Unity’s stock is plunging as company says it may walk back controversial fees. Here’s why.

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Unity Software shares dropped Monday after the game-engine company said it would be making changes to fees that caused an uproar.

Unity Software Inc. shares dropped Monday after the game-engine and app-monetization company said it would be making changes to controversial fees announced last week that caused an online uproar and led to open rebellion from some game developers.

While the new fees were unpopular, they also had the potential to deliver a monetization boost, analysts noted last week. Wedbush analyst Michael Pachter pointed to a Friday blog post from Adam Foroughi, the chief executive of rival AppLovin Corp. APP, +4.11%. Further, he noted, “some developers likely followed through on their threat to turn off Unity’s ad services, temporarily or permanently, to the benefit of AppLovin and others.”

“We also expect Unity to encourage developers to use its ad tech product by deeply discounting Runtime Fees for ad tech customers,” Pachter said. He has an outperform rating and a $55 price target on the stock. Uerkwitz cited a lack of communication with developers and the “curious” decision to tie additional fees to downloads given that it’s “extremely challenging” to track downloads effectively.

 

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