Earlier quoted context omitted.
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.
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.
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.