I personally value both pacing and merit. I love demos where I ask myself "how did they do that!?", and I love demos where I forget to ask that question while I'm watching them. This one, I found rather uninspired, and obviously very weak in the merit department. It clearly does not deserve a 2nd place; there's just too little of value that the authors brought to the table. In fact, their biggest contribution may be to open the door for other sceners to use UE4 for great things.
I'm more interested in the scene's artistic growth these days anyways...art in real-time, hyper constraints, etc.
Using a pre-built engine is not quite up to the standard I would normally expect to see.
However, an argument could be made that the Unreal Engine itself is a platform (like the C64, PC, Windows, etc.), and pushing that platform's boundaries is keeping with the spirit of the demoscene.
If we restrict one from using something like Unreal, do we restrict also the use of something like OpenGL or DirectX? Or Windows/Linux itself? There are a lot of layers of abstraction we can remove.
It's brought up a bit of an existential question in the scene however, it's not uncommon for teams to use their own engine, or engines coded by other teams, and assets of various sorts are frequently borrowed (but heavily remixed) and used in demos (famously photos of models are often turned into digital paintings used as filler scenes, but it extends to samples and other material).
So DEMO2 exists purely on its artistic merits, design and style without a great deal of technical work having been done by the team. So is it "ok" by the unwritten scene rules or does it challenge the scene to focus less on the technical merits of a piece and only on the artistic bits?
http://www.pouet.net/prod.php?which=66096