Engine and middleware royalties: budgeting for the cut you owe

Your game engine and middleware are not just tools you buy once. For many studios they are an ongoing cost of goods sold, owed to a third party as a share of revenue. A major game engine is the headline example: some engine licensors charge a royalty (commonly around 5%) on lifetime gross product revenue above a set threshold per product, with an initial exempt amount per product.

The catch is that this is a cost that grows precisely as your game does well. The better a title sells, the larger the royalty cheque, and it is usually owed in a foreign currency to a vendor abroad. This guide covers how engine and middleware royalties work, why they need to be budgeted as a liability rather than discovered as a surprise, and how to set the money aside in the right currency.

A royalty above an exempt threshold

A standard major-engine licence may charge a royalty (commonly around 5%) on lifetime gross product revenue, but only on the portion above an initial exempt amount per product. The first slice of each product's lifetime gross is often royalty-free. So a product earning just over the threshold owes the percentage only on the excess, not on the full amount, and the threshold typically resets per product rather than across your whole studio.

Because it is a percentage of gross, the absolute amount you owe rises in lockstep with success. A title that has only just crossed the threshold has a small, manageable liability; a much bigger seller has a far larger one. Planning for it early, while the royalty is still zero, is far easier than scrambling for it after a hit.

Store-linked reductions (time-sensitive)

Some engine licensors have introduced incentives tied to launching on their own storefront, and these terms can change, so treat this as a flag to verify rather than a fixed rule. Under such programmes, eligible games can see the engine royalty reduced if they ship on the licensor's own PC game storefront at or before their release on other storefronts on the platforms they support. Separately, sales made through the licensor's own storefront have sometimes been treated as royalty-free for the engine.

The practical takeaway is not the exact percentage, which may move, but that your effective engine royalty can depend on where and when you launch. Before you build a number into a forecast, confirm the current rate and the eligibility conditions directly in the licensor's licensing terms, because incentive programmes like this are exactly the kind of thing that gets revised.

Middleware has its own models

The engine is only part of the picture. Game engines, audio middleware, and a long list of other tools each carry their own licensing model. Some are royalty-based, some are seat-based or per-developer, some are tiered by studio revenue, and some are flat annual fees. There is no single rule, and the model that applies to one tool tells you nothing about the next.

What they share is that they are a per-game cost owed to a third party, frequently invoiced in a currency that is not your home currency. Before a project ships, build a short inventory of every engine and middleware licence in the title, note the model for each, and work out which ones scale with revenue. Those are the liabilities you need to reserve against.

Reserving the royalty as you earn it

The mistake is treating revenue as fully yours until an invoice arrives. A revenue-based royalty is incurred as you earn, even if it is paid later, so the cleanest approach is to set the money aside as the revenue comes in rather than after the fact. Once a product clears the exempt threshold, every further sale carries a known percentage owed; reserving that percentage as you go means the eventual payment is already covered.

It also helps to reserve per product, because the engine threshold is usually per product, and to reserve in the currency you will actually pay in. If you owe an engine licensor or a middleware vendor in US Dollars, holding the reserve in dollars removes the risk that a currency move between earning and paying quietly enlarges the bill.

How Altery fits

Engine and middleware royalties are a textbook case for ring-fencing. With Altery you can hold a dedicated pot per product and move the royalty percentage into it as revenue lands, so the liability is visibly reserved rather than blended into your spendable balance. When the invoice arrives, the money is already set aside and you are not borrowing from operations to cover it.

Because these vendors are usually paid abroad, a multi-currency account lets you hold USD, EUR or GBP and convert on your own timeline ahead of a payment, rather than at whatever rate applies on the day the invoice is due. Scheduled, FX-aware payouts let you pay your engine licensor and middleware vendors in their own currency, and real-time balances keep each product's reserve clear. Altery is not a bank and provides general information, not advice; always confirm current royalty rates and licence terms with each vendor.

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