02.21Handango Cuts Deep Into Mobile Software Developers Wallets
This is just plain wrong in my opinion. Software Retail Giant Handango is putting the screws to Mobile Software Developers with their latest CDA (Content Distribution Agreement) sent out recently to developers. Here is some of the content of that email that MoDaCo has posted:
GROSS REVENUE EARNED / ROYALTY PERCENTAGE:
Less than $250,000 in Gross Revenue / 50%
$250,001 - $1,000,000 in Gross Revenue / 60%
$1,000,001 + in Gross Revenue / 70%
OMG! Handango is taking 50%, that’s HALF of Software developers profits that sell up to 250K! 40% up to 1M and 30Â percent for anything beyond! Let’s keep in mind that Handango only provides a service and channel for the people who actually do the WORK, the software developers!
EDIT: Thanks Paul for the heads up on Royalty Percentage!
I was definitely diggin’ Handango during the Holidays with Free App Friday, but getting things for free at the extreme cost of our beloved software developers is just plain wrong! The developers put a lot of time and energy into picking up where Microsoft left us hangin with greatly improved functionality or just plain fun games!
There are a lot of alternatives to purchase your software, one being good ol’ AximSite.com Store! So check them out to and put some needed profit back into the developers that have taken a lot of time and energy in providing us with some cool applications for our devices!
Check out more of the Handango Email to developers here: (click here)
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I can’t belleave it…
Handango = slavery
February 22nd, 2008 at 5:02 am
I’m confused by your interpretation of the numbers. You state “Handango is taking 50%, that’s HALF of Software developers profits that sell up to 250K! 60% up to 1M and 70 freaking percent for anything beyond!”
But the heading indicates “GROSS REVENUE EARNED / ROYALTY PERCENTAGE”. I would interpret that to mean for beyond 1M then the developer gets 70% of gross revenue earned. That means Handango gets 30% in that case.
February 22nd, 2008 at 6:46 am
I’m a little fuzzy on the royalty percentage, but I think you are right. None the less, can you think of many software developers that are large enough to sell over 1m yearly to get 70%? At an average cost of $20 a copy, they would need to sell 50,000 copies! I work in the Automotive field and I know that suppliers are always squeezing manufacturers for more more and more. But they are brick and mortar warehouse or retailers, that publish paper catalogs, have extensive sales force and infrastructure in place. I cannot imagine Handango’s cost of doing business is anywhere near that with no brick and mortar & outside sales force. I hope this does not significantly influence other retailers to follow suit. I would think this kind of margine reduction would significantly hurt the small developer.
Thanks for the heads up!
February 22nd, 2008 at 8:10 am
I’ve worked for a software developer for the last nine years. Our major distributors get 50 points (50%). Some medium resellers get 37 point and the standard for smaller resellers is 20-25 points.
So, before you get all up-in-arms with Handango, their contracts setup is not uncommon.
February 23rd, 2008 at 8:15 pm
[…] A post from tilt site […]
February 24th, 2008 at 7:33 pm
I wonder of Handango charges Microsoft the same fee? (Voice Commander)
February 25th, 2008 at 2:32 pm
It’s not at all different from other b&m resellers. This has been the standard in the retail/reseller industry. The retailer sets the royalty based on tier pricing.
March 2nd, 2008 at 1:50 am
Basically, my opinion of the situation is:
The below clause in the handango-developer agreement prevents a developer from offering their product at a lower price in another software shop:
“At no time shall the Software’s SRP provided to Publisher be higher than the Software’s SRP provided to other distributors.”
Thus, even if another software store charged developers only a 20% commission (as oppose to Handango’s 50%), the developer can’t pass that 30% savings onto consumers because this clause forbids that!
For example, if another software shop only charged a 20% fee, you would think it could work like this:
XYZ app sells for $19.95 on Handango, Handango gets 50% = $9.95 profit to developer
XYZ app sells for $12.50 on ABCshop, ABCShop gets 20% = $9.95 profit to developer
In the above example, the developer would still make the same $9.95 profit, but the consumer would save $7.50 by buying it though ABCShop!
The only way a developer could sell a product for less would be to NOT sell it through Handango (thus, they are not bound by the clause). But this would be like shooting yourself in the foot because Handango is the biggest shop and provides the highest sales count to developers. So, the developer has to bite the bullet and charge the same price in all software shops
How can another software shop ever be competitive to Handango when the best way to do so (by offering lower prices) is specifically prohibited in Handango’s agreement?
Handango has the right to charge a premium commission if their market position offers developers higher number of sales. But, I feel that this clause is anti-competitive and Handango is using their market dominance to force developers into agreeing to it.
I feel Handango is in effect dictating the prices that consumers pay for mobile software - thats probably why every shop sells the same app for the same price that Handango sells it for.
I feel the FTC and other applicable government agencies should investigate this clause to see if it is violating any anti-trust/anti-competitive laws designed specifically to prohibit monopolies from preventing competition.
Also, because Handango has so many partnerships with cellphone carriers, when a newbie buys a smartphone and selects “purchase software” link, the chances are they are directed to Handango - thus handango gets first sales opportunity for all newbies. Then, after a newbie gets confortable, they will probably try to find a software store that sells apps at a discount, but because of the above clause, there isn’t any. And because all shops charge the same price for the same app, there really isn’t any significant incentive for a user to switch from handango.
However, if someone opened up a new software shop that offered 20% off ALL software, EVERYDAY, then the discounted price offered to consumers for an app would NOT be the developers fault, so Handango couldn’t scold them under this clause.
Such a shop would have a significant chance to compete against Handango because there would finally be a real reason for users to NOT buy from Handango!
March 30th, 2008 at 7:35 am
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March 31st, 2008 at 10:26 am
This 50% royalty is ridiculous. It’s like a real estate agent getting 50% of the house you’ve built, because he helped you sell it !!!
May 9th, 2008 at 11:57 am
Actually developers are not even getting 50%. If the app is sold through a portal running Handango’s powered store then it’s 50% to the portal, then 50% to Handango with the remaining amount going to the developer! So, if an app sells for $20 the developer will only get $5. This will force developers will increase the price of their apps, customers will pay more, only Handango benefits.
PocketGear.com is just as evil, they don’t even tell you who your customers are, they just supply an order ID when a sale is made. Image if you need support for a product you purchased several months ago, you don’t remember the order ID. So how will the developer know if you are a paid customer?
So please, please do not buy anything from Handango or PocketGear. The most developer friendly online stores are Clickgamer.com and MobiHand.com, buy from them. Or buy from the developers’ Website.
June 14th, 2008 at 3:37 am