By Ed Oswald | Sunday, January 16, 2011 at 2:31 am
Amazon’s move to build an app store for Android may have initially sounded like a good idea, but in the end it could end up screwing the developers that would make it all possible. How so? A little-publicized stipulation of its agreement with developers: the retailer sets the price.
Developers would still get to say what they’d like to sell their application for, an MSRP if you will. But Amazon does not guarantee that’s what its customers will pay. Instead, the retailer may choose to sell the app at a discount — just like Amazon does for other items on its site — or even give it away for free.
The developer would receive 70% of the selling price, or 20% of the MSRP, whichever is greater. So for example if a developer wants $5 for his or her app, but Amazon sells it for $3, the developer gets $2.10. If Amazon decides it wants to charge nothing for it for whatever reason, the commission drops to $1. Of course on apps with a higher MSRP and larger discount, the 20% rule could give the developer a larger cut in some cases.
I am flabbergasted that the company thinks this makes sense. Many developers are already practically giving away their work in hopes that cheap prices will bring more volume, and for Amazon to think it somehow knows better when it comes to this is beyond comprehension.
One thing is for sure: if Apple even ever thought of doing this, they’d be buried in an avalanche of criticism. That’s probably why the company has taken a hands-off approach when it comes to app pricing. Yes, from time to time the company has flexed its muscle to keep App Store users from being fleeced, but generally it is not telling developers how much their apps are worth.
As Dan Frommer pointed out on Silicon Valley Insider Friday, Amazon’s price strategies work elsewhere because it pays a wholesale price for product before it is sold. However with apps, nobody’s making anything until the customer purchases and downloads. Thus, it is Amazon who has the final say.
It could also force the developer to lower its prices elsewhere — such as a companion app on Apple’s App Store or RIM’s BlackBerry App World — to prevent other customers from feeling like they’re being overcharged.
Amazon should nix this idea. It shouldn’t decide the value of somebody else’s work. Hopefully developers will stand their ground, not only for themselves but the rest of the industry as well.