If I understood correctly, it seems that 5% royalties are based on gross revenue and I think it is too much for developer to pay when the developer distributes the game through a publisher.
To be clear, is royalty based on gross revenue or developer revenue? If a publisher takes 30% of gross revenue, royalties are 5% of the developer’s 70% revenue?
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First: “I’d like to buy a Porsche Taycan Turbo, but I think it’s too expensive. I think they should sell it for cheaper to me!”
Second: “Turbo” on an electric vehicle? That makes no sense!
Third: Your deal with the publisher will very likely include that the 5% comes from the overall sales price, not just your part. E g, they pay their fair share, out of their cut. You should make sure these terms are included in your publishing agreement.
Fourth: 5% is super cheap, compared to building it all yourself. If using Unreal Engine makes building your game just 5% faster, you will pay 5% less in salaries and rent and other expenses, and it will pay for itself. If your game sells 5% more because it has cool Unreal Engine features, compared to what you could get from Godot or your own tech, then it pays for itself.
Fifth: If you’re big enough to not only have a publisher, but also to make more than $1M in revenue (which is where royalties kick in,) and this 5% actually becomes an issue (it’s $50k out of $1M,) you can always negotiate a lower rate with a higher up-front payment with EPIC. Many big publishers already have a license of some sort, that you may be able to use. Again, bring this up with the publisher!
Sixth: I think up-front licenses start around $300k, so once you plan to sell more than $6M, the custom-license path might make more sense. The other benefit of that is that you can get access to direct-from-EPIC support, too, depending on terms.
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This. At least from the solo/indie developer point of view. All this is effectively free and only costs me a small % of revenue for a leap-frog of years of development time, backend support for multiplayer, etc.
It’s a good deal both ways, Epic gets a potential ton of passive revenue streams and the freeness of the tools make them widely available to maximize opportunity for both the developers and Epic.
Take that 5% and cost it out across what you would get if you could take that money and simply purchase what you would otherwise be getting from Epic. If that amount doesn’t replace Epic’s offering, then Epic is the value.
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I think the original poster did the math as:
“Sale price = $60”
“Contract publisher/dev split: 90%/10%”
“Publisher cut = $54”
“Epic part of sale = 5%”
“Epic royalties = $3”
“Developer cut = $60 - $54 - $3 = $3”
You should make very sure that your publishing contract does not end up calculating out like this – EPIC’s $3 should come off the top before the publisher/developer split:
“Sale price = $60”
“EPIC cut = $3”
“Publisher/Developer split = $51.30/$5.70”
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How about Steam? 33%.
That makes 5% seem pretty reasonable to me.
It used to be millions to get an editor license, now it’s free.
Good deal.
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ill be happy to give back 5% if i made a million. If it wasnt for unreal i flat out wouldnt be able to make the games i want to make. Not a chance in hell. There is not other alternatives.
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The system is very good. You get really fair coverage, the algorithm works.
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I was thinking about this, there are other reasons too… 
For instance, the patching. I haven’t investigated, but I assume Epic wants you to use the patching mechanism that comes with the engine? The whole packaging and patching path with UE is very very poorly documented. At least with Steam, there is documentation. And the patcher is rock solid ( famous last words ).
Is there a binary level patcher on the Epic store back end?
5% is very fair, without it there would be no so advanced UE5. Someone has to take care of engine core and 5% is very very fine compared to App Store insane % cut.
Ya know I also have been going back and fourth on weather or not to use the engine to make my games since yes on top of everything else taking another 5% sucks. But it just hit me that the 5% isn’t the problem.
Steam: 30% if you release on Steam not much you can do about this.
Taxes: 20%-30% for sure nothing you can do about this
When you release on Steam 50%-60% of your earnings are just gone before you even see it.
Epic: 12% again pretty much unavoidable
Realties: 5% if your game makes it, this wont
Taxes: 20%-30% again unavoidable
When you release on Epic only 37%-47% if your game makes over $1,000,000 is gone before you even see it. 32%-42% if you make less than the million cap. I was switching to another engine to avoid the 5%. But after thinking about it like this, I was going to release on Steam and Epic but now I will likely only release on Epic.
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Considering there are multiple storefronts but only one company (Epic, or someone else) makes the engine you use to make ALL your games, 5% isn’t a bad slice, IMHO.
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