Can Unity China be quickly established after the spin-off, can it pave the way for the “Metaverse”?

Unity officially announces the establishment of a new regional joint venture – Unity China

Can Unity China be quickly established after the spin-off, can it pave the way for the "Metaverse"?

Yesterday evening, Unity officially announced that it will establish a new regional joint venture, Unity China, which will inject its creation solutions business and game service business in China into the new joint venture. It is reported that this is also a further action taken after Unity’s spin-off of the Chinese business unit was revealed last week. 

As local partners, Alibaba, China Mobile, Gigabit , Mihayou, OPPO, Jiadu Technology and Douyin Group will participate in the investment in the joint venture. Unity China’s post-investment valuation is US$1 billion. Unity will retain majority ownership and control of Unity China, which will be responsible for operations throughout the Greater China region, and Unity executives and representatives of major investors will also form a board of directors to oversee it. 

As we all know, Unity is currently the industry-leading real-time 3D development platform. By providing a set of reusable frameworks for game developers and modularizing common codes for developers to call, Unity has gained nearly 50% of the market share in the game market. , among which there are many famous games such as “Yuan Shen”, “Honkai 3” and “King of Glory”.

Can Unity China be quickly established after the spin-off, can it pave the way for the "Metaverse"?

In September 2021, Unity went public on the New York Stock Exchange, offering 25 million shares at an offering price of $52, raising a total of $1.3 billion. In the past 11 months, Unity’s stock price is only $50.35, not only below the issue price, but also only a quarter of the November 2021 peak of $210. 

Investigating the reasons for its share price changes, industry insiders believe that around November 2021, Facebook changed its name to Meta, bringing the concept of “Metaverse” to the Internet and technology industries, bringing great benefits to Unity, a real-time 3D development platform, and becoming a leading platform for real-time 3D development. The driving force behind the rapid rise in stock prices. 

However, at the beginning of 2022, Meta’s financial report showed that the “Reality Lab” of the Metaverse business lost more than 10 billion U.S. dollars, causing the industry to question the concept of “Metaverse”. In addition, Unity itself has been in a state of loss for a long time, which has accelerated its The decline in stock prices.

Grab the Metaverse, Unity Explores Compliance Opportunities

Can Unity China be quickly established after the spin-off, can it pave the way for the "Metaverse"?

Image source: Unity official website

But obviously, Unity’s “ambition” doesn’t stop there. On its official website, not only game solutions are placed in obvious areas, but also automotive, transportation and manufacturing; film and animation; architecture, engineering and construction are also placed in equally important positions. It can be seen that all the scenes that need to be produced in 3D are the “nuggets” that Unity wants to get involved in.

In fact, long before the concept of “Metaverse” emerged, Unity had already started related business attempts. had a conversation with Rong Guodong, the chief engineer of Baidu in the United States, in the technical session of the Unite Shanghai conference. He said, “Using Unity for Apollo Creating a full-stack simulation of autonomous driving can ‘condensed’ the city’s road conditions within four miles, and combined with Apollo artificial intelligence technology, greatly improves the efficiency of model training.” 

When the concept of “Metaverse” emerged, Unity also saw the opportunity to transform from “game development tools” to “digital productivity tools”.

Speedway Metaverse Research Institute pointed out in the “2022 Metaverse Industry Development Trend Report”: “Metaverse” will catalyze cross-disciplinary and cross-industry integration, and gradually change the scene from “entertainment” to “tool-based” in order to seek industrial The accelerated landing of applications. The “Industrial Metaverse” will become an important part of the industrial digital and intelligent revolution, and will drive the development of the real economy in the medium and long term.

Can Unity China be quickly established after the spin-off, can it pave the way for the "Metaverse"?

Image source: Unity official website

For example, Jiadu Technology, the investor of the Unity China joint venture, said that 3D engines are particularly important in digital twin technology, which can simulate and model physical entities such as cities, stations, factories, and equipment, and build virtual machines for data and application operations. digital space. 

“In terms of the current market position of Unity in the 3D development platform, it will not have a significant impact on the current business level or on the industrial structure.” For Unity China, industry experts told Sutu Metaverse Research Institute , and he also pointed out that “the establishment of a joint venture company is more for business compliance considerations .” 

“Unreal Tencent, which has the strongest rendering technology of the three engines, has a stake. Cocos is purely domestic and its 3D level has not been verified as a popular product. Unity is the most versatile among the three engines. However, if an American listed company, if If the so-called software sanctions appear, Unity’s market share in China will be greatly affected. The establishment of an independent joint venture company in China actually avoids some risks and ensures the continued development of domestic business. “Expert Xiang Sutu Metaverse Research Court said.

Speedway Metaverse Research Institute learned that China, as the world’s largest game market, is also Unity’s second largest source of revenue after the United States. Under the ever-changing international situation, to ensure the steady development of business and maintain market share, compliance issues are an inevitable threshold. From a wholly-owned holding to a joint venture, Unity can obtain relevant qualifications through the JV structure and CEPA to avoid potential localization risks.

Advertising business shrinks, tools are still Unity’s life-saving straw

According to Unity’s just-released financial report, the most important revenue component of its revenue is advertising revenue, followed by game development tool revenue. In the second quarter of this year, Unity’s total revenue was $297 million, of which Operate Solutions represented by UnityAds was $159 million, down 13.3% from $183 million in the same period last year, and Create Solutions, represented by development tools, had revenue of $121 million. Strategic Partnership $17.667 million.

Can Unity China be quickly established after the spin-off, can it pave the way for the "Metaverse"?

For the contraction in advertising revenue, Unity blamed weak inflation in U.S. technology stocks in its earnings report, coupled with changes in privacy policies on platforms such as Apple and Google, which limit the ability of advertisers to collect application and user data. certainty. 

It is worth noting that on the same day that Unity China was established, game software company AppLovin Corp intends to acquire Unity for US$58.85 per share. If the acquisition is successful, Unity will own 55% of the issued shares of the combined company, accounting for about 49% of the voting rights. %. 

According to the “Comprehensive Strength List of Advertising Platforms” released by Appsflyer, a mobile advertising monitoring and attribution platform, with retention rate as the core evaluation indicator, Unity Ads ranked third in the global game category for both IOS & Android platforms in the number rankings. , second only to advertising giants Google and Facebook. This means that after the acquisition, the influence of both parties in the paid-for-performance advertising track will be increased. 

However, the Unity China joint venture business will not involve the Unity Ads business, which will continue to be managed by Unity’s global team, which may pave the way for a spin-off to be acquired .

Can Unity China be quickly established after the spin-off, can it pave the way for the "Metaverse"?

Image source: Unity official website

It can be seen that for the Chinese market, Unity prefers tools to promote revenue growth. However, these products help Unity expand its business boundaries, but the actual performance can only be regarded as unsatisfactory. Unlike Unreal developer Epic who also develops games, Unity is closer to the upstream development side of the industry. In the game industry chain, developers are less willing to pay than users. 

At the same time, the competition for the head of the game development link is obvious, and the head game developers have a high market concentration and generally have the ability to develop and deploy games and build their own data analysis systems. For example, Mihayou wants to realize masterpieces like “Yuan Shen”, and even has to customize Unity in depth and become an important contributor to Unity engine development. This is out of reach for many ordinary developers. 

Fortunately, as a powerhouse of digital construction, the Chinese market has not only begun to become high-quality products in the game market, but has also nurtured more market opportunities in the digital transformation of the industry. Here comes the opportunity. However, from the perspective of Speedway Metaverse, under the huge market opportunities, the competition pattern of the future industry Metaverse must be full of flowers, and Unity’s road to China may not be smooth.

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