This week, the International Game Developers Association (IGDA) issued a warning to its members, suggesting they “educate themselves on the pros and cons of submitting content to Amazon.” The letter refers to the recently launched Amazon Appstore, a curated market place for Android applications. The issue at hand is the pricing, or rather, Amazon’s complete control of the pricing. When Amazon sells an app, it pays developers either 70% of the sale price, or 20% of the list price, whichever is greater.
It’s this pricing structure that IGDA finds troubling. But do developers agree? Let’s find out in this week’s ReadWriteMobile poll.
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IGDA Has “Significant Concerns”
According to the IGDA’s letter, available here:
“…the IGDA has significant concerns about Amazon’s urrent Appstore distribution terms and the negative impact they may have on the game development community…we are not aware of any other retailer having a formal policy of paying a supplier just 20% of the supplier’s minimum list price without the supplier’s permission.”
Another concern is that Amazon, says the IGDA, doesn’t allow developers to run effectively run promotions through other outlets, because if a developer ever temporarily drops the app’s price elsewhere, they must permanently lower it in Amazon’s market.
The organization then lays out five different scenarios where it feels developers will have problems:
1) Amazon steeply discounts a large chunk of its Appstore catalog (imagine: “our top 100-rated games are all 75% off!”). Some developers will probably win in this scenario, but some developers — most likely, those near the bottom of the list — will lose, not gaining enough sales to offset the loss in revenue per sale. Amazon benefits the most, because it captures all the customer goodwill generated by such a promotion.
2) By requiring all developers to guarantee Amazon a minimum list price that matches the lowest price on any other market, Amazon has presented developers with a stark choice: abandon Amazon’s market or agree never to give another distributor an exclusive promotional window.
3) Other digital markets that compete with Amazon (both existing markets and markets yet-to-be-created) may feel compelled to duplicate Amazon’s terms, and perhaps even adopt more severe terms in an effort to compete effectively with Amazon. In essence, we’re looking at a slippery slope in which a developer’s “minimum list price” ceases to be a meaningful thing.
4) Amazon steeply discounts (or makes entirely free) a game that has a well-defined, well-connected niche audience. The members of that niche audience snap up the game during the promotional period, robbing the game’s developer of a significant percentage of its total potential revenue from its core audience.
5) Amazon steeply discounts (or makes entirely free) a hit game at a time when the game is already selling extremely well. This sort of promotional activity may attract consumers away from competing markets and into Amazon’s arms. But it might actually represent a net loss for the developer, which was already doing quite well and didn’t need to firesale its game at that moment in time.
The IGDA closes the letter with a dire warning that, under the current terms, Amazon has little incentive not to use a developer’s content as a weapon with which to capture market share from its competition.
GetJar Chimes In: Developers Should Set Their Own Prices
In response, Patrick Mork, CMO at the third-party app store GetJar has issued “a developer manifesto on pricing,” which essentially agrees with everything the IGDA says.
Mork believes developers should be able to set their own prices, choose their own billing partner and, if an app store decides it wants to set its own pricing, it should be done in conjunction with developers. He also says that developers should be able to promote their apps across storefronts, and this is especially true for Android apps.
“Android distribution is supposed to be open,” says Mork. “App stores shouldn’t hamper developers’ ability to leverage promotions or placement in other stores through rigid pricing policies…Android is supposed to benefit developers through open distribution, if stores abuse pricing to reduce this distribution it defeats the whole purpose behind open distribution and ultimately makes it harder to pay the rent.”
Of course, Amazon’s policies in this matter have a direct impact on GetJar’s business – it too, is an app marketplace whose bread-and-butter involves the marketing assistance it provides to developers for a fee.
Amazon = More Downloads, Wider Distribution?
By the looks of the Amazon Appstore catalog, plenty of developers have been willing to trade in their right to set their own prices and run their own promotions for a shot at the wide distribution offered by Amazon’s app marketplace. After all, Amazon knows a little bit about moving product off virtual stores, doesn’t it?
Amazon has also responded that IGDA was looking at an old draft of its terms – a draft that has since been abandoned. However, the only difference between the two that Amazon takes care to point out is that “the definition of list price applies only to the app’s current price on a similar store.” But Amazon is still very much in control of the pricing in general, which is still a major concern.
Poll: Should Developers Stay Away?
With both the pros and cons in mind, do you think app developers should keep their content out of the Amazon Appstore? Or do you think these concerns are overblown? Give us your feedback in this week’s ReadWriteMobile poll (and in the comments below, if you’d like!).
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