Status of the engine

[Runouw]

The "profit" comes from ads either in the game or on the page itself.
On Newgrounds, even if you don't have advertisements in the game, you get "Flash Portal Ad" impressions which is a pretty low eCPM of $.10 but it's still something. And also, there is value in getting users to redirect to another site. That's why some flash games have sponsorships (Money paid from a sponsor to make a flash game advertise for their site). Because, for example, there are people who play that game and click the sponsor's "Play More Games" button which gives that sponsor's website more views. This makes that sponsor's site more popular and the sponsor collects ad revenue from all the people redirected to their site from the flash game.

There are also plenty of fan games and fan movies out there that make money from in-game ads even though all the characters are copyrighted. I haven't seen companies do anything about this except for a rare case when a Pokemon MMO was taken down. But most of the time the big companies leave fan games/movies alone. Maybe it's because it could help boost their sales by reinvigorating consumer interest for their IPs.