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Sure as long as we acknowledge that this isn't really free it's just deferred payment
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But it is free up to $1mm in revenue. Anyone can go and download the engine and use it as much as they want free. It is really smart and honestly $1mm is a generous entry point to capture a royalty for everyone involved.
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They could have just sold the engine, even a subscription is better than royalties. If my game sells more it doesn't cost Epic any more money.
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You misunderstand the business model.

Unreal is like venture capital or a book advance (or the equivalent in music record deal)

Can you self publish? Sure, of course, have fun. But if you want the support and infrastructure of a company that understands the business of books, you take a deal and it is just like this: if a bunch of authors get book advances, that is generous to the ones who are unsuccessful, and they can only do that _because they capture the upside of those that are successful_.

Without that, you don't get advances for anyone.

So the point I'm making here: unreal provides variance reduction for all game publishers and yes that disproportionately benefits the ones who make under a million. But they're the ones who need the help!

And in exchange, if you're one of the lucky few, you pay a shockingly reasonable 5% in perpetuity.

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I know you’re trolling but come on. The entry price for what you are suggesting would never be obtainable for folks like this kid. You can absolutely negotiate pricing if you are a big enough studio but for hobbyist they let you use it for a royalty. It’s great because it opens it up for everyone. If they charged a fixed fee it would have to be at a very high price.
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Not deferred payment for most devs as they do not reach the 1 million revenue
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For "the best train sim ever made" they probably reach it.
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Sure, and then he can afford it, because he's making over $1M/year revenue on this sim, and taking a very reasonable 5% off the top of that. So it blunts the profits a bit at that point, but it hardly seems like such a terrible thing at that point.
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