Although he was clear to say that he has not seen the final hardware for the Revolution, Rein said the existing Unreal Engine 2 would provide more than enough muscle to take full advantage of the Revolution's hardware since it won't require HD resolution.
Naturally, nothing's been announced, so despite the fact this came from Epic's VP, consider it unconfirmed. Any geeks in the house care to pontificate on whether or not UE3 is in fact worth it for Revolution developers?
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(UPDATE: To prevent further confusion, I'll attempt to clarify what I think Mr. Rein was saying. The process of porting UE3 games running in HD from platforms like PC, Xbox 360, or PS3 to the Revolution "won't be easy" and therefore, he suspects, won't be done. He elaborated that licensing Unreal Engine 3 for a Revolution game would probably be overkill, since Unreal Engine 2 is already capable of maxing out what they perceive the system to be capable of.
That being said, what about the streamlined scripting and animation tools bundled into Unreal Engine 3's Kismet? Wouldn't some developers gladly pay the increased licensing fees to work in a refined development environment that, according to Epic, could cut their development costs. Furthermore, some developers, like Midway, have purchased studio-wide licenses to develop all their next-gen titles with UE3, presumably their Revolution titles as well.
I think mocax got it right, "Epic's writes software graphics/game engines. Nintendo makes a machine that allows developers to deviate from Epic's core business. Any self-respecting profit-oriented corporation will twitch at Nintendo's disruption." I suspect we will see UE3 on some Revolution titles, but the idea is antithetical to Nintendo's stated ideology and thereby threatening to a company that makes their money selling eye candy.