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Havok is a company that licenses the physics middleware used in Source games. The original engine licensed by Valve, Ipion Virtual Physics (IVP), was acquired by Havok in 2000 with the original hefty license fees intact. It is now a legacy product superseded by Havok's in-house middleware suite.
IVP was initially licensed for an estimated $50,000-$60,000 per title. The licensing cost for third-party Source games is now $25,000 per title.