Here’s something big we missed earlier this month when Amazon was talking about the App Store it’s building for Google Android — and we’re not sure it got the attention it deserves.Amazon itself — NOT app developers — will ultimately set the prices for paid apps in its store. That is a big change from what developers are used to (and have grown comfortable with) on the iPhone and Android.
And an iPhone/Android developer we just met with is not sure if they like it.
(We try to stay super-plugged-in to this topic, so we’re surprised we didn’t hear more about this.)
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, but it has to be the same price as (or cheaper than) the app is selling anywhere else.
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.
So if your $10 app is sold for $10, you get $7. If it’s sold for $5, you get $3.50. But if it’s sold for $1 or free, you’re at least guaranteed $2, or 20% of your $10 MSRP.
In theory, Amazon will be able to use whatever sales algorithms it has to generate the most possible revenue (retail price times number of buyers). But developers themselves won’t have control over app pricing.
This is sort of like the way Amazon sells other goods, such as paperback books and DVDs, but in this case, Amazon doesn’t pay a wholesale price or take physical inventory, the way it does for books. And it’s the opposite of the “agency model” e-book pricing technique, where publishers themselves set the price of Kindle e-books.
This could be a good thing for developers, if it generates more revenue than standard pricing set by the developer.
But it could create some problems. For example, 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.
Then there’s the element of giving up pricing control, which may be more of a subjective, emotional thing to get over than a real problem. But it still may deter some companies from participating.