IGDA Warns Against Amazon Appstore’s Pricing Terms

The International Game Developers Association, a global non-profit representing video game developers, issued a warning against selling apps Amazon’s appstore because it doesn’t give app makers control over their final pricing to consumers.

Under Amazon’s terms, developers earn either 70 percent of the price the company actually sells the app at or 20 percent of the developer’s requested price — whichever is greater. Developers also can’t price the app a higher than they do in other stores, so Amazon has to have at least as good a price as everyone else.

IGDA argues that this creates an incentive for Amazon to discount its entire portfolio of apps to gain marketshare against Google’s Android Market and other third-party Android stores. Or Amazon could discount a blockbuster app to attract consumers at the expense of that individual developer’s revenue. IGDA says this behavior in the long-run could drive app prices even lower across all Android stores, damaging revenue for developers.

“Under Amazon’s current terms, Amazon has little incentive not to use a developer’s content as a weapon with which to capture marketshare from competing app stores,” the IGDA says.

One thing to consider though is that while Amazon’s terms may be restrictive, many top developers are moving toward a freemium model, where they earn revenue through in-app purchases of virtual currency. Twelve of the 25 top-grossing iOS apps in the U.S. today are free, up from one third last November. While Amazon controls upfront pricing for apps, it has not issued any restrictions whatsoever on in-app purchases for the time being. So the terms IGDA is criticizing may not matter for top-performing freemium developers, who apparently won’t have to give up 30 percent of their in-app purchase revenue to Amazon for the foreseeable future. (This may change though if Amazon gains more clout, like what happened on the Facebook platform when the company introduced and then later mandated Credits for canvas games.)

When Amazon launched its store in March, it muscled its way in by snapping up top developers for a free app a day promotion. Our understanding of those contracts suggests that Amazon paid developers upfront for copies of their apps until a certain predetermined limit, say sources familiar with the deals. While we haven’t gotten numbers, a number of top developers we’ve talked to privately say that they’ve been pleased with the number of downloads from the store. This is despite the somewhat complicated eight-step process consumers have to go through to install it on their Android phones.

Important Advisory about Amazon’s Appstore Distribution Terms

To all members of the game development community:Two weeks ago, Amazon launched its own Android Appstore. We know that many developers have been eagerly looking forward to that launch in hopes that it would represent a great new revenue opportunity and a fresh take on downloadable game merchandising. The IGDA applauds Amazon’s efforts to build a more dynamic app marketplace. However, the IGDA has significant concerns about Amazon’s current Appstore distribution terms and the negative impact they may have on the game development community, and we urge developers to educate themselves on the pros and cons of submitting content to Amazon.

Many journalists have noted the unusual nature of Amazon’s current store terms, but little has been said about the potential implications of those terms. In brief: Amazon reserves the right to control the price of your games, as well as the right to pay you “the greater of 70% of the purchase price or 20% of the List Price.” While many other retailers, both physical and digital, also exert control over the price of products in their markets, 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.