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Amazon, Not Developers, Will Set New App Store's Prices

timothy posted more than 3 years ago | from the hope-that-wasn't-your-business-plan dept.

Businesses 294

Trebortech writes "Looks like Amazon is changing the rules of the game for developers with their new Android App store. I'm curious how Amazon will determine the value of your app and if having control of your prices really matters." The core of the linked article: "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. 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."

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294 comments

the golden rule at work (1)

MoeDumb (1108389) | more than 3 years ago | (#34888712)

He who has the gold makes the rules.

Re:the golden rule at work (3, Interesting)

Breathwork (1977146) | more than 3 years ago | (#34888840)

They control the horizontal, and they control the vertical (literally). At the rate these large companies continue to screw over customers and developers alike, I just don't see how they will last as more robust open-source ventures proliferate. It won't be too long before the combination of open-source hardware devices (like Arduino), combined with an open-sourced mobile OS, and Open-source ventures and outlets render these proprietary monopolists dead.

Live Free, Learn Breathwork [vivation.com].

Re:the golden rule at work (1, Insightful)

Anonymous Coward | more than 3 years ago | (#34888986)

I really don't see what the problem with the seller charging their own price for it. It's normal business practice to anyone who's ever shopped, online or otherwise.

Look at everything else Amazon sells, or at most other e-tailers, there's the suggested retail price and the actual sail price. If nothing else, the actual retail price is often lower than the retail price suggested by the manufacturer (for example, I recently ordered an Epson printer for $50 less than the suggested retail price (which is what Epson themselves sell it for, if you buy direct from them) - this isn't "screwing over their customers", in fact, it's quite the opposite, customers, believe it or not, actually APPRECIATE getting something for less. Utterly bizarre, I know!

Screwing the developers over, sure, but if the seller is bringing the actual retail price below the suggested retail price, then the developer in question is being screwed because s/he tried to screw the customer - nevertheless, said developer can very well simply not do business via Amazon or similar retailer. That's what Apple does, after all; dictate the resale price by being the sole distributor of their product and enforcing a minimal price for which their products can be sold. But then again, the traditional argument against that practise is that it's EEEVUUUHL.

How precisely the availability of the sourcecode for the distribution platform changes standard business practices is unclear at best, unless these ventures strive to be distribution channels rather than sales channels, but I'd question if such a model is sustainable, given that it's continuing functioning needs to be funded somehow. Unless of course the gripe is with the seller offering their own price, and you want to put the decision of pricing in the hands of the developer, in which case, this has absolutely nothing to do with open source at all, and developers unhappy with Amazon's policy, are, once again, free to simply not use the service, in favour of either using a service which allows them to fix their own price, or handle distribution and sales themselves at the expense of reaching a broader audience.

Or is this an argument against the possibility of the seller putting a price on something with a suggested retail price of 0 - which, most people outside of slashdot would view as a simple "tax" or fee for the service, since most people understand that such a service needs to be paid for somehow, in the name of funding its continued existence (as opposed to the common open source model of e-panhandling for donations), and of course, and I'm not sure wether I've mentioned this yet, there's the option to simply not use this distribution service And even then, if a customer sees "suggested retail price: $0" then they'll just hop on over to the developer and acquire the goods from there, no harm, no foul.

That last "live free" quip is just funny as well. This really isn't about proprietary vs open source, it's about normal business practices, which in this case, often works to the benefit of the consumer.

Re:the golden rule at work (2)

cynyr (703126) | more than 3 years ago | (#34889060)

except the only way to load an app on iDevice is via the app store, so if i want to sell an app for iDevices, i have to go through them. At least i can side load on android.

Re:the golden rule at work (0)

Anonymous Coward | more than 3 years ago | (#34889354)

What exactly are you trying to say? This is about Android. The Amazon app store is for Android, not iOS. This story has absolutely nothing to do with restrictive devices controlled by dictatorial companies. If developers don't want to use Amazon's app store then they can use the Android marketplace or distribute their app directly to users.

This is good. This is innovation, competition, experimentation. This is what Android is all about.

Don't pander to iSlaves (0)

FreeUser (11483) | more than 3 years ago | (#34889408)

except the only way to load an app on iDevice is via the app store, so if i want to sell an app for iDevices, i have to go through them. At least i can side load on android.

Yup. A good reason not to pander to iSlaves.[1]

Re:the golden rule at work (1)

poetmatt (793785) | more than 3 years ago | (#34889004)

all this means is nobody's going to work with amazon.

really, there's already an android market, it does well, nobody gives a fuck if amazon makes one as well.

Re:the golden rule at work (1)

Haeleth (414428) | more than 3 years ago | (#34889372)

The Android marketplace is pretty bad actually. It is very hard to find things in it; there is no quality control; user rankings are notoriously unreliable and do not give any useful indication of whether a given app is good or bad. I, for one, will be investigating Amazon's app store to see whether it provides a better way to find good apps.

Re:the golden rule at work (1)

Smauler (915644) | more than 3 years ago | (#34889454)

Have Amazon got exclusivity in their contract? If not, surely the best thing to do would be to find the app you like the look of on Amazon, google it, then buy for much less elsewhere.

Re:the golden rule at work (1)

maxwell demon (590494) | more than 3 years ago | (#34889388)

Simply suggest as price five time the amount you'd like to get as your share. Probably it will be too high, so Amazon will lower the price. However, since you are entitled to 20% of your suggested price, you'll get what you wanted.

Re:the golden rule at work (1)

Smauler (915644) | more than 3 years ago | (#34889474)

And your consumer will pay five times what you think your app is worth, with Amazon raking in the cash.

Re:the golden rule at work (0)

Anonymous Coward | more than 3 years ago | (#34889390)

Eh, without RTFA it seems to me like a lot of developers would just suggest a really high MSRP, to get 20% of that, rather than 70% of whatever Amazon sells it for.

If only the world worked like this.... (1, Offtopic)

UBfusion (1303959) | more than 3 years ago | (#34888714)

Imagine your country's economy working according to a similar scenario where everybody was paid by their employee according the same rules... Can you? It seems Apple can and did.

Hungary, 1946-1989. (0)

Anonymous Coward | more than 3 years ago | (#34888748)

That sounds a lot like how business was done in Hungary after WWII, and up until the fall of the USSR. Mind you, the distribution ratios were somewhat different, but the concept itself is the same. There was a central ministry that decided pricing, physical distribution and profit distribution for a given product, and nobody had any choice but to go along with their decisions.

Re:Hungary, 1946-1989. (1)

AHuxley (892839) | more than 3 years ago | (#34889312)

Makes me think of "The marvellous Magyar microcars"
http://www.economist.com/node/17722676 [economist.com]
Just as Apple/Stalin/Amazon try a "no cars" via Comecon or "store", Hungary went for the microcar.
Amazon should learn from this. The more "no" is screamed, books are removed, the more very smart people will enjoy finding a way around the brand and their legal enforcers.
The fun will start when errors slip past and Amazon has to reach in and remove every copy sold at the wrong price.
East Germany had to do that for a cartoon in its only satire magazine called Eulenspiegel in 1969. Every post office had to find and log every copy sent out with the local police. Whats the difference now? Amazon will get them all?

Re:Hungary, 1946-1989. (1)

maxwell demon (590494) | more than 3 years ago | (#34889402)

The Kindle has the revoke feature already built-in. If it's technically possible, I'm sure they'll build it into their Android store as well.

Re:If only the world worked like this.... (1)

SimonTheSoundMan (1012395) | more than 3 years ago | (#34888774)

Hang on a second, the developer should be able to set a 'cost price', and give an MSRP, then Amazon should sell it at what they like, but the developer should always get their cost price. What seems to be happening here is Amazon will sell it, and the developer will keep a small share of either the retail price, so if you quote $10 MSRP, and Amazon sell it at $1, you either keep 40c, or $2 if you want the 20% MSRP. Not like Apple's store where you would take $7. I'd still want my cost price of $7 no matter what, as with physical products if I was selling in the high street.

Re:If only the world worked like this.... (1)

SimonTheSoundMan (1012395) | more than 3 years ago | (#34888782)

Opps, you keep 70c if you take the 70% of $1 option.

Re:If only the world worked like this.... (3, Interesting)

TheRaven64 (641858) | more than 3 years ago | (#34888828)

It's whichever is greater, so if Amazon sells for $1, they pay you $2. This means that, aside from loss-leaders, they won't sell for under $2 - even at that price you're taking the entire sale price. At $3, they're paying you $2.10.

If it's implemented well, then developers may make more from this than from a fixed price. The advantage is that it lets Amazon dynamically adjust the prices quickly based on changes in the market. If 20% of people who buy something else are buying your app, then they may try offering a bundle where you buy both together for 50% off. If now 50% of people buy the bundle, then you get more money in total. With fixed pricing, they can't do this.

Re:If only the world worked like this.... (1)

freedumb2000 (966222) | more than 3 years ago | (#34888880)

I agree, I think this could actually make a viable system. It seems similar to what Stream does with their constant sales and package deals. I doubt they ask the developers every time they temporarily adjust sale prices. Of course you as the developer could adjust the price yourself, but I really think that would be a too big of a burden and few devs would actually do that on an ongoing basis. Let's also assume that Amazon (like Steam) wants the highest possible return on app sales so they will probably work towards your interest in pricing schemes. I think it will be interesting to see how this plays out.

Re:If only the world worked like this.... (1)

Suki I (1546431) | more than 3 years ago | (#34888862)

Hang on a second, the developer should be able to set a 'cost price', and give an MSRP, then Amazon should sell it at what they like, but the developer should always get their cost price. What seems to be happening here is Amazon will sell it, and the developer will keep a small share of either the retail price, so if you quote $10 MSRP, and Amazon sell it at $1, you either keep 40c, or $2 if you want the 20% MSRP. Not like Apple's store where you would take $7. I'd still want my cost price of $7 no matter what, as with physical products if I was selling in the high street.

We are close to the same thought, not exactly.
If you agree to put your app onto their "shelf space" they should have some say in how it sits there and they *probably* want to help it fly off the shelf. Adjusting the selling price is a factor there.
Is there anything stopping app developers from selling the same product from their own servers/eStores/etc. and pricing it there however they like?
The bottom line: Their shelf and they get to make some of the rules.

IIRC, in Kindle world*, you set an MSRP but Amazon can put the book on sale whenever they like and your royalty is based on the sell price, not what you asked for. You can still have the same book available at eJunkie, Smashwords, etc. and they all have different policies.

*Full disclosure: I *helped* with some paperback and Kindle books, even wrote one story myself, but I have never uploaded or established an account there.

Re:If only the world worked like this.... (1)

msauve (701917) | more than 3 years ago | (#34889212)

If you want $7, price it MSRP $35. No matter what Amazon sells it for, you'll get paid somewhere between $7 - $24.50.

The world does work like this (1)

thegarbz (1787294) | more than 3 years ago | (#34889386)

In the real world (not Apple's we set the price point world) the manufacturer sets an MSRP then negotiates the terms at which they will sell units to retailers. Retailers with higher buying power will often obtain a bulk discount. This bulk discount goes towards them lowering their retail price and someone somewhere does some simple maths to find the optimum retail price point to maximise profits.

Go to www.amazon.com and have a look at how many products are actually sold for the full retail price. You like camera gear? Would you rather pay the Olympus MSRP of $1800 for the new DSLR or buy it for $1400 from the store? Do you as a developer know the price points and have teams of people dedicated to maximising profits from your product through a specific number of sales at a certain price?

The reality is the way it works now with developers setting price is rare. It happens with Apple who also happen to own the distribution chain from start to finish, which is why you rarely see fancy discounts on Apple products. But unless you own the entire distribution channel why not leave the selling to the experts? You can always offer your app on a website for full price and then scratch your head why you're getting a reduced fee from Amazon.

Re:If only the world worked like this.... (1)

mini me (132455) | more than 3 years ago | (#34889452)

Sounds exactly like how some food products are sold from the farm in Canada, and some other countries. You produce the product and then a marketing board gets to decide how much you can sell it for.

The system has its pros and cons, but, whether you like it or not, being government mandated, you do not have much choice in the matter. At least Amazon is not the only marketer of software and you do have a choice to use their services.

Ah... (1)

zero.kalvin (1231372) | more than 3 years ago | (#34888718)

While it might seem unfair. It's not like it's the only app store out there. They can always submit to the one maintained by google. Unless there is something that prohibit them from doing so.

Re:Ah... (2)

QuantumG (50515) | more than 3 years ago | (#34888790)

unfair? Sounds like a typical retail store to me. "our RRP is $19.95" "That's nice, we're gunna sell it for $21.99 for three weeks and then slash the price to $17.95 and you take back all the stock we don't sell, ok?" "uhhh.. ummm.. no.." "no sale, later rep."

Re:Ah... (1)

houghi (78078) | more than 3 years ago | (#34888948)

OK, no sale. Will be a bitch when all customers buy at your competitor.

OK, that will only work if you are big enough. So in the end, size does matter. The big ones keep getting bigger, giving them even more power to 'negotiate'.

Which is why OPEN, REALLY OPEN is so FUCKING impor (0, Troll)

SmallFurryCreature (593017) | more than 3 years ago | (#34889162)

Which is why OPEN, REALLY OPEN is so FUCKING important ALL THE TIME. Even the if the closed evil is shiny it is still utterly and totally evil and a small evil might be tolerated but evil wants to grow and big evils are not so nice.

The Mac itself already shows this, WHILE the device is open, test just for fun how many apps that are for free on Linux and Windows cost money for the Mac. No, not the same apps, equivelant apps. Everything from an FTP client to text editors. Just because it is a Mac developers think people are happy to "donate" a few bucks. Hell, you can afford a Mac, you can afford some cash for code right?

Makes sense BUT it shows that ultimately most people dream of having so much cash in their pocket they need to pay someone to hold their trousers up. Greed is ALWAYS lurking around the corner.

And then you get yourself locked in and all that evil and greed has you under control. Want an application on your iPhone? PAY. Even free applications cost money, see the VLC debate.

There is a reason there are so many payment providers, so many different methods of parting with your cash, because a single closed in method always turns out to be to expensive.

Want proof? The US government is considering setting a max on what banks can charge in the US for Debit transactions. Durbin Amendment. Banks are in an uproar and threathen to raise their service prices that 5% of people will be unable to afford to use banks. Small detail? In Europe the transaction costs are far less AND nobody has to go without banking services because they can't afford it AND it is faster. Oh and EVEN that ain't as good as it gets, PIN transctions are cheaper still and FREE! So Free that PIN transctions are used for 1 cent to verify accounts.

Ain't competition wonderfull? The free American market has succesfully competed until prices are the highest and service is the lowest.

Amazon has gotten so big that they not only can dictate what and what doesn't not happen but that the effort in going around it might become to great. Yes, you can buy a Nokia phone with a real OS on it and run anything you want but how long will people continue to develop for that when so few are using it?

The iPhone and closed Android systems are a threath not out of themselves but because they upset the ecology. Anyone that thinks these are healthy probably looks at the map, sees countless seas of green farmland all with the same crop and nothing else and thinks "Well nature is doing all right, lots of plants, lots of growth".

Do we REALLY want the walmart effect to become part of every element of life?

Seems a lot of people do.

Re:Ah... (2)

Seumas (6865) | more than 3 years ago | (#34888812)

It doesn't seem unfair to me, at all.

Manufactures often set MSRP on items. Stores still sell them at whatever price the stores wish. If they want to give a sale on the item at 30% below MSRP, they do it. If they need to clear the shelves and practically give it away, they do. Why should this be any different? Since when does the manufacturer of a product get to determine the price the retailer sells it for?

Of course, on the other hand, there are a couple valid points:

1) Since when does the amount that the retailer sells the item for factor into the amount the manufacturer gets paid? If the wholesale price of a TV is $500, you pay me $500, as the retailer. If you sell it for $1,000, I don't get any more money. If you sell it for $300, I don't get any less money.

2) If you buy 100 units and only sell 50, that's your problem. The manufacturer still gets paid for 100 units. (As far as I know, at least. Maybe that's not actually how it works in retail and maybe you actually return unsold items to the manufacturer for a refund?)

Re:Ah... (1)

Jeff DeMaagd (2015) | more than 3 years ago | (#34888856)

Manufacturers of physical goods set a wholesale price and a recommended list price, or suggested list price. Some manufacturers use contracts to set a minimum advertised price (not that uncommon, you can sell for less, but can't advertise below the MAP outside the store), a few manufacturers don't allow any discounts at all.

It sounds like Amazon is taking the WalMart model even farther and setting the price they want to pay the developer too.

Re:Ah... (1)

zero.kalvin (1231372) | more than 3 years ago | (#34889052)

If you do something for me that is equivalent of 400 $ and I pay you 1000$ that's unfair, if I pay you 100$ it's unfair. The point is, as much as we dislike our corporate overlords, fairness should be in order. So what I am trying to say, that system is not fair, as in the end you don't earn what you should be earning. Whether you got paid more or less.

Re:Ah... (4, Insightful)

Pharmboy (216950) | more than 3 years ago | (#34889076)

You can't really compare that way. The cost to stock your software at Amazon is close to zero. They are not buying a fixed number of units from you. Technically, they aren't even buying and reselling the software, they are simply brokering the sale for you, since they never invest any money into the transaction. That said, the 30% commission is very reasonable, but not sure everyone will like Amazon setting prices. Even if Amazon does a good job with it, the fact that they are setting the price for a product that they are actually only brokering is problematic.

Re:Ah... (1)

Golddess (1361003) | more than 3 years ago | (#34889146)

The problem though is you're trying to compare physical goods with digital goods, which do not have the same limitations. Amazon doesn't need warehouse space for 10,000 of the same app, they only need HDD space for a single instance of that app.

I suppose one could still straight-up buy a license to sell 10,000 copies of the app, but why would you? It doesn't appear to make business sense to "stock up", because there is no stock of which to speak.

Didn't do the math (0)

Eudial (590661) | more than 3 years ago | (#34888732)

Seems like somebody didn't think this through. If you set your MSRP to be $1,000,000,000, you'll get $200,000,000 for every sale, no matter what they charge for it (as 20% of a billion is going to be greater than 70% of pretty much any retail price.)

Sweet.

Re:Didn't do the math (3, Informative)

michelcolman (1208008) | more than 3 years ago | (#34888740)

I think they'll probably refuse to sell it, then. But you could still ask for 3.5 times as much as you normally would, and get at least the same income you wanted in the first place.

Re:Didn't do the math (1)

Suki I (1546431) | more than 3 years ago | (#34888874)

I think they'll probably refuse to sell it, then.

But you could still ask for 3.5 times as much as you normally would, and get at least the same income you wanted in the first place.

Only if anybody thinks your app is worth that price, of course.

Re:Didn't do the math (1)

Chapter80 (926879) | more than 3 years ago | (#34888750)

Seems like somebody didn't think this through. If you set your MSRP to be $1,000,000,000, you'll get $200,000,000 for every sale, no matter what they charge for it (as 20% of a billion is going to be greater than 70% of pretty much any retail price.)

Sweet.

But isn't this pretty much how all retail works?

Manufacturer sets the MSRP and the price to the retailer. The retailer can charge however much they want. And the retailer pays the manufacturer a predetermined price.

Typically, not always, the retailer sets the price to for the consumer to be higher than what they pay the manufacturer. I'd expect that to be the case here. If you set the MSRP to $1,000,000,000, the retailer would set the price to the consumer to be something close to that. And you won't sell any.

Re:Didn't do the math (1)

eXlin (1634545) | more than 3 years ago | (#34888836)

No. In case seller try's to set certain % cut for developers. No matter what price they sell it forward. And making possible discounts go from developeres wallet not theirs.

If you make cookies and sell one pack of cookies for 1€ to my shop, i will pay you 1€ per pack.
After that i can charge from those cookies to consumers whatever i want.

What would you like if afterwards tell you (your flour per cookies cost 0,8€/pack, just to demonstrate) that i decided to give discount from cookies and tell you that i decided to pay only 0,5€/pack to you.

In many cases manufacturers try to "suggest" retail pricing by labelling price into products prior shipping.

So truly it should go developers tells their price and vendors decide how mutch "profit" they want to add into price. And in many cases retail into retail pricing affect manufacturers willingness to set certain price+profit for their product and local competition usually keeps cost reasonable.

Re:Didn't do the math (1)

Confusador (1783468) | more than 3 years ago | (#34888764)

That was my first thought, too. Then I realized that they can simply reject the submission.

What I want to know is how the contract words the right of the developer to pull their app from the store. Can they throw it out there as an experiment, and pull it if it turns out that other stores are more lucrative?

Re:Didn't do the math (1)

TheRaven64 (641858) | more than 3 years ago | (#34888838)

They don't have to reject it, they can just choose not to discount it. If they list it at $1,000,000,000 and no on buys it, then they pay you nothing. They can try discounting it to $300,000,000 and if someone buys it then you get $210,000,000 and Amazon gets $90,000,000. They won't discount it more than that.

Re:Didn't do the math (0)

Anonymous Coward | more than 3 years ago | (#34888768)

Seems like somebody didn't think this through. If you set your MSRP to be $1,000,000,000, you'll get $200,000,000 for every sale, no matter what they charge for it (as 20% of a billion is going to be greater than 70% of pretty much any retail price.)

Sweet.

I'm sure that Amazon's pricing strategy is to maximize their own profit, not the profit of the developers. If someone puts the MSRP ridiculously high, then Amazon will leave their retail price high enough to profit over 20% MSRP. Remember, Amazon are #1 because they have mastered the art/science of optimization! Whatever their pricing strategy is, I'm sure that it is very good and that they will profit from it more than if developers picked their own prices.

Re:Didn't do the math (2)

Ricken (797341) | more than 3 years ago | (#34888776)

They don't even have to reject it, they can just set the retail price to $2,000,000,000. Granted, it wouldn't sell, but still.

Re:Didn't do the math (-1)

Anonymous Coward | more than 3 years ago | (#34888928)

They don't even have to reject it, they can just set the retail price to $2,000,000,000. Granted, it wouldn't sell, but still.

In Leftoid Maobama world, that is not how things work. Like how drug companies "overcharge" for medicine for "profit" and the same way "big oil" does everything.

It does not matter a bit that the person with the oil rig does not set the price, the buyers do.

Here on Hammer & Sickle Dot(TM) the only reason that developers do not price their wares at $2,000,000.00 per copy is because they are nice, unless they are Micro$oft, then it is because they are evil.

Re:Didn't do the math (5, Insightful)

Alef (605149) | more than 3 years ago | (#34888784)

Seems like somebody didn't think this through.

Indeed, but I don't think it is Amazon. Obviously, if you set the MSRP to $1,000,000,000, then Amazon will just offer it for that price (or anything down to about $285,700,000 where they still make a profit), and you'll get zero sales.

Not particularly sweet.

Re:Didn't do the math (1)

Alef (605149) | more than 3 years ago | (#34888890)

...or anything down to about $285,700,000 where they still make a profit...

To correct myself, at $285,700,000 they would have the same profit margin. Presumably, they would still make a profit with a price close to $200,000,000, as long as transaction costs and financial risks are covered, but it wouldn't be as many percent.

Re:Didn't do the math (4, Interesting)

Cyberax (705495) | more than 3 years ago | (#34888816)

That's OK. They'll just set the price at $1,000,000,000 so you can enjoy your lack of sales.

That reminds me of old Dutch anti-contraband law - a skipper could set any price of his goods and pay duties based on that price. However, Dutch government reserved a right to buy all skipper's cargo at whatever price he declared.

So, to price my app correctly... (1)

Opportunist (166417) | more than 3 years ago | (#34888746)

I have to take the amount of money I plan to make, multiply by 5 and then announce it to Amazon? To which Amazon then either follows my lead (and make my app prohibitively expensive so nobody buys it) or decide it's too much, cut the price by like 50% and ... pay me more in the end?

Re:So, to price my app correctly... (1)

Elbart (1233584) | more than 3 years ago | (#34888904)

Assuming that all your customers own a goose that lays golden eggs, yes.

Pricing tactics (5, Insightful)

Froggie (1154) | more than 3 years ago | (#34888760)

I am a developer, I want $2 per sale, so I set the price at $10 knowing it will never sell at that price.

Amazon will then have it almost permanently on sale at $2.85, "70% off!" - which is coincidentally the 70% return mark.

The basic premise seems to me to be that Amazon will be able to offer huge discounts on apps because the developer nominally 'agrees' that their recommended sale price is offensively high - because the pricing strategy compels them to. But the developer gets decent money, so neither party loses. The only loser is the consumer who are being deceived into thinking they're getting a huge discount.

It'll be interesting to see how this plays in different countries - for instance the UK has no great respect for recommended prices and insists that items on sale are actually sold at full price for some (small, admittedly) proportion of the time. I imagine the rules vary by country, too.

Re:Pricing tactics (4, Interesting)

ShakaUVM (157947) | more than 3 years ago | (#34888798)

>>It'll be interesting to see how this plays in different countries - for instance the UK has no great respect for recommended prices and insists that items on sale are actually sold at full price for some (small, admittedly) proportion of the time. I imagine the rules vary by country,

By contrast, here in California, we apparently get to pay full sales tax on the imaginary MSRP dreamed up by some marketing guy smoking crack. Even if you get it for free, or with a discount, or whatever. I was mildly interested in taking up Verizon on a 2-for-1 Blackberry sale, before they told me I'd have to pay $70 in tax for the "free" phone, since the MSRP on a free phone was apparently around 700 dollars. I don't know if that's just cell phones or what, but it's just ridiculous.

>>Amazon will then have it almost permanently on sale at $2.85, "70% off!" - which is coincidentally the 70% return mark.

Which, all things considered, isn't too bad a situation. Customers get cheap-ish apps, developers get 70% of the sale, and Amazon gets lots of people buying because they're constantly on "sale".

Re:Pricing tactics (1)

TheRaven64 (641858) | more than 3 years ago | (#34888844)

That's basically what they do with books. When you buy a book wholesale, it comes with an price stamped on it, which is double the wholesale price (what the retailer pays). Amazon then offers 25% off!111eleventyone, which means wholesale price + 50%.

Re:Pricing tactics (1)

Peeteriz (821290) | more than 3 years ago | (#34888978)

If retailers can advertise '50% discount' while offering the normal, expected price, then it's a symptom that your truth in advertising laws aren't working for the consumers.

Re:Pricing tactics (1)

AmberBlackCat (829689) | more than 3 years ago | (#34888914)

The basic premise seems to me to be that Amazon will be able to offer huge discounts on apps because the developer nominally 'agrees' that their recommended sale price is offensively high - because the pricing strategy compels them to. But the developer gets decent money, so neither party loses. The only loser is the consumer who are being deceived into thinking they're getting a huge discount.

But what happens if stores have a requirement that your app price in their store is never lower than the price of the same app in a competing store?

Re:Pricing tactics (1)

Cryacin (657549) | more than 3 years ago | (#34889048)

Then you'll wind up like cheap jewellery stores in Australia. Where EVERYTHING is on permanent 50% discount!!!

Re:Pricing tactics (1)

stg (43177) | more than 3 years ago | (#34889062)

Then you can't sign with them and Amazon at the same time.

  I was once "invited" to sell my software on a site that had this rule in their contract. I simply declined to do business with them.

Re:Pricing tactics (2)

Suki I (1546431) | more than 3 years ago | (#34888934)

I am a developer, I want $2 per sale, so I set the price at $10 knowing it will never sell at that price.

Amazon will then have it almost permanently on sale at $2.85, "70% off!" - which is coincidentally the 70% return mark.

The basic premise seems to me to be that Amazon will be able to offer huge discounts on apps because the developer nominally 'agrees' that their recommended sale price is offensively high - because the pricing strategy compels them to. But the developer gets decent money, so neither party loses. The only loser is the consumer who are being deceived into thinking they're getting a huge discount.

It'll be interesting to see how this plays in different countries - for instance the UK has no great respect for recommended prices and insists that items on sale are actually sold at full price for some (small, admittedly) proportion of the time. I imagine the rules vary by country, too.

That might be why they have separate and distinct USA and UK stores.

Re:Pricing tactics (1)

houghi (78078) | more than 3 years ago | (#34888956)

In Belgium you can have sales only during two limited periods during the year. Many stores are against it and not because they want to be nice to their customers. :-/

As you said, the 'only' loser is the customer.

Re:Pricing tactics (2)

surzirra (1977164) | more than 3 years ago | (#34888988)

It will definitely be interesting to see how consumers end up viewing huge discounts on these apps. I am sure there is some term in Economics for a person's willingness to factor a discount into the opportunity cost of not buying the product while it's on (a seemingly temporary) sale.

Re:Pricing tactics (1)

Alef (605149) | more than 3 years ago | (#34889006)

The only loser is the consumer who are being deceived into thinking they're getting a huge discount.

For a while, I would say. Either Amazon would have to offer some apps with a smaller discount, or users will figure out that everything is always at 70% discount, and that the discount figure is actually BS.

But I agree with your general analysis -- the "recommended price" is a pointless number. What the developer is actually setting is effectively a lower limit of the price.

I suppose it's possible that Amazon will be using more complicated pricing schemes towards customers as well; "Buy two apps and get this third one for free" and the like.

Re:Pricing tactics (3, Interesting)

fermion (181285) | more than 3 years ago | (#34889064)

I think it goes a bit beyond this. Amazon is a sales site, so makes money from directly selling product. It is not like Apple and Google where the money can be made off some products, and other products just need to cover costs. Sure Amazon can have loss leaders, but there is not reason to make an entire catagory a loss leader, especially if there is not expectation of profit on the back end.

So what Amazon is doing, IMHO, is to make sure they never sell at a loss. I don't suppose this is any different from what they do with any other product. There is the cost of the product from the manufacturer, the costs associated with the sale, the profit, which leads to the final price. The final price, as we all knows, varies and is set by Amazon. So a developer wants a dollar, so sets the MSRP at five. As long as Amazon sells it for more than a $1.42 the developers get more, so it is win win. If I were an Android eveloper, I would prefer this model where sales are actively managed rather than a site where Apps were just plunked down.

I think this is a reasonable mode for a private App store that is not subsidized by the hardware the Apps. Developers are guaranteed a certain amount per sale, and Amazon is free to adjust the price to meet market conditions. Amazon is not cheating developers out of profits from the sale. It does allow them to sell free Apps, but, as mentioned, Amazon is not doing this to promote other products, so it makes little sense to offer free apps the way they offer free books for the Kindle.

Re:Pricing tactics (1)

Graff (532189) | more than 3 years ago | (#34889196)

The basic premise seems to me to be that Amazon will be able to offer huge discounts on apps because the developer nominally 'agrees' that their recommended sale price is offensively high - because the pricing strategy compels them to.

It's all pretty ridiculous. Let the developer set the price to whatever they want. If it sells, cool, if not then someone else will come around with a similar product at a better price. Then the new product will sell.

Eventually each developer will either figure out how to best price his products or he will fail miserably. There's plenty of developers aching to take his place. Welcome to the free market!

Re:Pricing tactics (0)

Anonymous Coward | more than 3 years ago | (#34889336)

What Amazon will really do is try to price your application for less than it sells for in the Android Market. Because, their main goal is going to be getting people to buy stuff from them at all.

But, I'm not sure amazon realises how little incentive developers have to put apps in their store at all. I have emails from a half dozen other app markets beggng me to put my apps in their stores (and they will do it for free.) And I even have one Korean app store that will pay me a few hundered dollars to put my app in their store. So, unless I see a high volume of phones/tablets with amazon's store on it, why on earth would I want to put my app there?

just go to 350% (1)

HungryHobo (1314109) | more than 3 years ago | (#34888762)

so now every developer just sets their recommended price to 350% the price they would otherwise .
if amazon reduce it then you still get the same as their 70%.
if amazon don't reduce it then they've decided a higher price will mean higher revenue and the devs get more.

easy

So much for free market eh ... (1)

unity100 (970058) | more than 3 years ago | (#34888772)

thats the principle - once you let parties to get increasing control of any aspect of social life, it doesnt stop until you come up and forbid it.

seeing apple getting away with its antics and control mania, others have started to engage in it too.

now, what will happen ?

Re:So much for free market eh ... (1)

maxwell demon (590494) | more than 3 years ago | (#34889434)

Unlike Apple Store for iAnything, Amazon's app store is not the only place where you can trade Android apps. If you don't like Amazon's conditions, you can simply use another one, or even open your own.

Restocking fee (2)

mdsolar (1045926) | more than 3 years ago | (#34888810)

Shouldn't developers get to charge a restocking fee if Amazon fails to sell some of their product because it set the price too high? It costs something to process returns after all.

So? (2)

Spazmania (174582) | more than 3 years ago | (#34888832)

What's the problem? Set the MSRP at 5 times the minimum you expect to be paid for each sale and let Amazon decide whether or not you get more. They have some experience at this; they're probably a lot better than you are at finding the optimal price point that earns them (and you) the most money.

Re:So? (1)

garcia (6573) | more than 3 years ago | (#34888982)

The problem is when the price is set to $10 and Amazon decides to set the price to free.

Re:So? (1)

m94mni (541438) | more than 3 years ago | (#34889014)

Well, the rules say that you get at least $2 in this case (the max of 20% ($2)of your price ($10) and 70% of the actual selling price ($0)).

Re:So? (2)

Spazmania (174582) | more than 3 years ago | (#34889366)

Then you get $2 per download courtesy of Amazon and they get a "loss leader" that pulls people into the store. That's the rule: the *greater* of 70% of the sale price or 20% of the requested price. So if they sell it for half the requested price, you actually get 35% of your requested price but if they sell it for 10% you get the 20% floor.

Again, what's the problem? You still control the price floor at least as far as what you get paid. When the manufacturer tries to tell a vendor what he can or can't sell for, that's called "price fixing." Why should you have a privilege that lands brick and mortar stores in court?

Re:So? (1)

Rockoon (1252108) | more than 3 years ago | (#34889000)

They have some experience at this; they're probably a lot better than you are at finding the optimal price point that earns them (and you) the most money.

If both you and Amazon are each getting a flat percentage of the sale, then the optimal price point is the same for both of you.

However, if it is not always a flat percentage, then the optimal price point may be different for both of you. Amazon is in control of the matter so it will only be looking to optimally price for itself.

Re:So? (1)

dk90406 (797452) | more than 3 years ago | (#34889088)

If I want the price to be free for my über game, and Amazon decides it is worth $5? They get $4 per sale and i get $1 (that I didn't ask for). Even better: I say my app is worth $2 and Amazon agrees. They keep 80%.
I don't like that manipulation room. Make the developers cut 70% regardless of how the price was set.

But at least Android developers have the option to publish their work on multiple stores. (or even their own sites)

Re:So? (1)

Spazmania (174582) | more than 3 years ago | (#34889344)

Why should Amazon sport your app for free? Not the app they want to offer for free, but the cheezy app you want to push on them for free? Costs a lot of money to run those servers. It's android; if you want to make the app available for free, do it on your own dime.

Dear Amazon letter (0)

Anonymous Coward | more than 3 years ago | (#34888850)

All of the developers should write the following to Amazon:

"Dear Amazon, Fuck Yooooooooooooooooooooooooooooooooou."

Then, they should go develop their apps and host their works elsewhere.

It's actually quite simple... (4, Interesting)

XDirtypunkX (1290358) | more than 3 years ago | (#34888864)

If you think about it, the 20% of MSRP thing is good for developers; Amazon is going to maximize their return, at the same time they're maximizing the developer's return, which is *at least* 70% of whatever Amazon is getting. If Amazon lowers or raises the price, it's because they expect a greater return (which means you'll get a greater return) and to be fair, they're probably better at setting a price to make the maximum amount of money than your average Indie developer. This means the 20% MSRP just means you'll get a larger cut than 70% if Amazon thinks they can make a killing slashing the price.

The only way you're going to get screwed is that if Amazon decides having your application priced in an uncompetitive way is going to maximize their return on another app. This is more of a danger than anything, because they might raise the prices of all competing apps to make one in particular seem like a "bargain" at the same time they advertise the hell out of it.

Sounds Great! (1)

asn (4418) | more than 3 years ago | (#34888872)

So if the MSRP that I submit for my app is a million bucks, but they think it is worth $1 -- someone buys my app for $1, and they pay me 20% of the MSRP because that is greater than 70% of the actual retail price? sounds great!

Re:Sounds Great! (0)

Anonymous Coward | more than 3 years ago | (#34889442)

You, obviously, didn't read any of the posts before yours or you would have seen this same comment was made 30 before and the responses that shot it down. Since you didn't read those, you won't read this, so I'm not going to bother repeating them.

Re:Sounds Great! (1)

nacturation (646836) | more than 3 years ago | (#34889510)

Yeah, and if they actually did that you would simply buy as many copies for yourself as you possibly could and pocket the free money.

Very smart move, I like it (1)

nielzz (822766) | more than 3 years ago | (#34888878)

The main reason for doing this, I think, is so that Amazon can bundle apps from various developers. By taking over the " price management " amazon can determine the combined price without upsetting the individual developers (they will be getting their minimum anyway). Amazon's datamining will then go on and determine the ideal software "bundle's", everybody will be buying at Amazon because they get free-apps with some bundles. They will rule the WORLD, my friends. The W.O.R.L.D.

Interesting idea (4, Interesting)

SirJorgelOfBorgel (897488) | more than 3 years ago | (#34888894)

It's interesting and could somewhat work, with Amazon's experience in finding the perfect price point.

However, developers have some experience here too, and regularly adjust prices in the search for the perfect price point themselves.

All in all, I don't really get why we, the developers, should submit our apps to yet another app store. Aren't these things meant to make everything easier for everyone ? The consumer has yet another app store to visit, the developer another one to maintain. How will people even get the Amazon app store ? Why would people install it, seeing their phones already come with Google Market, which is of course a bigger store than Amazon's ? Even if Amazons store is pre-installed, would it actually be used ?

Take for example the Samsung app store for Android. It's pre-installed on all Samsung Android devices. There's only a handful of apps in it, and sales through this store are abysmal - so bad it's not worth the effort to have your apps available in there. And we sell quite some apps across various platforms!

Not to mention it's one more app store to track sales through, which is actually a lot of work for some of us. If you sell a lot of copies, you need to have your taxes in order, so you need to get the right reports from the app store. This will differ per country, but in our country (inside the EU), we need to charge 19% VAT for all sales made to European customers, and then hand this money over to the taxman. That sounds pretty straightforward, and it is, as long as you have the information about how much is sold (and for how much) inside and outside the EU. You can imagine this can be quite some work ( = money) for some of these app stores as their reporting is generally terrible (Google has the reports you want only if you are from the US or UK, or make less than 500 sales a day). The app store needs enough users and sales to warrant even bothering with the extra work, or it's a net loss to publish apps there. I don't see Amazon getting there any time soon.

I'd say... (0)

Anonymous Coward | more than 3 years ago | (#34888960)

Given that in this day and age, hardly any consumer will be swayed by claims of "n% off [absurdly high figure]", I think it's more likely that the core idea is that Amazon, if they so desire, can prevent free and potentially superior competition to paid apps (which being downloaded by everybody over the paid alternative would imply no profits for themselves either).

So this is the shape the long-anticipated "FOSS is damaging to the market" backlash takes in the end.

Response to e-book publishers? (1)

Xian97 (714198) | more than 3 years ago | (#34888962)

I am wondering if this could be a response to e-book publishers. On Amazon's Kindle store, the publisher sets the price which results in e-books costing more than their physical counterparts in many cases. It didn't use to be that way until Apple came in and negotiated new terms with the publishers allowing the publishers to sell direct to the consumer, just using Apple as a middleman and Amazon had to follow suit. This was called the Agency Model.

I suspect Amazon's profits went down once they lost control of setting the price on e-books, if for no other reason due to reduced sales by people not wanting to pay the inflated prices, so I see this as making sure that they retain pricing control.

The real reason for this (2)

gnasher719 (869701) | more than 3 years ago | (#34889024)

This kind of agreement allows Amazon to undercut any competitor. If you have a contract with one seller that the suggested price is $10, and you get $7 for each copy sold, and you have a contract with Amazon, where the suggested price is $10, but they can sell it for less and pay you less, then Amazon can drop the price to $7 and they still make $2.10 on each sale, while their competitor will make nothing at that price.

And I am missing the comments that came up on the Apple Store, that 30% of the retail price is robbing developers.

in other news... new awesome car dealership (1)

youn (1516637) | more than 3 years ago | (#34889056)

to deal with previous buyouts, in this newsbit I just made up, apparently, there will be a new car store is to be opened... in this shop, the car dealer gets to set the price... maybe full price, maybe discount... maybe free :)

what are they smoking :)

Don't Read TFA, Read This Instead (5, Informative)

hdon (1104251) | more than 3 years ago | (#34889086)

Business Insider and author of TFA, Dan Frommer, got several details wrong.

TLDR; Amazon prevents you from selling for cheaper on other outlets, or giving away free downloads or FOSS if you want to charge on the Amazon Appstore.

(Snipped down.) When developers will be able to set a suggested retail price ('MSRP'). Then Amazon will set the retail price. 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.

What does "MSRP" mean?

In the retail business (that's where the "R" in "MSRP" comes from) retailers make speculations on how many units they can sell at what prices over what period of time, compare to actual or theoretical negotiated bulk prices for purchasing from a manufacturer or wholesaler, and then decide whether or not it meets their profit expectations. It can be a little more complex than this, but this is the gist of it.

Well, the article linked to by Slashdot does not help you find Amazon's justification for using the terms "MSRP" or "SRP." My research, which may be incomplete, indicates that Amazon is not using this term, and rightly so. Here is an excerpt from Amazon's Appstore Distribution Agreement, which you can see in PDF form here [ssl-images-amazon.com] (MD5 checksum 15636c42ecfb47dc819445ad3214eac4, just in case they change the file in the future without renaming it.)

Section 2a of Amazon's Appstore Distribution Agreement

For each sale of an App, we will pay you a royalty (“Royalty”) equal to the greater of (i) 70% of the purchase price or (ii) 20% of the List Price.

Ok, so what we're actually dealing with is called a "List Price" in the legal agreement to supply Amazon's new App Store. This is a more correct term, because an MSRP is legally unrelated to the price a retailer secures from their supplier for units of the product. It's clear though that this "List Price" bears legal weight in determining the PPU (price per unit) of the product from the supplier (or, developer, I guess.)

So at this point what we have established is that the "List Price" in fact has no bearing on what the app will be sold for, but is defined to be five times the minimum PPU the developer is paid.

Here is a really important detail that Business Insider and author of TFA, Dan Frommer, glossed over:

..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.

Somehow, even managing to discuss the situation in which you set your prices differently for different sales outlets, Business Insider and Dan Frommer miss this juicy tidbit:

Section 5i of Amazon's Appstore Distribution Agreement

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 on any Similar Service or the lowest actual price at which you make 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.

"List Price," then, is not simply five times the minimum PPU you wish to be paid (which would effectively allow you to actually set the price you want to sell at, which would be nice) but is in fact a function of what price you are offering, but a function of the price your app is available for at different outlets! This means if your app is on multiple outlets, Amazon takes away your ability to set your price through the List Price, and even takes away your ability to offer a better price at another sales outlet.

This is particularly troubling because it means that you cannot set your price as a function of favoritism. For instance if you had more grievances with Amazon than another market, you cannot favor the market you like more with a better price.

Along that vein, this part that Business Insider was not likely to mention (because Software Freedom doesn't matter to them)

Section 2a of Amazon's Appstore Distribution Agreement

No Royalty is payable for Apps with a List Price of $0.00.

and..

Section 3a of Amazon's Appstore Distribution Agreement

A “Similar Service” is any online distribution
service that makes Apps available for sale or download to end users in the Territory using a mode of distribution similar to
those used by this program, including any mobile or Internetbased application marketing, sales and distribution service.

So, to combine the language in a way that makes this unequivocally clear: "The 'List Price' for an App is an amount that does not exceed, at any time, the lowest price for an App available on any online distribution service that makes Apps available for download."

Given that a future version of Kindle will probably only come with the Amazon Appstore, it was probably a thought that many of us had that we would indulge unconcerned consumers their desire to buy apps from Amazon, and make a profit in the process. Apparently if your App is free to download from anywhere else, or it is free, open source software, Amazon is not going to pay you a dime.

Re:Don't Read TFA, Read This Instead (1)

Alef (605149) | more than 3 years ago | (#34889182)

"The 'List Price' for an App is an amount that does not exceed, at any time, the lowest price for an App available on any online distribution service that makes Apps available for download."

Given that a future version of Kindle will probably only come with the Amazon Appstore [...]

If you're right, this seems more like a scheme to boost Kindle sales rather than optimizing app sales. Essentially, Amazon will be able to guarantee Kindle customers that they will be able to buy apps cheaper than on any other platform, and by that get a competitive advantage over other tablet manufacturers.

Of course, all of this hinges on enough developers going along with it.

Monopoly? (0)

Anonymous Coward | more than 3 years ago | (#34889100)

Doesn't this strike anyone as monopolistic behavior? It's kind of weird that the "manufacturer" will not be able to set their own price - it gives too much power to the distribution channel, which means the distributor can unfairly promote or punish the makers of its products...

Re:Monopoly? (1)

AHuxley (892839) | more than 3 years ago | (#34889364)

"Competition is a sin." The US is just returning to its roots. Monopolistic behavior and cartels worked very very well for a select few for a long time. Welcome back :)

Re:Monopoly? (1)

Haeleth (414428) | more than 3 years ago | (#34889412)

"Monopoly" does not mean "something Slashdot does not like". It means a market where one player dominates to such an extent that they effectively control all sales. Amazon does not control sales of anything, least of all Android apps; therefore, by definition, nothing Amazon does can be considered monopolistic.

Just like vanity books (1)

DrXym (126579) | more than 3 years ago | (#34889142)

Amazon sets the price for vanity (oops "self published") books by the page. At least if you self publish and have an ISBN you can set your own price. What recourse to app developers have? Perhaps the answer is for devs to steer clear altogether, or perhaps set up a cooperative where they have more clout to negotiate their own terms.

Opinion from an actual Android developer (me) (1)

Anonymous Coward | more than 3 years ago | (#34889206)

Listing on Amazon.com's store is appealing because it allows customers to purchase my apps without having to use Google checkout.

But there is no way that I'm letting Amazon discount my apps for me. I know the right price for my apps and I want to keep that price. I'm not just selling a game, I'm selling an app that has specific value to a niche market. It sells quite well on Apple's app store at those higher price points. I'm sure that Amazon.com's automated systems would see my high price point and discount the app.

My apps will stay on Google's Android Market, thank you very much.

Re:Opinion from an actual Android developer (me) (1)

Ash-Fox (726320) | more than 3 years ago | (#34889356)

Listing on Amazon.com's store is appealing because it allows customers to purchase my apps without having to use Google checkout.

What's wrong with Google checkout?

What is the big deal? (1)

thetagger (1057066) | more than 3 years ago | (#34889240)

Considering that you still take a fixed cut of whatever the price Amazon sells it for, what is the big deal? Amazon's interest in maximizing revenue from that product is as big as yours.

It all comes down to whether Amazon can take better decisions about pricing than the developer. Which truth be told, will probably be the case.

I only see this feature being unacceptable to a certain class of boutique apps where the price is extremely high for no good reason, but where the high price is also a part of the appeal of the product: things like Things and Delicious Library come to mind.

Yippie (1)

TRRosen (720617) | more than 3 years ago | (#34889254)

Thanks to this cluster f%^k I wont have to listen to people whine about the Apple Store for a while. Seriously if Apple said we're gonna give you 70% of whatever we decide is good or 20% of what ever you decide what do you think would happen.

Amazon is saying they can discount your app up to 70% any time they like an you have to give up the same amount from your cut.

Your selling an app for $10 and selling 100 a week earning a decent $1000 a week income for your hard work.
Amazon decides dump YOUR app on the market for $3 and they sell 1000 in a week making you $2100 nice right.
Now it goes back to regular price and your selling 10 a week for months because the sale wiped out the market.
You lost $4900 in future income in one week because of Amazon.

Just set MSRP to 500% of what you want (0)

Anonymous Coward | more than 3 years ago | (#34889324)

5 x .2 = 1

competition not allowed (1)

TRRosen (720617) | more than 3 years ago | (#34889376)

this allows Amazon to undercut any competitors price by 80 %
$10 app on Amazon and competing store.
on sale for $5 at competitor (50% off) - $3.50 to dev
Amazon can sell for $1 and still break even.

I cant see any serious developer giving Amazon control of its cash flow

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