Amazons Apps Store

Wed, Jan 5, 2011 7-minute read

(This was prompted by a question asked by Reto Meier)

As many of you may know my company built and later sold AndAppStore over the course of two years. During that time we kept an eye on the competition and received feedback from users and developers and got a good idea of what both sides wanted. I commented on Google Market because it was the main distribution channel for developers, but I rarely commented on competitors alternative app stores because each of them has their own business plan and all of the legally operating ones seemed to be doing their best to strike a balance between what they need to survive and what users and developers want.

And then Amazon came along.

When Amazon approached my company about listing the apps we’d developed in their app store I had a lot of reservations about it given the terms we were shown. Now their app store is starting to roll out it seems few (if any) of the concerns I raised with them have been addressed. Given Amazons brand it might appeal to many developers to list their apps with them, so I’d like to highlight a few of the issues I found that left me thinking Amazons app store is more about what Amazon want than helping developers market their apps;

The yearly $99 developer fee

Amazon don’t produce the Android SDK. Amazon don’t have control over how the Android platform develops. Amazon certainly don’t have any inside knowledge about every Android device out there. And, as far as I can tell, they’re not offering any Android developer support. So this all this leads to one question;

Why does Amazon think it can charge developers the same price as Apple who have control over the iOS SDKs and Platform, have intimate knowledge of the hardware the apps are running on, provide direct developer support, and can change the platform in response to developer requests?

I couldn’t come up with an answer for this, and it appears Amazon couldn’t either, because when I asked them the question directly last year their response was to waive the fee (which they’re now doing for everyone, but only for the first year).

I can understand there is a need to cover the costs of approving an application, but wouldn’t it make more sense for that to come from their cut of your application sales? For example; Charge the developer a one-off $25 joining fee and then take a 40% cut of a developers application sales until $99 has been taken at which point it drops back to 30%. That way the developer doesn’t have a big outlay and Amazon have an incentive to promote and sell applications in order to cover their costs.

The other slightly odd thing is the flat $99 fee. This means a developer who has 1 application to list will pay the same as a developer who lists 100, which would suggest they’re looking to either discourage, or make a big profit from, developers with a small number of applications.

As it currently stands they could take $99 per year from you and bury your app at the bottom of their recommendations listings if they wanted to. They still get their money but you have no guarantee from them any users will ever see your application.

Pricing for paid apps.

Amazon has total control of the price of your paid app, right down to being able to make it available for free. This is something that you should never accept willingly.

Think about it for a moment; would you work for someone who says “We’ll pay you somewhere between 20% and 70% of what you want us to charge and we’ll change the payout whenever we feel like it”?

Most people wouldn’t.

If you’re thinking of making your listing price high enough so that 20% is the same as the 70% you receive from other stores then you’re probably out of luck because the Amazon T&Cs I saw last year said you have to list your app at the best price it’s available on any other store (including the price it may be offered in any promotions).

As a developer you should always be in control of what someone is charging for your application because you’re the one who knows how much you need to make developing it worthwhile. You can factor in a 80/20 or 70/30 split, but you can’t account for Amazon suddenly deciding to offer all your apps at a quarter of the price you’re listing them at elsewhere (possibly just to increase traffic to their app store) and then only paying you 20% of your list price.

If Amazon control your pricing it means they can offer your $5 app for free, publicise your app as being free from their store, and then pay you only $1 per copy instead of the normal $3.50. The only way you could stop them is to remove your app from their store entirely, which may take days, by which time you’ll find your sales on other app stores will have significantly dropped.

The thing to remember is Amazons interests are focused on selling anything, so if they lose one developer with 3 apps listed, but gain the attention of 3000 new users by offering your app for free, they could consider that worthwhile, even if you don’t agree.

Problems for international developers.

If you’re a non-US developer read the FAQ carefully. It says that unless you provide the relevant US tax documentation they can put a tax withholding of up to 30% on your royalties. That means that even if they decide you are entitled to the 70% maximum royalty rate they may withhold 30% of that for tax reasons.

So if your app is listed at $1, and you’re due a royalty of $0.70 you may actually only get paid US$0.49 after the tax withholding. This means, for international developers, after tax, the best possible split is more like 50/50 than 70/30 unless you want to get involved in the US Tax system.

You also have to consider their payment cycle. For international developers you will only be paid when you’ve made over $100 at which point you’ll get a paper check which, if you pay it into a non-US bank, will normally incur a charge when it’s converted into the currency your bank account it is. So you’re taking another hit on your revenue due to Amazons choices.

Hiding the developer agreement.

You should always be wary of generic contracts which aren’t publicly available.

When you’re dealing with contracts between you and another party (or a limited number of other parties) having an NDA in place is normal because the terms will usually have been worked out for that agreement. Things you’ve accepted for that agreement may not be acceptable for other agreements with other parties who can’t guarantee a certain level of income or a certain amount of distribution, so the secrecy of an NDA avoids other parties saying “I want it at the same price as X” and it avoids X giving away their predicted sales figures.

When it’s a “terms of use” agreement that applies to anyone who signs up to a non-invitation service all of the terms of use should be public so you know exactly what you’re getting in to before you sign up.

As it stands I would recommend developers steer clear of Amazons store, but if you think it might be a worthwhile proposition I’d be interested to know why.

Please Note: Because the finalised developer agreement isn’t publicly available I can’t comment on the specific wording in it because the FAQ has enough objectionable points to stop me signing up for the portal.