Amazon, Not Developers, Will Set New App Store's Prices

Trebortech writes "Looks like Amazon is changing the rules of the game for developers with their new Android App store. I'm curious how Amazon will determine the value of your app and if having control of your prices really matters." The core of the linked article: "Here's how it works: When developers submit apps to Amazon's app store, they will be able to set a suggested retail price ('MSRP'). It can be free, it can be $50, whatever. Then Amazon -- not the developer -- will set the retail price. It can be full price, it can be a sale price, or it can be free. Developers will get to take home the standard 70% of the app's retail price (what the app sells for) or 20% of the MSRP (what the developer thinks it should sell for), whichever is greater."

Comments

Pricing tactics

[Froggie]

I am a developer, I want $2 per sale, so I set the price at $10 knowing it will never sell at that price.

Amazon will then have it almost permanently on sale at $2.85, "70% off!" - which is coincidentally the 70% return mark.

The basic premise seems to me to be that Amazon will be able to offer huge discounts on apps because the developer nominally 'agrees' that their recommended sale price is offensively high - because the pricing strategy compels them to. But the developer gets decent money, so neither party loses. The only loser is the consumer who are being deceived into thinking they're getting a huge discount.

It'll be interesting to see how this plays in different countries - for instance the UK has no great respect for recommended prices and insists that items on sale are actually sold at full price for some (small, admittedly) proportion of the time. I imagine the rules vary by country, too.

Re:Didn't do the math

[Alef]

Seems like somebody didn't think this through.

Indeed, but I don't think it is Amazon. Obviously, if you set the MSRP to $1,000,000,000, then Amazon will just offer it for that price (or anything down to about $285,700,000 where they still make a profit), and you'll get zero sales.

Not particularly sweet.

Re:Ah...

[Pharmboy]

You can't really compare that way. The cost to stock your software at Amazon is close to zero. They are not buying a fixed number of units from you. Technically, they aren't even buying and reselling the software, they are simply brokering the sale for you, since they never invest any money into the transaction. That said, the 30% commission is very reasonable, but not sure everyone will like Amazon setting prices. Even if Amazon does a good job with it, the fact that they are setting the price for a product that they are actually only brokering is problematic.

This is an evil monopoly move, and must be stopped

[Garwulf]

As another comment on here pointed out, just about everybody is missing the point of what Amazon is doing. This isn't something to benefit the customer - this is a monopoly move designed to wipe out any competition to Amazon in the app marketplace.

I'm going to discuss this in layman's terms. Now, for details on the contract, see this post, which shows you where things are on the contact and how they're working: http://developers.slashdot.org/comments.pl?sid=1951734&cid=34889086

This is an evil monopoly move by Amazon, and it isn't the first one. This is the third I've seen. The first was a move to wipe out print-on-demand printers used by the small press market - Amazon contacted several of the larger small press publishers and informed them that if they didn't switch to Amazon's in-house printer (a company called Booksurge known for shoddy printing jobs), Amazon would remove the buy button on their books. Amazon did pull that trigger, by the way, and it resulted in a class action lawsuit that put an end to that particular trick. The second was an attempt to wipe out any competition selling e-books - Amazon spun the dispute as greedy publishers wanting to price-gouge customers, but what it was actually about was that Amazon had tried to get publishers to sign contracts stating that Amazon would always get the lowest list price for e-books, regardless of any other arrangements past or future...including direct sales from the publisher's own website. The publishers fought that one and won, even though they took a PR hit for it.

This one is an effort to wipe out any competition in the app market by manipulating app developers. Here's how it works:

As the article said, the terms are set where the app developer will receive 70% of the actual sale or 20% of the list price (basically, the price the store is supposed to sell it for), whichever is greater. As was left out (and pointed out in the post I linked to), there's a clause in the contract stating that Amazon must always get the lowest list price.

So, if you're a developer, you need to calculate the list price of your product based on what you need to receive from each app sold. Let's say that's $4. But, with the terms of this agreement, you are only guaranteed that if it is 20% of your list price, so you have to set your list price at $20. Therefore, if Amazon turns around and sells it for $4.50, you are guaranteed to get your $4.

But, this also means that in order to ensure that you get that $4, you are now forced to overprice your product. So, everybody else who carries your product - including yourself, if you have your own little app store - has to do it at a list price of $20. In the meantime, Amazon can set the price to whatever it wants, and so long as it doesn't go below $4, it will make a profit on the sale. And, Amazon even makes it look like it is doing you a favour - after all, if your app sells for $10, you're going to get $7 from it. Amazon gets to have the lowest prices, and you - the developer - have made it so that every other app store gets thrown under the proverbial bus when it comes to your app, because they will never be able to compete while using the list price that you are forced to give them.

This is an incredibly dirty trick, and what needs to happen is that app developers need to fight back and refuse those contract terms en masse. If they can do that - like the publishers did with e-books - then Amazon will be forced to back down. If they don't, then Amazon will stand a reasonable chance of not only gaining a monopoly position, but actually wiping out any competition.