UE4 Royalty Fees: Myths and Facts

When developing a game using Unreal Engine 4 (UE4), creators are often faced with a 5% royalty fee on gross revenue from the game. But what happens if a developer decides to switch to their own game engine midway through the project? Should they still owe royalties to Epic Games for the use of UE4?

Understanding the Royalty Fee Obligation

The answer to this question depends largely on the specific circumstances of the project. If you initially develop a game using UE4 and then decide to build your own game engine to continue development, you would generally still be subject to the 5% royalty fee on any revenue generated from the game. This royalty applies to any revenue from games developed using UE4, regardless of whether you switch engines later.

Complete Switch to Your Own Engine

If you completely remove any reliance on UE4 and the game is no longer using any UE4 assets or code, you might not owe the 5% royalty. However, this situation is rare and typically applies to scenarios where you start from scratch and do not reuse any UE4 content. It is crucial to review the specific licensing agreement you accepted when beginning your project with UE4 and consider consulting with a legal expert for clarity on your obligations.

Rewriting a Game for a Different Engine

A scenario often cited is rewriting a game using a different engine. For example, if you release a game X using UE4, and later decide to switch to your own custom engine to remake the game, you generally do not owe any 5% royalty for the remake under the new engine. As long as you have not used anything in the UE4 core or any UE4 assets or code, you have no obligation towards Epic Games and its Unreal Engine.

This situation is more common with sequels. For new content or a substantial remake, using a new engine can be financially viable. However, it is challenging to recoup costs and profits from remaking an exact copy of the original game with only slight changes. Usually, the new engine is used to create a sequel or a remade version of the game with up-to-date graphics and effects if possible.

Partial Dependance and Other Complex Situations

Even if you make a game entirely with UE4 and then switch to your own engine before release, you still have to pay the 5% royalty if the final product uses any UE4 assets or code. However, if your project is only a partial use of UE4 (e.g., an internet browser for account management while gameplay is done in UE), you might not be obliged to pay the 5% royalty.

For more complex situations, such as creating a mobile version of a game developed on UE4 and selling it through different platforms, the royalty obligations can be more complicated. If the mobile version uses a different engine and does not directly interact with the UE4 version, the sales from the mobile version may not require the 5% royalty. However, if the mobile version pays for the PC version, you would have to pay both the 5% royalty to Epic and the royalties to Unity, the creator of the mobile engine.

Physical Goods and Licensing Considerations

If you sell physical goods or collectibles based on your game made with UE4, you generally do not owe any royalty for those sales. However, if the physical goods are part of a bundle that includes the actual game made with UE4, you would be liable for the 5% royalty. In this case, you need to keep detailed records of your costs and subtract them from your royalties to avoid overpayment.

All game engines include sections in their user agreements that explicitly state that their engines must not be used in direct conjunction with another engine or software. While you might be able to negotiate a special deal, you cannot use another engine to control car systems or robot arms when developing with UE4. This makes it clear that you can't directly interject another engine into your UE4 project to bypass payment obligations.

Conclusion

The royalty fee obligations for UE4 can be complex and depend on the specific details of your project. Always review your licensing agreement and consider consulting a legal expert for clarity. Whether you continue to use UE4 or switch to a custom engine, understanding these obligations is crucial for managing your project's financial structure effectively.