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."

Re:Didn't do the math

[michelcolman]

I think they'll probably refuse to sell it, then. But you could still ask for 3.5 times as much as you normally would, and get at least the same income you wanted in the first place.

Don't Read TFA, Read This Instead

[hdon]

Business Insider and author of TFA, Dan Frommer, got several details wrong.

TLDR; Amazon prevents you from selling for cheaper on other outlets, or giving away free downloads or FOSS if you want to charge on the Amazon Appstore.

(Snipped down.) When developers will be able to set a suggested retail price ('MSRP'). Then Amazon will set the retail price. 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.

What does "MSRP" mean?

In the retail business (that's where the "R" in "MSRP" comes from) retailers make speculations on how many units they can sell at what prices over what period of time, compare to actual or theoretical negotiated bulk prices for purchasing from a manufacturer or wholesaler, and then decide whether or not it meets their profit expectations. It can be a little more complex than this, but this is the gist of it.

Well, the article linked to by Slashdot does not help you find Amazon's justification for using the terms "MSRP" or "SRP." My research, which may be incomplete, indicates that Amazon is not using this term, and rightly so. Here is an excerpt from Amazon's Appstore Distribution Agreement, which you can see in PDF form here [ssl-images-amazon.com] (MD5 checksum 15636c42ecfb47dc819445ad3214eac4, just in case they change the file in the future without renaming it.)

Section 2a of Amazon's Appstore Distribution Agreement

For each sale of an App, we will pay you a royalty (“Royalty”) equal to the greater of (i) 70% of the purchase price or (ii) 20% of the List Price.

Ok, so what we're actually dealing with is called a "List Price" in the legal agreement to supply Amazon's new App Store. This is a more correct term, because an MSRP is legally unrelated to the price a retailer secures from their supplier for units of the product. It's clear though that this "List Price" bears legal weight in determining the PPU (price per unit) of the product from the supplier (or, developer, I guess.)

So at this point what we have established is that the "List Price" in fact has no bearing on what the app will be sold for, but is defined to be five times the minimum PPU the developer is paid.

Here is a really important detail that Business Insider and author of TFA, Dan Frommer, glossed over:

..if your app is $10 in the official Android market and $10 in Apple's iPhone app store, but $5 at Amazon's store, it could hurt sales in your other channels where you get more revenue per sale.

Somehow, even managing to discuss the situation in which you set your prices differently for different sales outlets, Business Insider and Dan Frommer miss this juicy tidbit:

Section 5i of Amazon's Appstore Distribution Agreement

The “List Price” for an App is an amount that does not exceed, at any time, the lowest list price or suggested retail price for such App (including any similar edition, version or release) available on any Similar Service or the lowest actual price at which you make such App available for sale through any Similar Service. You will update the List Price for each App as necessary to ensure that it meets the requirements of this section 5i.

"List Price," then, is not simply five times the minimum PPU you wish to be paid (which would effectively allow you to actually set the price you want to sell at, which would be nice) but is in fact a function of what price you are offering, but a function of the price your app is available for at different outlets! This means if your app is on multiple outlets, Amazon takes away your ability to set your price through the List Price, and even

This is to prevent selling on multiple stores

[Jimmy_B]

Lots of comments here that're completely missing the point. This is to prevent you from selling at multiple stores at once. You see, in addition to setting whatever price they want, Amazon also has a rule which says that you're not allowed to set a "list price" that's higher than what you sell it for on other app stores. This means that if you put the same app in both Google Market and Amazon's store, then Amazon's store will always be cheaper - and you can't raise the price to counteract Amazon's discounting without ruining your sales on Google Market.

This is just one of several showstopping issues that ensure that I, as an app developer, will not put anything to Amazon's app store.