Oppenheimer sees Unity making no concessions on structure of pricing changes

Oppenheimer believes Unity’s new pricing structure is too “good” to retract entirely. On paper, it improves average sub mix, drives incremental high margin runtime fees, and helps Levelplay to gain share. Unity’s bet is that its engine is too important to let go; therefore, the eventual financial/market share benefits far outweighs negative PR in the near-term. The firm acknowledges that broadly speaking, Unity has no real competition on mobile. But for the hypercasual genre, known for its simpler game design and more rudimentary graphics, switching to alternative game engines is more feasible, Oppenheimer points out, adding that another major hurdle is the lack of ad monetization support for smaller engines. The firm doesn’t expect Unity to make fundamental concessions on the structure of its pricing changes. With tighter, “forced” integration of Unity Engine and Levelplay, Oppenheimer expects developers, mostly hypercasual developers to start migrating to alternative game engines to conserve long-term optionality. The firm has a Perform rating on the shares.