Amazon has laid down the law for app developers who want to sell apps in the upcoming Amazon Android App Store. They will control prices, not developers – a reverse from how Apple and other resellers handle application sales.
Amazon tried similar tactics with booksellers and electronic books and, until last year, got away with it. Publishers finally banded together and forced Amazon to re-tool their sales strategy, which has resulted in what amounts to an industry-wide norm of $9.99 for an ebook.
App developers may have to do the same, though it’s possible for them to not deal with Amazon at all, since they can sell their apps through other venues. Of course, given the marketing power of Amazon, this may mean a lot of lost money for some developers.
It will work like this: developers submit apps to Amazon with a suggested retail price. The price can be anything ($0, $50, $5, whatever), so long as it’s at or below the retail price the app sells for at other venues. Amazon, however, is not required to go along with that. They can set the price wherever they’d like. It’s not all bad for developers, though, as Amazon does agree to pay a minimum 20% of the suggested retail. The normal developer share is 70% of retail.
So it would shake out like this: you set the suggested retail for your app at $10, which would mean you get $7 every time it sells. Amazon sets the price at $4 on a sale or other incentive, which puts your payout at $2.80. That’s still higher than the minimum 20% they will pay no matter what. Now if Amazon decides to give your app away for free? You still get $2 for every app “sold.”
So although the strategy looks ugly on its face, it’s not a total screw job. On the other hand, if you have a killer app that sells like hotcakes at other venues and Amazon attempts to undercut those venues by offering it for much less, you lose money too.