We are currently working on a game for marketing purposes (will be available for free in the app store). This project is a contract work for a client. We normally use Unreal in the interactive visualisations area, the game is more of an exception. We are using Unreal Studio and its features since we normally do visualisations.
So the question is: Will we or the client have to pay for royalties if the game is a contract work (payed once for producing it) that will then be availabe for free in the store?
If you all are the only party generating revenue from the project created in UE4, then you will need to submit a royalty statement and payment. You can submit your royalty statement through the form on this link: Unreal Engine Royalty Form - Formstack. We will then provide you with payment instructions. This information and payment are due 45 days after each quarter end. For example, if you receive payment for your UE4 project in June, then you will report and pay royalty for Q2 2018 (which is the period of April - June) by August 15, 2018. Please keep in mind you can deduct the first $3,000 of gross revenue prior to calculating your 5% royalty due.
If your client is not generating any revenue off of the project, including in app purchases, than no royalty will be owed by them.
Hope this helps! If you have any additional questions, please let us know!
Let me please clarify one point here. If you are doing custom work for hire for your client (i.e., producing a custom app in exchange for non-recoupable work-for-hire fees), no royalty would be due on those work-for-hire fees. You can take a look at Section 5(3) of the EULA.
As bdavis mentioned, if the resulting app is not monetized, then no royalty would be due on that app either.
