If you publicly distribute a product made with Unreal Engine that earns more than $1,000,000 in gross revenue, you owe Epic a 5% royalty on the revenue above that threshold. Advances from publishers also count toward this calculation.
This analysis describes what Unreal Engine's agreement states, permits, or reserves. It does not constitute a legal determination about enforceability. Regulatory applicability and practical outcomes may vary by jurisdiction, enforcement context, and individual circumstances. Read our methodology
This is the primary financial obligation in the agreement and can represent a significant cost for successful commercial game studios or product developers.
Developers whose products earn more than $1,000,000 in gross revenue will owe Epic 5% of that revenue as a royalty, which can materially affect the financial returns of a successful product.
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"Distributions of any Product that is not a Royalty-Free Product (such Products, 'Royalty Products') will be subject to the terms of the attached Royalty Addendum. Additionally, any advance on Royalty Product revenue you receive to develop a Royalty Product will be subject to the Royalty Addendum. However, as described more fully in the Royalty Addendum, you will not be obligated to pay us royalty payments under this Agreement unless a Product directly generates more than $1,000,000 USD in gross revenue.— Excerpt from Unreal Engine's Unreal Engine EULA
REGULATORY LANDSCAPE: Royalty payment obligations and the calculation of gross revenue may engage standard commercial contract law in North Carolina (for US entities) and Ireland (for non-US entities). Revenue reporting obligations may intersect with financial disclosure requirements under applicable securities or tax regulations depending on the licensee's corporate structure and jurisdiction. No specific US federal regulatory agency directly governs this provision, but the FTC's oversight of unfair or deceptive trade practices could be relevant if royalty terms are materially misrepresented. GOVERNANCE EXPOSURE: Medium. The royalty obligation is clearly stated and widely known in the game development industry, but the inclusion of advances and other funds raised in the gross revenue calculation may create unexpected obligations for studios that receive publisher advances before a product generates direct consumer revenue. The $1,000,000 threshold applies per product, not across a studio's portfolio, which is a notable operational distinction. JURISDICTION FLAGS: US-based studios are subject to North Carolina law; non-US studios are subject to Irish law. Studios in jurisdictions with mandatory local commercial protections should assess whether those protections limit Epic's ability to enforce royalty terms as written. The inclusion of publisher advances in the revenue base may face challenge in jurisdictions with strict rules on revenue recognition. CONTRACT AND VENDOR IMPLICATIONS: Publishers and distributors acting on behalf of licensees are subject to the royalty terms through the licensee, creating indirect financial exposure for upstream parties. Studios should ensure publishing agreements clearly allocate royalty obligations and account for Epic's royalty in their financial models. Work-for-hire arrangements qualifying under Section 4(a)(iii)(B) may be royalty-free but require specific written agreement conditions. COMPLIANCE CONSIDERATIONS: Finance and legal teams should establish revenue tracking systems that segregate Unreal Engine product revenue from other revenue streams to support accurate royalty reporting. The Royalty Addendum's quarterly reporting requirements and the audit rights in Section 12 mean that record-keeping for all relevant products must be maintained contemporaneously and comprehensively.
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This is the primary financial obligation in the agreement and can represent a significant cost for successful commercial game studios or product developers.
Developers whose products earn more than $1,000,000 in gross revenue will owe Epic 5% of that revenue as a royalty, which can materially affect the financial returns of a successful product.
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