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Royalties

I’m not a game creator (yet) but was wondering:
With the huge amount of target platforms Unreal is capable of making games for, the number of game distributors, price fluctuations (discounts, bundles, etc.) and price localization how is Epic Games able to verify the trustworthiness of an royalty report? How are disagreements handled? I imagine a developer would be excluded from using the Engine if it ever came to that. Considering developers scattered around the globe this seems like a legal uncertainty.

In some cases it will be very difficult for them to notice, but if your game is successful then they will know it exists and can have a good guess at what the royalty payments would be like.

They don’t know what you earn but can profile and estimate. You would of course have to have a bookkeeping of all your sales regardless of the platforms or currencies and Epic reserves the right to audit your records at any time with a prior notice. Companies are always forced to have some kind of bookkeeping and usually individuals have to have something for tax authorities. Even if you fail to do any of these things, most platform have sales reports which Epic may require you to provide and with messy, incorrect bookkeeping you will the one to pay all costs of the audit procedure.

Unhelpful Assumptions…

There’s a lot more Telemetry inside UE4 than UDK had. So I imagine Epic know quite a lot actually… :slight_smile:

There’s also Steamspy and insider industry tactics that could be used by Epic in the event of an audit.

Its easy to over-focus on this and forget about the elephant in the room: App Store / Steam 30% cut.

Its also easy to ignore cross border tax issues. Whereas Epic’s cut per quarter is extremely generous!

Simple word by EPIC: If you succeed then we succeed. If successful then you will be noticed by EPIC eventually. 5% by Epic is actually very generous as they provide very expensive engine with full source. Before UE4 it was impossible to get Unreal Engine without being millionare.

Epic Games reserves the right to audit entities that publish UE4 content. If you’re audited, Epic Games will pay the cost of the audit if you are cleared. (The line is defined as “a shortfall in payments in excess of 5% during the period audited” in the Unreal Engine 4 EULA.) If you didn’t make all the appropriate payments, then you will need to pay for the cost of the audit. There is also a 2% (compounding) late fee per calendar quarter for unpaid royalties.

Long story short: if they’re suspicious, then you can be audited. They’ll try to make it as painless as possible, though, if you’ve been honest.

For a small developer it is certainly amazing at 5% of revenue. For a larger one, that can rake up hundreds of millions to billions in sales, maybe not so much. Guess they found out that middle sized developers are where the gold’s at.

Granted, but Steam is only one of the many available vendors. You could also be selling directly from you website for example. In that case analytics go out of the window.

I think the real problem is not being honest, but disagreement in what the exact fair value is. Maybe I’m overthinking it but with the huge amount of possible revenue streams this seems like a very convoluted process.

If you can manage that “huge” number of revenue streams, you should also be able to deduct 5% from them.