Does it Cost Money to Use Unreal Engine? A Deep Dive into Epic’s Royalty Model
Yes, it is free to download and use Unreal Engine for learning, prototyping, and even development. However, a royalty fee is applied once your game or application generates a certain level of gross revenue. Let’s break down the details to understand exactly when and how Unreal Engine incurs costs. Unreal Engine’s pricing model is one of the most generous in the industry, designed to empower creators, not penalize them.
Understanding the Royalty Model
The current royalty model, as of the latest updates from Epic Games, stipulates that you pay a 5% royalty on gross revenue from your game or application after the first $1 million USD earned. This threshold is per-game, per-product. Crucially, this only applies to commercial products that you sell or license.
For example, if your game earns $1.5 million USD, you would pay a 5% royalty on the $500,000 exceeding the threshold, which amounts to $25,000. The calculation is straightforward: ($1,500,000 – $1,000,000) * 0.05 = $25,000.
This model is designed to be fair. It allows developers to get their projects off the ground without upfront costs and only requires them to contribute when their creations become successful. Let’s delve into the nuances and exceptions in the following FAQs.
Frequently Asked Questions (FAQs) About Unreal Engine Costs
1. What qualifies as “gross revenue” for royalty calculation?
Gross revenue encompasses all revenue generated from your product, including sales, in-app purchases, DLC, subscriptions, and any other source of income directly attributable to the use of Unreal Engine. This doesn’t typically include things like merchandise sales unless they are directly bundled with the software.
2. Are there any exceptions to the royalty fee?
Yes, there are several key exceptions. Royalties are not charged for:
- The first $1 million USD of gross revenue.
- Internal projects within your organization (e.g., simulations, architectural visualizations not sold to external clients).
- Free games or applications (unless they generate revenue through other means exceeding the threshold).
- Open source projects.
- Revenue generated from using the Unreal Engine for film, television, or animation.
3. What about prototypes and learning projects? Do I owe royalties on them?
No. You do not owe royalties on prototypes, learning projects, or anything you create for personal use or experimentation. The royalty only kicks in when you commercially release and profit from a product. The focus is on commercial deployment of your creations.
4. How do I report and pay royalties to Epic Games?
The reporting and payment process is outlined in Epic’s documentation. Generally, you’ll need to report your gross revenue quarterly. Epic provides tools and resources to help you track and report your earnings accurately. You’ll submit a report, and payment can usually be made via electronic funds transfer (EFT) or other approved methods. Full information on reporting and royalty payment is available on the Epic Games website.
5. What happens if I don’t report or pay royalties?
Failing to report or pay royalties is a breach of the Unreal Engine End User License Agreement (EULA). Epic Games can take legal action to recover unpaid royalties, potentially including audits of your financial records. Honesty and transparency are crucial in maintaining a good relationship with Epic.
6. Does the 5% royalty apply to revenue generated from publishing on consoles or mobile platforms?
Yes, the 5% royalty applies to revenue generated from all platforms, including PC, consoles (PlayStation, Xbox, Nintendo Switch), and mobile (iOS, Android), after the $1 million USD threshold. The platform through which your product is distributed doesn’t change the royalty obligation.
7. Are there any alternative licensing options besides the standard royalty model?
While the standard 5% royalty model is the most common, Epic Games may offer custom licensing arrangements for enterprise customers or specific projects. These are typically negotiated on a case-by-case basis and might involve upfront fees or different royalty structures. Contact Epic directly to explore such options.
8. Does the royalty apply if I use Unreal Engine to create non-game applications like architectural visualizations or simulations?
Yes, if you sell or license these applications and generate revenue exceeding $1 million USD, the 5% royalty applies. However, if you use Unreal Engine for internal projects within your organization (e.g., architectural visualizations for internal design reviews), no royalties are owed.
9. What if I use other game engines in addition to Unreal Engine in my project?
The royalty is only based on the revenue generated from the aspects of your project built using Unreal Engine. If you’re using multiple engines, accurate revenue attribution is vital for royalty calculation. It’s recommended to keep detailed records of which parts of your project were developed using Unreal Engine.
10. How does the royalty apply to virtual production or film projects using Unreal Engine?
Interestingly, revenue generated from using the Unreal Engine for film, television, or animation is exempt from the royalty. This makes Unreal Engine an attractive option for these industries, as users can leverage its powerful real-time rendering capabilities without worrying about royalty payments.
11. If I sell my game assets on the Unreal Engine Marketplace, do I owe royalties on those sales?
As a Marketplace seller, you already have a revenue sharing agreement with Epic Games in place. Marketplace sales are not subject to the 5% royalty on top of that agreement.
12. Can Epic Games change the royalty model in the future?
While Epic Games has generally been consistent with its royalty model, they reserve the right to modify the terms of the EULA. However, any changes would typically only apply to projects started after the changes are announced, providing developers with ample notice. Always refer to the latest version of the EULA on the Epic Games website for the most up-to-date information.
13. Where can I find the most up-to-date information about Unreal Engine’s licensing terms?
The definitive source for information on Unreal Engine’s licensing terms is the Unreal Engine End User License Agreement (EULA), available on the Epic Games website. This document outlines the legal terms and conditions for using the engine, including royalty obligations. It’s crucial to read and understand the EULA before starting any project.
14. Is Unreal Engine right for educational purposes?
Absolutely! Unreal Engine is a fantastic choice for education. Students can learn valuable skills in game development, virtual reality, and more, using a powerful, industry-standard tool. And of course, educational use is free. To help support educators and the understanding of game based learning consider the resources available at the Games Learning Society, a vibrant community dedicated to exploring the intersection of games and education. Visit them at https://www.gameslearningsociety.org/.
15. Can I get support from Epic Games regarding licensing and royalty questions?
Yes, Epic Games provides support for licensing and royalty-related inquiries. You can contact their support team through the Epic Games website or forums. They can provide clarification on specific scenarios and help you navigate the royalty reporting process.
Conclusion
In summary, Unreal Engine offers a powerful and accessible platform for developers of all levels. While a royalty fee exists, it’s structured in a way that only impacts commercially successful projects. By understanding the royalty model and taking advantage of the free access for learning and prototyping, you can leverage Unreal Engine’s capabilities to bring your creative vision to life without significant financial risk. Good luck and happy developing!