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Amazon, Not Developers, Will Set New App Store's Prices 294

Posted by timothy
from the hope-that-wasn't-your-business-plan dept.
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."
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Amazon, Not Developers, Will Set New App Store's Prices

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  • Pricing tactics (Score:5, Insightful)

    by Froggie (1154) on Saturday January 15, 2011 @09:20AM (#34888760)

    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.

  • by Alef (605149) on Saturday January 15, 2011 @09:26AM (#34888784)

    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.

  • by Anonymous Coward on Saturday January 15, 2011 @10:13AM (#34888986)

    I really don't see what the problem with the seller charging their own price for it. It's normal business practice to anyone who's ever shopped, online or otherwise.

    Look at everything else Amazon sells, or at most other e-tailers, there's the suggested retail price and the actual sail price. If nothing else, the actual retail price is often lower than the retail price suggested by the manufacturer (for example, I recently ordered an Epson printer for $50 less than the suggested retail price (which is what Epson themselves sell it for, if you buy direct from them) - this isn't "screwing over their customers", in fact, it's quite the opposite, customers, believe it or not, actually APPRECIATE getting something for less. Utterly bizarre, I know!

    Screwing the developers over, sure, but if the seller is bringing the actual retail price below the suggested retail price, then the developer in question is being screwed because s/he tried to screw the customer - nevertheless, said developer can very well simply not do business via Amazon or similar retailer. That's what Apple does, after all; dictate the resale price by being the sole distributor of their product and enforcing a minimal price for which their products can be sold. But then again, the traditional argument against that practise is that it's EEEVUUUHL.

    How precisely the availability of the sourcecode for the distribution platform changes standard business practices is unclear at best, unless these ventures strive to be distribution channels rather than sales channels, but I'd question if such a model is sustainable, given that it's continuing functioning needs to be funded somehow. Unless of course the gripe is with the seller offering their own price, and you want to put the decision of pricing in the hands of the developer, in which case, this has absolutely nothing to do with open source at all, and developers unhappy with Amazon's policy, are, once again, free to simply not use the service, in favour of either using a service which allows them to fix their own price, or handle distribution and sales themselves at the expense of reaching a broader audience.

    Or is this an argument against the possibility of the seller putting a price on something with a suggested retail price of 0 - which, most people outside of slashdot would view as a simple "tax" or fee for the service, since most people understand that such a service needs to be paid for somehow, in the name of funding its continued existence (as opposed to the common open source model of e-panhandling for donations), and of course, and I'm not sure wether I've mentioned this yet, there's the option to simply not use this distribution service And even then, if a customer sees "suggested retail price: $0" then they'll just hop on over to the developer and acquire the goods from there, no harm, no foul.

    That last "live free" quip is just funny as well. This really isn't about proprietary vs open source, it's about normal business practices, which in this case, often works to the benefit of the consumer.

  • Re:Ah... (Score:5, Insightful)

    by Pharmboy (216950) on Saturday January 15, 2011 @10:29AM (#34889076) Journal

    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.

  • by Garwulf (708651) on Saturday January 15, 2011 @02:51PM (#34890928) Homepage

    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 [slashdot.org]

    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.

If you had better tools, you could more effectively demonstrate your total incompetence.

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