It’s free because it’s brilliant. It solves so many issues. Everything is falling into place with this strategy.
For instance:
The UE Editor. As I understood it, prior to this announcement, a developer could not ship a game that encapsulated and added features to the UE Editor itself. Developers of quality games that want their games to have an editor for users to mod, level design, and such, faced two choices: A) indirectly support UE Editor but require that game purchasers also have a UE account (paying at least $19 on top of what they already paid for the game). B) developing their own editor entirely from scratch or with third-party tools.
Option A is obviously a complete no-go and not just because of the price. No good game in its right mind would want to frustrate users with that indirection. Option B is doable but then it wouldn’t benefit Epic (less game players using UE Editor). This new pricing model suggests that it’s no longer going to be an issue, that the licensing doesn’t stand in the way. It swings the door wide open. It means UE can amass a major community of modders, artists, scripters, and players. There are other revenue streams that come from a larger community that has no barriers to entry.