I read somewhere that Unreal had a licensing fee of $300,000. This confused me. Is there a licensing fee in regards to my question?
Releasing Products
What kinds of products can I release with Unreal Engine 4?
You can release any product that is allowed by law, with the exception of gambling applications and certain safety-critical control systems described in the EULA. You can release games, demos, VR projects, architectural showcases, trailers, films, and more.
The only parts of the Unreal Engine you can’t release to the general public are the source code and tools or modifications to them; these components may only be distributed to other licensees with access to the same version of the Unreal Engine.
What do I need to do when releasing a product?
You must notify Epic when you begin collecting revenue or ship your product; see here for more details.
If I release a commercial product, what royalties are due to Epic, and when?
Generally, you are obligated to pay to Epic 5% of all gross revenue after the first $3,000 per game or application per calendar quarter, regardless of what company collects the revenue. For example, if your product earns $10 from sales on the App Store, the royalty due is $0.50 (5% of $10), even though you would receive roughly $7 from Apple after they deduct their distribution fee of roughly $3 (30% of $10).
Royalty payments are due 45 days after the close of each calendar quarter. Along with the payment, you must send a royalty report on a per-product basis. For more information, see here.
What about downloadable content, in-app purchases, microtransactions, virtual currency redemption, and subscription fees, as well as in-app advertising and affiliate program revenue?
Revenue from these sources is included in the gross revenue calculation above.
Why does Epic think it’s fair to ask for a percentage of a developer’s product revenue?
Our aim is to provide powerful tools, a scalable and productive workflow, advanced features, and millions of lines of C++ source code that enables developers to achieve more than they would otherwise be able to, so that this structure works to everyone’s benefit.
In this business model, Epic succeeds only when developers succeed using UE4. Many of the industry’s leading developers and publishers have signed up to license the Unreal Engine with royalty-based terms over the years, and now this level of access is open to everyone. And, don't forget, we continue to offer custom terms.
Do I need to report royalties forever?
No, you only need to report royalties when you are making more than $3,000 per quarter from your product. If your game no longer is being sold, or no longer makes that amount of money, no royalty reports are due.
What if my project requires custom licensing terms?
If you require terms that reduce or eliminate the 5% royalty in exchange for an upfront fee, or if you need custom legal terms or dedicated Epic support to help your team reduce risk or achieve specific goals, we’re here to help. See the custom licensing page for details.
Can I ship a game that supports mods using the UE4 Editor or source?
Yes, and we have designed the UE4 Editor and launcher to accommodate this. We aim to build a unified UE4 development and modding community. Here is how this works: You’re free to release your game through any distribution channels of your choosing, however the UE4 Editor (including modified versions) and code may only be distributed through official Epic channels (e.g. the UE4 launcher for binaries, and GitHub for source), to users who have accepted the EULA.
Epic is in the process of opening up the UE4 launcher to developers who wish to ship games supporting mods using the UE4 Editor, and we think this is a great opportunity for games to inspire and benefit a rapidly-growing UE4 mod community. For an example of this process in action, see the Unreal Tournament tab within the UE4 launcher: it hosts the game, the editor, and a marketplace for user-created content. If you’re interested in early access, contact us.
What if my product is released through a publisher or distributor?
You’re free to release Unreal Engine products through a publisher or distributor, and the EULA gives you the right to sublicense the necessary parts of the Unreal Engine to them so they can release your game.
When negotiating terms with publishers, please keep in mind that the royalty remains 5% of the product's gross revenue after the first $3,000 per game per calendar quarter from users. In this scenario, feel free to refer your publisher to Epic during discussions, as it may be advantageous to all if the publisher obtains a custom-negotiated, multi-product Unreal Engine license covering your product.
We actually covered this topic and related business and legal questions on during a Twitch broadcast [April 30, 2015].
What if my project wins cash awards?
You do not have to pay royalties on award winnings.
What if my product obtains crowdfunding via Kickstarter or another source?
Royalties are due on revenue from Kickstarter or other crowdfunding sources when the revenue is actually attributable to your product. For example, if the user is required to purchase a particular funding package to obtain access (now or later) to your product, or if that package gives the buyer benefits within the product such as in-game items or virtual currency.
Here’s an example of what we mean by “attributable”: Assume you provide two tiers of offers, a signed poster for $20, and a signed poster plus game access for $50. No royalties are due on ancillary products like posters, so no royalty is due on the $20 tier. On the $50 tier, the user is paying for the poster with a $20 value, and that implies that the remaining $30 of value is attributable to the product. So, for each $50 tier sale, you’d pay a royalty of $1.50 (5% of $30).
Are any revenue sources royalty-free?
Yes! The following revenue sources are royalty-free:
Ancillary products, including t-shirts, CDs, plushies, action figures and books. The exception is items with embedded data or information, such as QR codes, that affect the operation of the product.
Consulting and work-for-hire services using the engine. This applies to architects using the engine to create visualizations as well as consultants receiving a development fee.
Non-interactive linear media, including movies, animated films and cartoons distributed as video.
Cabinet-based arcade games and amusement park rides.
Truly free games and apps (with no associated revenue).