep the profits but dump the debt with the company itself as it goes under. BB&B had some of this going on. However, I consider this a further consequence of the original debt financing, basically one of the concrete ways it can fail.
(Expect to see some more over the next few years. There's a lot of "zombie companies" out there (a term you can google), which is a term for the companies making just enough revenue to pay the interest load on their debts but not pay down principle. In a zero-interest rate world they could sort of chug along indefinitely, but as they have to pay real interest you're going to see these companies really start to struggle.)
AIUI, it's common when taking on debt for the creditors to try to protect their investment by including specific performance guarantees. There may be numbers that the company has to maintain around revenue, inventory turnover, etc. - or the creditors will have the right to call the debt.
The thing is, the need for the creditors to limit their risk isn't necessarily aligned with the overall best interest of the company. Conforming to these debt covenants can force the borrower to act for short-term numbers at the expense of long-term performance, a sort of Goodhart's Law effect caused by the metrics imposed in the debt covenants.
I've seen my employer become the beneficiary of this through a couple of periods of tough markets. Privately held with zero debt, our CEO was able to solidify our market position at the same time our competitors were doing obviously dumb things, the result of which is that we came out of those difficult times very much stronger in the industry.
Hum, kinda, but infinite-growth management doesn't get a bimodal distribution. They get a corporate version of the Peter principle, where the loans increase in value until the company can't grow enough to pay them.
You don't even get a distribution in final outcomes, just in lifetime. And since the growth is exponential, there isn't a lot of variance on it either.
I've always wondered the degree to which these buyouts are legitimate last-ditch turnaround efforts vs front-running bankruptcy proceedings.
I'd be curious about typical financing terms in retail for physical expansion.
But time at a few solid, well-run companies made me appreciate how important a powerful but ego-less CFO is to success. Someone in the room to say "Doing that will cost a lot in the future. What about this alternative?"
I'd also be curious about the frequency of successful debt management schemes... it seems something of a prisoner's dilemma if you're a large shareholder in a heavily-indebted business.
Either you allow the company to plow revenue into paying down debt (maybe for years), or you preempt your fellow investors and launch a raid to extract value for yourself before it implodes.
It seems like making companies more resistant against raid-and-dump-debt would be good for all involved (companies, their creditors, the entire pool of equity holders... basically everyone except raiders).
Recently--mostly private equity.
Any company with >$50 million in real cashflow is a target for private equity to come in, load it up with debt and extract the cash.
There you go. Bed Bath and Beyond.
In my youth we called these "airport lounge deals", imagining that the deal had resulted from the two CEOs happening to sit next to each other at the bar in the first class lounge at JFK during a snow storm. They get drunk and decide to form a strategic partnership or merger. Everyone else is like "Huh?".
Biggest hardware tech in film business ARRI isn't worth third of that. That's how small all of that behind the scenes industry is.
You heard it here, folks, Unity is the next meme stock.
I don't know that Unity has a future. Unity is still better than Godot, and in some ways by a wide margin, but Godot is gaining ground fast, the learning/tooling ecosystem has exploded in the last several months, and for most "indie" projects, which Unity's pricing change was targeting, Godot is the better choice. It might be the best open source tool I've ever worked with.
Unity is going to either need to position itself at the top of the productivity curve between Unreal's raw power and Godot's "Blenderyness," or it's going to have to become a more mature ecosystem that caters to bigger games (which might be harder after the brand damage). Godot is going to become better, faster in the next 18-24 months.
For consoles there's a company called W4Games developing a console exporter using Godot's GDExtension API, and some other companies will port for you. There's a popular game on Xbox right now - Cassette Beasts - which was developed on Godot 3.
The implosion of the home console ecosystem in the United States between Atari and Nintendo is widely understood to have been caused by Atari giving up or losing the capacity to regulate who made games for their console and the quality of those games. As a result, the need for consumers to exercise their own savviness in finding the good ones went up, but rather than rise to the challenge, consumers just threw up their hands and stopped buying Atari home consoles and the games that went with them.
The lesson the whole industry learned is that they're selling a luxury product and they need to control quality to keep it a luxury product. Development ecosystems where anybody can write games of whatever quality are relegated to the home computer space, where the console providers (as console providers) are content to compete minimally.
PC games also became popular later and being able to freely install any game from any publisher you like hasn't killed the platform. The amount of crap on app stores and digital console stores still is quite high, even on the Switch store from 'quality minded' Nintendo which doesn't put a dent in sales.
My guess is the other factors, most probably the early market saturation, panicking investors and competition from home computers have contributed a lot more to the crash.
https://atarionline.org/atari-2600/pac-man
As arcade games improved, Atari console games began to look like garbage by comparison, even the high-profile games produced by Atari, like Pac-Man.
Those arcade games didn't improve by themselves though, you needed better hardware for better games. While Atari didn't do themselves a favour by trying to squeeze every penny from the 2600 they did build successors. But by then the economy tanked and the competition from Nintendo started.
I had a conversation with an Xbox development producer back in the early aughts on this topic where I had the chance to ask why Microsoft cared if people cracked the console to turn it into a home system they controlled, given that consumers would almost certainly still feel more comfortable buying officially branded software from the official distributors. The answer was simple: Microsoft isn't concerned about the home user, they were still concerned about development houses making their own games outside of the Microsoft ecosystem control and, more importantly, developing peripherals and alternatives compatible with Microsoft software, up to and including clean room developed alternative versions of the Xbox itself sold by other companies.
A generation of console is one big game of architecture cracking, which is one of the things that keeps console generations evolving: sit on one console architecture for too long, and everything about it from the legal protections to the technical competency required to reproduce the artifact will age out. To give up the NDA is to willingly let that clock spin much faster, and ultimately disintermediate the console manufacturer from the flow of money they need to continue making product and developing the next generation of console.
For example, the Xbox/Windows GDK allows you to basically target one codebase for both platforms (with minor differences). So developing an Xbox-competing console is a matter of shipping a GDK-compatible software platform. Maybe even using Proton on a linux-based console.
But that's just on the software level of course. The entire ecosystem of a console is hard to replace.
I would have said it's about preserving the price-point/entry-barrier of the devkits themselves, but they don't cost thousands of dollars as they used to either.
So, I think they do the NDA because that's the way it's always been done.
Two reasons:
1. It exposes you to patent trolls, which is fine if you have no money so they won't come after you or have too much money to bleed them dry in courts.
2. If you license third party IP (which had been the case for every console after, perhaps, Atari 2600) you are also bound by the agreement with the third party, which has its own reasons, generally related to the reason #1.
Now I’m so afraid for Parsec.
The software saved me during the pandemic and it remains the absolute best remote software I’ve ever used.
The Foundry, who are a VFX based version of Adobe/Autodesk have a similar style of working, but not at such a massivly inflated scale. They negotiate license agreements to take over tools from VFX companies and extend them for sale to others. (nuke, is from Digital Domain, Mari from Weta, Katana & Flix from sony) However they never spaffed 1.6billion for a complete pipeline.
Partly because they could never raise that much cash, the market isn't anywhere big enough to support that, but also VFX pipelines are incredibly bespoke and mostly ephemeral. I'm willing to bet that most of the stuff Unity bought was glue code for getting assets in and out of off the shelf software. The rest is managing billions of versions of individual files. (Weta people, please jump in and correct me)
Sure there are special bits of rnd that allow procedural generation, or better marker->3d model tracking, but not 1.6 billion and 250 people. The "tooling" team of weta original was never more than 60 people from what I understand.
The point of production pipelines being bespoke (at least past a certain company size) is a relevant one. The main workhorses of large scale production (Maya, Houdini, Nuke, etc.) are extremely customizable and extensible. Over years (decades in the case of Weta) companies develop highly complex workflows and associated tools based on these applications.
That is why the Unity deal never really made sense to me. The idea that Weta's tools could somehow be packaged up and delivered as essentially shrink-wrapped consumer-level add-ons to Unity was a naive one at best. I'm not entirely surprised to see it fall apart.
Unity stock price peaked in late 2021 due to the general tech bubble and the whole "Metaverse" thing specifically. The Wētā deal was announced a month or two earlier and probably had no real effect. It was downhill ever since...
So in fact the peak of Unity's stock was perfectly timed to allow insiders to sell their shares at those inflated prices.
I know personally someone who made closer to $10 million on Unity stock. If the IPO had been two years later, the stock would have been worth only a few million. (Or perhaps more likely not liquid at all, since Unity is the kind of company that would have no chance of an IPO in the current environment.) That's a life-changing difference.
Seems like a disaster of a deal by Unity. Weta just got free money for a snapshot of their code.
These 265 are just the people worked in the "professional services" part of the business and were doing actual VFX stuff for Wētā FX and not on the tooling part.
Edit: I was wrong, 275 was the entire workforce of Weta Digital when Unity acquired it back in 2021. So yeah.. it seems they just almost literally burnt $1.6 billion..
Software has shape, and if you're acquiring a stack that's wildly different from your own, there's no guarantee that integration will be particularly feasible. You may not even be acquiring the talent that would know where to start with such an integration because you never know what key pieces of the system were built ages ago by somebody who left long before acquisition was even discussed.
I've watched this happen with systems as closely aligned as two Python / JavaScript tech stacks that differed in frameworks, libraries, and wire protocol. It took something like 2 and 1/2 years past executive projections to integrate the offerings.
I still don't know why you'd spend 1.6billion on a VFX pipeline. I mean sure it gives you cachet, but a lot of the pipeline is mostly asset management rather than the few bits of special sauce that provide artist tooling.
but 1.6 billion is a ridiculous amount of money for a company's turnover of ~110million[1], with pretty thin profit margins, compared to a software company.
Maybe I'm wrong about weta, they did make mari after all, which is pretty special, however the foundry didn't pay anywhere near that much for mari, for what appears to be a similar licensing deal.
[1]https://rocketreach.co/weta-digital-profile_b5c60ffef42e0c50
I have no idea, my own speculation as curiosity, but maybe Unity was looking for coding for realistic rendering, know-how, for rise a competence with the Unreal market space?
But if it were the case, why let to fly away the team? Maybe was this part of the deal with Weta? to sell an snapshot as the parent comment says, with the pack of programmers for to train Unity's team temporally?
I don't know. The numbers are very high, if I were in charge I wouldn't invest that quantity of money without sending firstly a pair of emissaries for to read code and verify the toolset will be useful for the pipeline.
PS: The shareholders owe me a few beers for sowing the seeds of doubt.
Unity already has a 3d engine that can match Unreal (more or less, and we won't talk about the fact that there is 3 rendering pipeline, and the deprecated one is the only one who is reliable. Really, we won't talk about it). If anything, Unity use to have some of the best realtime-cg engineer under their payroll. The mobile/2D game is mostly historical, a lot of AAA quality game have been made in Unity.
VFX is a different beast. For the longest time, realtime CG and VFX/movie CG use to be really two separate field (with a lot of connection ofc, CG is CG). Unreal made wave when they started to be used in cinema (The Mandalorian I think was the first big name openly saying they were using Unreal in their pipeline). Realtime CG got so good that it can (for some specific effect) be used instead of traditional VFX pipeline, which are usually slower to iterate in. I think the exec at Unity saw Unreal "success" and wanted to get a piece of the cake before it was too late. It was not a bad idea, but Unity as been so mismanaged these past few years, it again completely failed at producing anything real, stable and usable.
The dynamic background technology being used now for shows like The Mandalorian and Star Trek changed the story. Now VFX teams are being asked to craft the back half of a set as a 3D model that can be blended with live action shot in front of a screen displaying that model to proper perspective based on camera position. So now they have to care about the 3D dynamics of the scene in a way they previously weren't required to... A way that video game engines have been wrestling to ground for decades.
This is still very niche compared to normal vfx shots. VFX shots are everywhere.
So now they have to care about the 3D dynamics of the scene in a way they previously weren't required to
What does "3D dyanmics of the scene" mean specifically? Any vfx shot with 3D needs to track the camera, find the ground plane and maybe map out some simple geometry of the scene.
A way that video game engines have been wrestling to ground for decades.
What does this mean?
... but task them with creating a whole virtual set that links to the practical set and the actors are acting within, and now questions like the realism of the whole space, light sources that impact the real world, etc. come into play. Game engines have been modeling whole spaces that can be inhabited at any point in the space for ages longer than VFX tooling pipelined for post-production has.
This is absolutely not true. Typically there is lidar for an entire set and the camera and the set lidar need to fit together and make sense.
but task them with creating a whole virtual set that links to the practical set and the actors are acting within, and now questions like the realism of the whole space, light sources that impact the real world, etc. come into play.
This is what camera trackers do. Lights are done by the lighting department.
Game engines have been modeling whole spaces that can be inhabited at any point in the space for ages longer than VFX tooling pipelined for post-production has.
Photogrametry is 25-30 years old and virtual sets have been used for a very long time on green screens.
I'm not sure what point you are trying to make at this point, but the things you're saying aren't true.
Don't mistake the attention that the virtual stage stuff gets as being the same as the use it gets. The enabling technology is the large high resolution screens more than anything and the point of using them is more about reflections, refraction and to a lesser extent hair and backlighting that are difficult to make work on green screens.
I would also guess that if you have really good technology for virtual production you have tech that is useful for other things, like tele-presence, simulation, image scanning and so forth.
I've replaced the word in the message, "Speculation" is a word that is perhaps better suited to warning the reader that it is a thought without much research.
...as are other highly questionable decisions by tech companies lately.
A lot of "business type" individuals were truly kept afloat by just being to finance their dumb ideas on cheap money instead of actually being able to bring profit to the table.
Had they not massively overhired, stayed at ~1500-2000 employees, focused on the engine itself and not wasted massive amounts of money on acquisitions like this the company would likely already be profitable.
That's not necessarily true. There are plenty of examples of public companies which have grown in more sustainable way while prioritizing their core businesses.
> You are serving the needs of the shareholders. Line must go up therefore you need to constantly expand.
Yet the market did not reward them and the shareholders are not particularly happy. While these pressuresfor public do exist at the end the incompetences of Unity's board and upper management are to blame.
Sure, not necessarily but it is a common result and not a surprising one.
>Yet the market did not reward them and the shareholders are not particularly happy. While these pressuresfor public do exist at the end the incompetences of Unity's board and upper management are to blame.
Ultimately these moves end poorly for the business doing them. That's not in question. But shareholders are mad not because the move was made but because it didn't work as intended. Buying smaller companies to inflate your stock value short term while crippling the company with debt and bloat long term is an old tactic to maximize short term shareholder wealth so they can cash out and leave latecomers holding the bag. This lead to some famous company collapses when it backfired or when it drove less unethical executives to commit accounting fraud like Worldcom. But it doesn't always end up with such a spectacular implosion. Usually it just cripples the company and they get gobbled up by a competitor a few years later.
Its a common problem because the way the stock market works today doesn't necessarily align with its intended goals. The point was to let outside investors join in an enterprise they think was profitable and grow with it. But that's not the only way the game can be played. stock itself is a commodity and treated as such. I don't know how you fix that but doing so would go a long way to realigning incentives and preventing this kind of thing.
Can you cite how you know this is the case for all / most publically traded businesses?
The Billion dollar acquisition was probably driven by megalomaniac ex-CEO, wanting a piece of every pie and world domination.
"That's just a shot of a man walking across the deck of a ship, what did you do."
"I animated the man."
I was dumbfounded. At that point our 3d graphics looked worse than Minecraft and I had no idea what CG they were sticking into practical shots.
(edited for spelling and I didn't catch all the errors I am sure)
2 years later and that never happened. I would guess that's because it's quite difficult to jam a software platform into another software platform.
Unity has a long history:
> 1) acquire some software/tech
> 2) attempt to integrate (force) it into Unity
> 3) fail
> 4) scrap the integration
Based on what I've heard about how Unity operated under John R, this was likely a scenario where the head honchos recognized a business synergy and didn't consult the engineers on how feasible integration would be.
Mobile game developers don't need Weta tech.
Am I right?
To be fair you can be say that about just about every game engine out there (yes, even the open-source ones) and be right 99% of the time.