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Amazon Shoots Itself in the Foot -- Again -- With Terms for Game Apps

The Amazon (AMZN) Android AppStore has generally gotten off to a good start, but game developers aren't happy with the online retailer's purportedly onerous terms. The International Game Developers Association (IGDA) sent out a missive this morning complaining about Amazon's absolute power over game price. And the organization may have the clout to force Amazon to change its practices.

The power struggle here is two-fold. First, Amazon will pay game publishers either 70 percent of the purchasing price or 20 percent of the list price -- whichever is higher. It leaves little actual profit for the game developers themselves.

Second, Amazon can change a game's price at any time. For instance, Amazon may decide to put all basketball video games on sale during the NBA Playoffs. Publishers have no say in this decision -- and, of course, Amazon's decision will affect their bottom line for good or for ill.

In a lengthy letter, the IGDA made its argument against Amazon's policy:

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.

Deja vu alert: Amazon was in the same situation a year ago when latecomer Apple launched the iBookstore. Amazon ultimately set Kindle book prices, while Apple allowed publishers to set their own price and then charged them 30 percent of that.

The key difference between books and apps is that Amazon doesn't have the first-mover advantage this time. Here, Amazon's the underdog. If it has any hope to match Apple's multibillion-dollar app sales, it's going to have to give game developers more control.

Photo courtesy of thecrazyfilmgirl // CC 2.0

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