Well, reported today (although apparently the details have been known for a while, slow news day perhaps?) have been the details of the Unreal Development Kit (UDK) commercial licencing terms. In brief (focusing on indie game development) the details are, and I’m assuming this is all on a per-title basis as it doesn’t specify:

$99 (£65) up-front

0% royalties on first $5000 (£3250) of UDK related revenue

25% royalties on all revenue above $5000

They have some examples behind the second link, but basically you get £3185 per game before their royalty kicks in. This might sound great to aspiring Indies, and yes it does mean you have access to one of the most widely used and respected game engines, but I personally feel it would be a bad deal. Say you make £5,000 revenue from your game (sorry for £s but hey, I’m from the UK 🙂 ), now comparing it with Unity Pro as an example:

Unity Pro – you pay £780 for the engine with no royalty terms.

Total cost = £780 upfront

Total profit = £5000-£780 = £4220

UDK – you pay £65 up front, 0% on the first £3250, then 25% on the remaining £1750.

Total cost = £65 + 25% of £1750 = £503

Total profit = £5000 – £503 = £4497

So the upfront cost of Unity Pro is higher, meaning you make £227 more by using UDK on your first £5000. Great! Until you realise that you will always have 25% taken from any future earnings. In fact any revenue above £6250 will see you worse off under the UDK deal. And unlike big studio developed games that aim for that sales spike on release to reap most of their profits, Indie devs rely much more on the ‘long tail’ – those sales that keep trickling in months, years after release. If you depend on that revenue model the UDK royalty deal is far less appealing.

What also concerns me is this particular section of the terms:

“UDK related revenue includes, but is not limited to, monies earned from: sales, services, training, advertisements, sponsorships, endorsements, memberships, subscription fees, rentals and pay-to-play.”

Most royalty terms I’ve seen for other engines focus on revenue from sales of the title only. However Epics’ terms not only include revenue from direct sales, but also seemingly any revenue generated by ad banners on the game’s webpage, Google ads/adwords for the game or money coming from third parties that you use to promote your game (e.g. at a con or in an Indie game showcase). And the ‘but is not limited to’ means they could stretch this to anything bringing in some cash that they deem to be in any way connected to the game you have made. For example, you make game related T-Shirts or some art books to sell – 25% cut please. Your game wins a competition that comes with a cash prize – they would be well within their terms to request a 25% cut of that too as it is ‘UDK related revenue’.

Now I’m not promoting Unity over UDK as a game engine. Unity is great, but as engines go UDK is far more established, more feature packed, incredibly powerful and using it will give you many transferrable skills should you wish to apply for a ‘proper job’ in the industry. But using Unity as an example of an engine with a flat-fee and no royalty structure, especially with regard to where the smallest Indies make profit, UDKs royalty structure is not a good deal. Also their far-reaching and simultaneously open-ended definition of what constitutes ‘UDK related revenue’ should be very concerning for any Indie that relies on trickle revenue and merchandising sales to keep things ticking over.

In fact I would go so far as to say that any royalty-based deal for a game engine for an Indie is a no no. You’re already having big % cuts taken from the likes of Steam and/or your website store provider, you don’t need yet another party taking yet another cut. Pay a single upfront fee instead – it will hurt more to start with, but you will benefit in the long run.