This might be true for this special case, but it is easy to change materials and post processing in the Unreal editor.
And besides that I would not make a little casual game for your web platform with UE3. There is still TGB and Unity3d for such a project. And they will survive because of this market niche they fill.
Dont expect UE technology to run fast like hell on your old programmer laptop. It is an advanced technology with lots of bundled features like AI, SpeedTree, SceneManagement and a complex shader system. It is not a minimal Java 3d engine.

So this demo is obviously not intended to run on an iPhone.

I see it this way: the market changed a lot with this offer. Cheap and free indie engines will have a hard time now. They need a niche. TGB has a good niche to create 2d games. Unity still has the option to make iPhone and Wii games. Maybe Wintermute still can live with the 2.5d approach for adventure games.

But all the technologies that basicall tried to be something like Unreal with a cheaper price set (C4, Torque3d, Leadwerks and Gamestudio) have stronger and cheaper competition now. Some hardcore fans will still use it but new customers will simply check demos, tools and power and will use UE3 in the end, if they have big dreams. And I can assure you, most of the beginners start with big dreams (me and all my friends included).

So this is the time to find a market niche for each product, to specialize it (platforms, game style, editor approach).
But in the end the market will experience a fast consolidation.