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.

Furthermore, Amazon dictates that developers cannot set their list price above the lowest list price “available or previously available on any Similar Service.” In other words, if you want to sell your content anywhere else, you cannot prevent Amazon from slashing the price of your game by setting a high list price. And if you ever conduct even a temporary price promotion in another market, you must permanently lower your list price in Amazon’s market.

These Amazon policies could have far reaching effects on game developers. The IGDA has identified five potentially problematic scenarios in particular:

1) Amazon steeply discounts a large chunk of its Appstore catalog (imagine: “our top 100-rated games are all 75% off!”). Some developers will probably win in this scenario, but some developers — most likely, those near the bottom of the list — will lose, not gaining enough sales to offset the loss in revenue per sale. Amazon benefits the most, because it captures all the customer goodwill generated by such a promotion.

2) By requiring all developers to guarantee Amazon a minimum list price that matches the lowest price on any other market, Amazon has presented developers with a stark choice: abandon Amazon’s market or agree never to give another distributor an exclusive promotional window.

3) Other digital markets that compete with Amazon (both existing markets and markets yet-to-be-created) may feel compelled to duplicate Amazon’s terms, and perhaps even adopt more severe terms in an effort to compete effectively with Amazon. In essence, we’re looking at a slippery slope in which a developer’s “minimum list price” ceases to be a meaningful thing.

4) Amazon steeply discounts (or makes entirely free) a game that has a well-defined, well-connected niche audience. The members of that niche audience snap up the game during the promotional period, robbing the game’s developer of a significant percentage of its total potential revenue from its core audience.

5) Amazon steeply discounts (or makes entirely free) a hit game at a time when the game is already selling extremely well. This sort of promotional activity may attract consumers away from competing markets and into Amazon’s arms. But it might actually represent a net loss for the developer, which was already doing quite well and didn’t need to firesale its game at that moment in time.

The IGDA’s bottom line is simple: 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 does not have the power or inclination to dictate how others conduct their business. However, the IGDA is permitted to express its views on business practices that affect the developer community, and it is the firm opinion of the IGDA that:

1) A developer’s permission should be required by any retailer seeking to pay less than the standard percentage of a developer’s minimum list price. This could be automated and even “opt-out” with a reasonable period of notice, but ultimately, a developer’s permission should still be required.

2) Developers should have the freedom to set a minimum list price of whatever amount they see fit, without regard to pricing in other app stores.

The IGDA has formally communicated its views to Amazon, and while Amazon has been very willing to engage with the IGDA, it has thus far expressed zero willingness to adjust its distribution terms. We believe that the people currently running Amazon’s Appstore may have the best of intentions and a desire to make their development partners successful, in general. The problem, as history has repeatedly demonstrated, is that things tend to change when a marketplace achieves any degree of dominance. The terms of Amazon’s distribution agreement give it significant flexibility to behave in a manner that may harmful to individual developers in the long run. Any goodwill that Amazon shows developers today may evaporate the minute Amazon’s Appstore becomes so big that Android developers have no choice but to distribute their content via the store. It would be foolish to assume that because Amazon’s Appstore is small today, it will not become the Walmart of the Android ecosystem tomorrow.

If Amazon responds to this open letter, it will likely invoke the success of games that have already been promoted in its Appstore; for example, games that have been featured as Amazon’s free app of the day. The company may claim that the success of those games is proof that Amazon’s model works. The IGDA believes that this argument is a red herring. Amazon does not need the terms it has established for itself in order to give away a free app every day. Nor does it need the powers it has granted itself to execute a wide variety of price promotions. Other digital games platforms, such as Xbox LIVE Arcade and Steam, manage to run effective promotions very frequently without employing these terms.

Amazon may further argue that its success depends on the success of its development partners, and therefore, that it would never abuse the terms of its distribution agreement. Given that Amazon can (and currently does) function perfectly well without these terms in other markets, it is unclear why game developers should take a leap of faith on Amazon’s behalf. Such leaps are rarely rewarded once a retailer achieves dominance.

We respect Amazon’s right to stay the course, but as part of our mission to educate developers, we feel that it is imperative to inform the community of the significant potential downside to Amazon’s current Appstore terms. If you feel similarly, we urge you to communicate your feelings on this matter directly with Amazon.

Sincerely,

The IGDA Board of Directors

Update 4/19: IGDA responds to Amazon’s Clarification

57 Responses to Important Advisory about Amazon’s Appstore Distribution Terms

  1. Macgufin says:

    This is a fantastic use of the IGDA’s soapbox to protect developers. Thanks!

  2. sdf says:

    This is lame. Stop crying, go to godiddy an register “randomcrybabysappstore.net”, uploaod your apps and live long and prosper.

    No one’s forcing you to use Apple, Amazon or anyone else’s storefront.

    • dariusk says:

      You’re right, nobody is forcing developers to list with Amazon’s Appstore. As part of our mission to educate game developers we felt it was important to make sure they were aware of the potential long-term ramifications if they did choose to.

      (As to your other comment, this comment was never erased: it was in the moderation queue.)

    • John says:

      Love this guy’s response. “BE a man.” Right dude, way to be appreciative of good business advice.

  3. jon jordan says:

    The bottomline is that if developers aren’t happy with the terms, they won’t release their content with Amazon. Everyone I’ve spoken to about the Appstore currently seems happy with the situation. After all, someone needed to do something to bring some order to Android app and game distribution.

    • dariusk says:

      That’s right. We felt it was important to let developers know what the terms are so that they can make an educated decision regarding distribution.

    • dubane says:

      Ultimately this is a long-term problem. In the short-term that is absolutely correct. Amazon is going to make sure they keep developers happy for now, but the terms they are asking for are far greater than any other similar store. In the long-term if their store becomes a dominant one they will have the ability with their current terms to take advantage of developers, and developers would be left with no option except to pull their apps from what could then be one of the few viable revenue streams.

      They don’t need the terms they have given themselves to create a dominant store, and we want to be sure that developers know what they are giving away if they decide to list their games on Amazon’s Appstore.

  4. Thanks for notifying us of this development. Definitely the sort of thing the IGDA should be doing to keep its members educated.

  5. sdf says:

    I noticed my previous post was conveniently erased. I guess IGDA is an infantile group that can’t handle opposing opinions.

    You’re free to delete this too of course. It just makes you flaming hypocrites.

  6. Kaira- says:

    It is good that you’ve brought this to our attention. Of course it’s ultimately the developer’s responsibility to find out about the terms of contract, but it never hurts if someone is willing to give the “too long didn’t read”-version.

  7. Three cheers for the IGDA. This is a fantastic article and effort on their part for the benefit of all of us.

  8. Ryan says:

    Everyone: please note that Reflexive was bought by Amazon in the past. So if you take issue with your games being on Amazon, and work with Reflexive, there’s a good chance your games will end up on Amazon as well.

  9. Steve says:

    As a publisher who is considering joining Amazon’s app store, I’m grateful you posted this article. I had noticed the oddities you mentioned, but not worked out their ramifications nearly as well as you have. The line about prices being no higher than anything “available or previously available on any Similar Service.” is particularly scary! As you pointed out, that affects our ability to offer a discount to another market, but the “previously available” is what gets me. That suggests that we would have to set a list price on Amazon already at the lowest sale we had ever set.

    • travisgamedev says:

      Agreed. This is way out of line for Amazon. Developers will speak with their actions by not conforming to these terms. It doesn’t look like there’s going to be a good Android Marketplace for a while now. Well, at least there’s the real App Store.

    • Abhi Beckert says:

      So if your app was ever free, you’re not allowed to start charging for it?

      If one of amazon’s competitors (also without your permission) offers the app for 10 cents as part of a 3 day promotion, then you are forced to permanently offer your app for a list price of 10 cents? It looks like it’s any previous “available” price, not the list price.

      Also, what if my app has expenses? The project I’m working on now has an expensive server side component. If I sell the app for $5, then my $3.50 will easily cover the server costs for a few years. But if amazon starts selling it for $1.49 and I only get $1.04c then maybe I’m selling it at a loss?

      I won’t be offering anything via amazon store unless they change this.

  10. Dan Fabulich says:

    I’m already 10 posts deep, so I’m pretty sure nobody will read this, but…

    The article is factually incorrect about Amazon’s terms. They USED to have a term that said that the list price was the lowest price “available or previously available on any Similar Service,” but they eliminated that term from the contract shortly before the store launched.

    The updated contract says: “amount that does not exceed, at any time, the lowest list price or suggested retail price for such App (including any similar edition, version or release) available on any Similar Service or the lowest actual price at which you make such App available for sale through any Similar Service.”

    This does not address IGDA’s main argument that Amazon should not be allowed to violate the minimum list price, but at least that part of the article should be amended to represent the current facts.

    • dubane says:

      Hi Dan, I hope you are correct that this term has already been changed. However the contract they have embedded on the Amazon Appstore signup page (as of April 14, 8:30am PDT) definitely has the language we quote in our statement.

      5.i. List Price. The “List Price” for an App is an amount that does not exceed, at any time, the lowest list price or suggested retail price for such App (including any similar edition, version or release) available or previously available on any Similar Service or the lowest actual price at which you make or made such App available for sale through any Similar Service. You will update the List Price for each App as necessary to ensure that it meets the requirements of this section 5i.

      (emphasis mine)

  11. Guyal Sfere says:

    The fact that one has an option to not do business with Amazon is only about 1% of the picture, because the question on the table is “what are the contractual risks if you go forward with Amazon?”

    Given that Google is already starting to openly walk away from the “Android is about developer freedom” pitch, its reasonable to consider whether Amazon will “play nice” when its terms say that it doesn’t have to “play nice”. The use cases listed are generally realistic hypotheticals to consider, regardless of what Amazon ultimately does, and its valuable that someone has taken the time to collect and consider them, regardless of my ultimate analysis relative to my business.

    The primary, hypothetically-catastrophic risk of the Apple App Store control model is that they might simply say – after you’ve completed development – “No, you can’t ship this app on iOS.” Amazon has a subset of this risk in that they can prevent you from shipping, though only relative to their store, but their terms have added an essentially new major risk to the relationship.

    Nice, timely analysis of the terms, thanks.

  12. You’re not the only community to have been hit like this, FYI. If it’s ANY consolation, the film making community has also experienced something similar:

    http://www.nicholasdewolff.com/2011/04/amazon-what-are-you-doing/

  13. Jeff says:

    It’s a good and valid concern to bring up, but obviously these concessions are offset by the distribution reach that Amazon’s store provides.

    It does seem reminiscent of some of the bad music deals artists have fallen into in the past, however.

    • Abhi Beckert says:

      If you have a $10 app, amazon has reserved the right to drop the price temporarily or permanently to any price they want, such as $2.50. In which case they will only pay you $2 per copy sold, instead of $7 per copy.

      If you drop the price of your app in amazon’s competitors to $2.50, then you are forced to permanentlydrop your list price at amazon to $2.50 as well, allowing amazon to drop the price even further (to as low as $0.50 without loosing money themselves). And once you’ve done this, you’re never allowed to raise the “list price” on amazon back to $10.

      This has potential to drastically hurt profits for game developers, especially popular ones, and it could also force some to pull out of the store altogether… maybe the game includes licensed content or server expenses or tech support expenses that exceed 20 percent of the list price.

  14. PDubya says:

    I just want to point out that the best way to change these kinds of problems is to individually bring your concerns as a customer.

    Anybody who has made a decision against using Amazon based on this should voice their opinion directly with a representative and cite these reasons specifically.

    A non-response will accomplish nothing. A strong polite response can move mountains.

    Additionally, anyone who has never had any plan to use this service should not say anything directly to amazon. Do not cloud the real communications with the white noise of angry e-mailers.

    Anyway.. that’s my 2 cents.

  15. Jason says:

    Would it not be trivial, if you wanted to offer a promotion, to create a “special version” that would be eligible for the promotion? This would be similar to how, say, a mattress manufacturer will create a new model name/number for a particular chain store, so that said chain store doesn’t have to price match with other retailers.

    Amazon always gets “Dudebro: MSIFUSIGTS/SY II: ISUDT: Amazon Exclusive Edition”.

    • Wendy Despain says:

      One thing to note – another part of their terms say if you want to list one game with their app store, you must list your entire catalog with Amazon.

      • Abhi Beckert says:

        Once you do that, at least on the iOS app store, you are forced to maintain that “special version” indefinitely. You cannot send out bugfixes to an app that is no-longer available for purchase.

  16. james katt says:

    Amazon’s rules means developers will earn much less on the Amazon store than Apple’s iOS App Store. Developers may earn even less on Amazon than Google’s Android Marketplace.

    Therefore, what is the incentive for a developer to sell on Amazon when doing so is like committing financial suicide????

    As such, the Apple iOS Store makes over 10 times more profit for developers than Amazon without this nonsense.

    The primary incentive for developers is to make money.

    IF Amazon robs developers of money, as these terms threaten, it will crash and burn. There will be no incentive to sell on it.

  17. ChrisK says:

    I’d like to suggest that the IGDA take the (moron) sdf’s advice and actually make an app store. It would be platform-independent, with a low publishing rate, and very industry-conscious. And an avenue by which we can support our own industry while supporting our own organization.

    • E. Zachary Knight says:

      While I think that is good advice, it might not make a lot of market sense.

      The IGDA has almost no brand recognition outside the game industry, so it would be very difficult to start from scratch making a successful app store.

      Difficult but not impossible.

    • This is an absolutely fantastic idea. Well, I don’t know about the market feasibility, it would be a tough start – but even if it doesn’t take off, its existence should put pressure on other game app stores to play honest. It’s all about alternatives and leverage.

      I will fully support this if it is going forward. Hell I’ll push it forward.

    • magallanes says:

      meh!, easy to say, hard to do.

      as a programming viewpoint, it is a bit easy to do it, but as a business viewpoint, it involves taxes, payment method, international sales,support, warranty and so on…

  18. [...] Developers Association is warning game developers that it may not all be sunshine and roses.In a statement, the IGDA said (the bold is there emphasis):Many journalists have noted the unusual nature of [...]

  19. Well done, IGDA. I appreciate the heads up. These are critical marketplace issues. A protest is most powerful when expressed loudly with a clear and united voice. You have done so.

  20. [...] their apps or games through their distribution model. In their eyes, a small upstart Amazon could potentially end up as the “Walmart of the Android ecosystem” if developers don’t get involved. The [...]

  21. [...] their apps or games through their distribution model. In their eyes, a small upstart Amazon could potentially end up as the “Walmart of the Android ecosystem” if developers don’t get involved. The [...]

  22. [...] International Game Developers Association has sent an ‘important advisory’ to its members warning them to take care if they are planning to submit content to the Amazon Android App [...]

  23. [...] whole argument laid out by the IGDA can be found here, but they sum it up this way: The IGDA's bottom line is simple: under Amazon's current terms, [...]

  24. [...] following the IGDA story is game enthusiast magazine Game [...]

  25. [...] The IGDA had a lot more to say on the matter, which you can read here. [...]

  26. [...] the open letter, titled “Important Advisory About Amazon Appstore’s Distribution Terms,” on its website. In the letter, the IGDA warns that Amazon has inserted language into the terms that could be [...]

  27. [...] their apps or games through their distribution model. In their eyes, a small upstart Amazon could potentially end up as the “Walmart of the Android ecosystem” if developers don’t get involved. The [...]

  28. Matt Duffy says:

    I wish to express my gratitude to the IGDA Board of Directors for this.

    I am grateful that an organization exists to help developers at every level make educated decisions that will benefit us as individuals and collectively in the long run.

    When you, as a developer, sign on to a bad deal for whatever reason — youth, inexperience, reckless “passion”, desperation, laziness — the bell tolls not just for thee, but for us all.

    The bourgeoisie is only able to exploit the proletarians because we let them, because we slit each others’ throats trying to make a living, never realizing that the throat we have slit is actually our own.

    Thank you, IGDA, for taking a stand to protect and promote the long-term future of this industry.

  29. [...] order to distribute content on Amazon’s App Store. I won’t re-hash the advisory here, you can read it on the IGDA site — and if you haven’t read it you probably should before continuing this article. They [...]

  30. Christian Plummer says:

    Perhaps this is where Valve will step up to the plate? They have solid name recognition and there’s been some rumors going around that they are thinking about it anyway.

    • magallanes says:

      Valve is strong only for the audience of hardcore players and it is marginal in comparison with the size of the market.

      The strategy of Valve is to sell several products for a single customer.

  31. empy says:

    I totally agree. I was considering publishing on the Amazon Appstore but soon decided against it after reading and being somewhat surprised by the terms and conditions. I was also surprised that I hadn’t seen more reaction by developers to this. In a similar manner to the way large supermarkets squeeze their suppliers, Amazon are in a powerful position and can get away with restrictive terms that other app stores wouldn’t dream of.

    For Amazon to effectively dictate prices in other app stores seems completely wrong and anti-competitive (between app stores).

    I will definitely not be publishing on Amazon Appstore unless these terms change and I’d hope other developers would do the same.

  32. stonewallred says:

    Why doesn’t the IGDA launch an app store catering to all the various platforms, and then show the competition how it is done?
    Seems since you have members, who write games, it only makes sense they would be glad to sell their products on your site.

  33. Thanks for all the information, and thanks for all the comments. I’m reading and observing, reading and observing.

    I wonder how this corresponds to Amazon’s agreements with book publishers, both ebooks and “regular” books. That would be interesting to see.

    On opting out of Amazon and creating other game stores — well, the thing is, Amazon is brilliant with regards to how they sell stuff, and they sell a lot of stuff. Shopping with them is a pleasure, both for “physical” objects and electronic objects. Ebook purchasing, if restrictive, is a dream, and all the other stuff around it (people who bought this, bought that, recommendations, user reviews) — it’s wonderful.

    The Amazon appstore for Android is in the early stages, but I love going to the appstore to look at Android apps, and of course I’ve gotten some. I love the recommendations, the reviews, the free product of the day, the intelligent way they categorize apps. I love how easy it is to buy and install the apps. The Amazon appstore is something that I look at, on my Motorola Droid, every single day, much more than I look at the Google app store.

    As for going to Steam or an IGDA site — for Android stuff — no. I’m one of the people who knows about Steam, and likes it, and knows about and respects IGDA! But, as a consumer, why would I go somewhere else? If I’m buying an Android thing, I want to look at something on my device (for me, my phone), one or perhaps two sites max, and that’s it. Buying something for an Android device is all about the easy, and all about the spontaneous purchase. Unless your game is so well known, I won’t go out of my way to buy it for my Android device — and I’m one of the people who follows games! I’m not everyone, of course, but it is a thought.

    The thing is — game developers are brilliant at making games, but at doing all the stuff around games, around getting it onto the consumer’s device — not so much, from what I’ve seen. Some are great of course, but you can’t be great at everything.

    This is understandable. Developers do what developers do and Amazon does what it does. They hire very smart people with the education and training to make it great for the consumer. I have no way of knowing whether they focus on the consumer more than the developer, but they sure as heck don’t focus on the consumer less. That’s what they do.

    So — my recommendation, for what it’s worth. Keep working with Amazon, to see what makes sense to do. And, of course, kudos to IDGA for doing the research and analysis. I think this is an ongoing story, so it will be interesting to see what happens.

    mszv

  34. Rob says:

    Well Said.

    We have seen this game before on a smaller scale. When Palmgear and Handango and the other palm os retailers went to war, they all quickly moved to the best offer that they were allowed to make according to their contract. They were all allowed to discount by 20%, so once every week or two, they just have ’20% off weekends’.

    There is zero benefit for the developer here; The stores just compete for market share by squeezing the developer.

    Amazon might be playing nice now – but they are asking for way too much power.

  35. Sara Jensen Schubert says:

    I’m delighted to see this kind of advocacy from the IGDA. Thank you and keep it up!

  36. neatware says:

    Amazon made terms in ambiguous. Where is the MSRP ( Manufacturer’s Suggested Retail Price)? Amazon try to get all the controls to set the price on Amazon Store. Where are the rights of Manufacturers? The discount should be limited such as no more than 30% less than MSRP.

    Although digital products may have no production cost in material, it can be applied as a marketing gifts. Amazon can bundle game to sell real goods. For example, customers can buy $20 book with a game in $0.5 while game’s MSRP is $5. What is the reward of game developers in Amazon’s terms?

    Remember Amazon did not guarantee the number of sales of your games in a period of time. That is it does not invest in inventory. This is unlike WalMart which gain rights of price by guarantee purchase. Without guarantee purchase but requires more rights, good deal for somebody but not game developers.

    Internet assign developers more power in marketing. No companies can control consumers in the Internet whether they are Amazon, Facebook, Google, Microsoft, Apple.

  37. Charles Jenkins says:

    I’m no math whiz, but it sounds to me like Amazon basically plans to sell all games at 30% of their list price. 70% of 30% is about the 20% they promise at minimum, right?

  38. So this means that Amazon can set the price of my product almost at will and with that hurt my revenue.

    I see a simple scenario where Amazon wants to advertise things like 10,000 games 75% off and so choose a lot of small apps and ruin their revenue. And all gains are Amazons’ and the pain is the developers.

    But there is one logical way around that. Only publish special versions of your apps on each market. It’s like the [major manufacturer] laptop model/config you can only buy at [major electronics chai]. This makes it an exclusive procut and gets you out of the most favorite price clause that Amazon demands of you. I’d start right at the basic design to have merchant specific variants of each apps.

  39. Nobody says:

    I think a workaround is to make a game & post it in whatever store u want
    & repackage it under a different name & treat it as a different product !!
    (& of course insist on asking the players which game they’re talking about even though there’s absolutely no difference, but make it as a legal distinction)

    & then put this repackaged version in amazon store for a higher price (to protect urself from the 20% policy, such as setting a price that’s 5 times the original price)

    this might have a side effect that the consumers might be extremely annoyed at you,
    but even if u don’t set the higher price, i think it’s a possible workaround for the promotion things.

    (@PlanBForOpenOffice making a new version for each would create an overhead, therefore i think it’s a possible solution to whatever store that implements the same policy)
    (note: I’m not up to date with android markets, therefore not really sure how many are there & how much of an overhead will that create)

    (but I’m on my way :D)

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