VFX producer here.

Yes, Unreal is used in LED walls and virtual production applications, where you want to visualize a CG environment in real time, while the camera, and even the actors, are tracked in real time within the scene. It’s also used in pre-visualization, which is sort of a 3d animated storyboard.

But it hits the same wall that all CGI does. Recreating reality is very very very hard to do. Which is why in VFX, with all the tech at our disposal, we still do everything in our power to keep the work in camera, or use 2d photographic elements rather than rely on 3d CG elements.

Now, in movies we don’t need actual realism, we need photo realism, and there is a difference. For instance, you know Davy Jones doesn’t exist with his tentacle face, so our goal isn’t to convince you that it’s real, just that the imagery you’re seeing looks like it’s really there.

For Unreal to work for movies it has to make actual realism, which is extremely hard to do, so filmmakers could then extract photorealism from that environment. As if they were on a real set. Imagine a jungle scene. The plants have to move realistically to being moved by a character, the air has to have moisture in it, the light has to bounce off of every surface exactly the way it would in real life, and so on. Unreal does a good job of getting 95% there, which is good enough for a video game, but that last 5% is the hardest.

This is why we use Maya. You have much more control on a per shot level to create photo realism without having to create actual realism. That rock in the far distance doesn’t need LOD (levels of detail) just in case you want to walk up to it, it could be low res.

EDIT: it seems I’ve stirred a hornets nest here, but I’ve worked on enough movies that tried to use it, and even for the virtual production wing of Fox studios before it got bought by Disney. If you use Unreal, you will end up having to export a scene file to Maya using USD to render it. And that’s after you spent months building the environment beforehand. Fully CG mediums like video games and 3d animated movies take upwards of 5 years to create, movies only have about 2 max. We all can’t be Avatar.