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I'm a research analyst in the gaming space looking for some more info on the economics of game development, specifically the costs of licensing FPS game engines like Unreal and CryEngine when creating titles for xbox.
1) My current understanding is that a license for either of these engines might cost as much as $400k. Is that correct?
2) Is that license fee paid yearly?
3) Is there any additional royalty based on sales that goes back to the engine developer?
1) In the business world, cost is whatever you negotiate. It may be $400k for one game, or $40k for a smaller business, or a charity case with no cost except showing an in-game ad for another game. A major company like EA who licenses engines for many products over many years is going to be on very different negotiating terms than a startup studio.
2) It is often the case that when a product is a one-time drop, the cost is also a one-time drop. Maintenance and updates over time tends to require a longer-term payment.
3) Depends on the negotiation. Royalties are a difficult thing generally; they require additional bookkeeping and are subject to Hollywood Accounting problems.