Game Developers Cite ‘Significant Concerns’ About Amazon Appstore Terms

The International Game Developers Association “has significant concerns about” the distribution terms that Amazon is using for its recently launched Android Appstore (CED March 23 p7) and “the negative impact they may have on the game development community,” IGDA said in an open advisory letter. The letter was made available to IGDA members and others who regularly receive its notices by email. IGDA urged developers “to educate themselves on the pros and cons of submitting content to Amazon."

The Mount Royal, N.J.-based game industry group said it “applauds Amazon’s efforts to build a more dynamic app marketplace.” IGDA was aware that “many developers have been eagerly looking forward to” the Appstore launch last month “in hopes that it would represent a great new revenue opportunity and a fresh take on downloadable game merchandising,” the group said.

But IGDA complained that “little has been said about the potential implications” of the “unusual nature of Amazon’s current store terms.” Amazon “reserves the right to control the price of” games, along with the right to pay game makers “the greater of” 70 percent of the purchase price or 20 percent of the list price, IGDA said. “Many other retailers, both physical and digital, also exert control over the price of products in their markets,” it said. But IGDA said it was “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."

Amazon also “dictates that developers cannot set their list price above the lowest list price ‘available or previously available on any Similar Service’,” IGDA said, quoting from Amazon’s terms. That meant that if developers wanted to sell their content elsewhere, they couldn’t “prevent Amazon from slashing the price of your game by setting a high list price,” IGDA said. If a game maker then runs “even a temporary price promotion in another market,” they have to “permanently lower” the list price in Amazon’s market, IGDA complained.

IGDA singled out “five potentially problematic scenarios” raised by Amazon’s terms. First, Amazon “steeply discounts a large chunk of its Appstore catalog.” While “some developers will probably win in this scenario,” IGDA said others -- “most likely, those near the bottom of the list -- will lose, not gaining enough sales to offset the loss in revenue per sale.” The e-tailer “benefits the most, because it captures all the customer goodwill generated by such a promotion,” IGDA said.

Second, in requiring that developers “guarantee Amazon a minimum list price that matches the lowest price on any other market,” the e-tailer is forcing them to either “abandon Amazon’s market or agree never to give another distributor an exclusive promotional window,” IGDA said. Third, other digital markets, including existing ones and those not yet created, “may feel compelled to duplicate Amazon’s terms, and perhaps even adopt more severe terms in an effort to compete effectively with Amazon,” IGDA said, calling it “a slippery slope.” Fourth, offering games at deep discounts or for free in an Amazon promotional period can rob the developer “of a significant percentage of its total potential revenue from its core audience,” IGDA said. Last, if Amazon “steeply discounts (or makes entirely free) a hit game at a time when the game is already selling extremely well,” that could “attract consumers away from competing markets and into Amazon’s arms,” while creating a “loss for the developer, which was already doing quite well and didn’t need to firesale its game at that moment in time,” IGDA said.

The “bottom line” was that under Amazon’s current Appstore terms, the e-tailer had “little incentive not to use a developer’s content as a weapon with which to capture marketshare from competing app stores,” IGDA said. “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,” it said. Developers should also “have the freedom to set a minimum list price of whatever amount they see fit, without regard to pricing in other app stores,” it said.

IGDA “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,” IGDA said. Those running Amazon’s Appstore “may have the best of intentions and a desire to make their development partners successful,” IGDA conceded. But it said history has shown that “things tend to change when a marketplace achieves any degree of dominance … 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."

Amazon didn’t immediately respond to our request for comment. IGDA speculated that if Amazon responded to its open letter, the e-tailer would “likely invoke the success of games that have already been promoted” at the Appstore, such as the free app of the day, and might “claim that the success of those games” offered “proof that Amazon’s model works.” IGDA called that potential argument “a red herring” because Amazon didn’t need the terms it set to give away a free app each day or to try various price promotions. IGDA said other digital game platforms, including Steam and Xbox Live Arcade, were able “to run effective promotions very frequently without employing” the same kind of terms. IGDA also predicted that Amazon may claim its success depended on the success of developers, so it wouldn’t abuse the terms of its distribution deal. “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,” IGDA said. It urged those who agreed with it to contact Amazon and express their concerns.

Amazon declined to comment last month after Apple slapped it with a trademark infringement complaint in a U.S. District Court in California. The filing alleged that Amazon had been using Apple’s “App Store” trademark at Amazon.com without permission since early this year to sell mobile software applications including the new game Angry Birds Rio.