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The royalty threshold creates a revenue-based triggering mechanism that determines whether the licensee's payment obligations under the Royalty Addendum take effect. This establishes the financial conditions under which Unreal Engine receives compensation for commercial product distribution beyond the initial license grant.
Licensees developing products on Unreal Engine are required to remit 5% royalties on all gross revenue above $1,000,000 USD per product. Products that do not exceed the $1 million revenue threshold operate under royalty-free terms, and advances received for development of royalty products remain subject to the Royalty Addendum's terms.
How other platforms handle this
In the European Union, developers can distribute iOS apps outside of the App Store through alternative distribution. Developers can also use third-party payment processors in their apps. These options are available under the Digital Markets Act and require developers to agree to additional terms.
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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
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The royalty threshold creates a revenue-based triggering mechanism that determines whether the licensee's payment obligations under the Royalty Addendum take effect. This establishes the financial conditions under which Unreal Engine receives compensation for commercial product distribution beyond the initial license grant.
Licensees developing products on Unreal Engine are required to remit 5% royalties on all gross revenue above $1,000,000 USD per product. Products that do not exceed the $1 million revenue threshold operate under royalty-free terms, and advances received for development of royalty products remain subject to the Royalty Addendum's terms.
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