Handango revises developer agreement, developers despair at increased cut

[Guest Paul (MVP)]

Crikey, it's tough being a Windows Mobile developer. If making a go of it in the WinMo software market isn't hard enough in itself, then the biggest and baddest software shop in the ecosystem is right there to make your life harder by taking a sizeable chunk of your earnings!

From an email recently circulated to developers by Handango...

Important Updates to the Content Distribution Agreement

These are exciting times. The wireless industry is continuing to evolve. Smartphone sales are increasing, mainstream consumers are migrating from feature phones to smartphones and content is quickly becoming the purchasing influencer for many of those devices.



To keep up with the growth and change in our industry, we must continually update and standardize our legal agreements. While the existing distribution agreement has received minor updates in the past, this agreement has been entirely revamped to enable us, as strategic partners, to share in the risk and reward of the many new business and market opportunities as they emerge.

Please find the new Content Distribution Agreement (CDA) attached. There is no action required on your part. The terms will go into effect March 15, 2008

Together we are poised to take advantage of the momentum building behind mobile content.



1. Royalty Percentage: Subject to the terms and conditions set forth in the Agreement and provided that Software Owner is not in default
hereunder, Publisher shall pay Software Owner Royalty Payments based on the following Royalty Percentage on Software sales
occurring in all Channels, except the E-Commerce Services Channel:

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% 1. Royalty Percentage: Subject to the terms and conditions set forth in the Agreement and provided that Software Owner is not in default
hereunder, Publisher shall pay Software Owner Royalty Payments based on the following Royalty Percentage on Software sales
occurring in all Channels, except the E-Commerce Services Channel:

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%

1. Royalty Percentage: Subject to the terms and conditions set forth in the Agreement and provided that Software Owner is not in default
hereunder, Publisher shall pay Software Owner Royalty Payments based on the following Royalty Percentage on Software sales
occurring in all Channels, except the E-Commerce Services Channel:

2. E-Commerce Services: Subject to the terms and conditions set forth in the Agreement and provided that Software Owner is not in default
hereunder, Publisher shall pay Software Owner Royalty Payments based Royalty Percentage of eighty percent (80%) for all Software sales
occurring in the E-Commerce Services Channel.

So let me just put that in plain english.

• If a developer runs a Handango shop on their site, they earn 80% of the revenue from that store.
• If a developer sells a product on the main Handango site and their total earnings are under a QUARTER OF A MILLION DOLLARS, they ONLY EARN 50% of the revenue.
• If a developer sells a product on the main Handango site and their total earnings are under a between a quarter of a million and a million dollars, they earn 60% of the revenue.
• If a developer sells a product on the main Handango site and their total earnings are over a million dollars, they ONLY EARN 50% of the revenue.
  
  
  If, like me, you are disgusted at this, as a consumer there are a few simple things you can do to help developers, i.e.
• Buy from the store on the developer's own site wherever possible
• Buy from http://FairDeal.MoDaCo.com whenever possible - the developer will earn 80% of the revenue
• Only buy from Handango as a last resort
  

I should make it clear that for purchases on FairDeal, aside from the 80% that goes to the developers, the other 20% goes to Mobihand for running on the online store. We have chosen to relinquish our earnings from the affiliate shop such that developers get a 'Fairer Deal'.

What's your take on this? Are the %ages unreasonable? Does Handango have a right to take this cut based on their online presence / promotion etc.? I'd love to hear from both end users and devs on this!

P

[Guest Syphon Filter]

Just start selling direct to customers.

There are enough online payment methods (namely PayPal) for a clever developer like yourself to knock together a website to sell directly to your consumers.

Sounds to me like Handango are taking the Pee I double S.

[Guest auto123456]

(the below post is only my personal opinion - you are encouraged to verify/research my comments and come to your own conclusion regarding this issue)

What is even more troubling to me is that in another section in Handango's agreement it says:

"At no time shall the Software's SRP provided to Publisher be higher than the Software's SRP provided to other distributors."

Which basically forbids developers from offering their products in another software shop for a cheaper price.

For example, as Paul just mentioned, fairdeal only charges developers a 20% fee - so you would think that developers would be able to pass on that savings to customers:

XYZ app sells for $19.95 on Handango, Handango gets 50% = $9.95 profit to developer

XYZ app sells for $12.50 on Fairdeal, Fairdeal 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 Fairdeal.

If such discounted prices were available on Fairdeal for apps that Handango carried, Fairdeal would have a shot at being a competitor to Handango. So, why aren't the prices cheaper on Fairdeal? Simple, because Handango has such a dominant position in the mobile software sales market, developers have little choice but to sell their apps on Handango if they want their products to have the best chance of being noticed by potential customers (developers have to choose between high visibility and high commission fees of Handango, or lower commission fees and much lower visibility of other stores.)

How can another software shop ever be competitive to Handango when the best way to do so (of 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 a higher sales rate. But, I feel that this clause is anti-competitive and Handango is using their market dominance to force developers into agreeing to it.

Thus, 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 (excluding limited time special offers).

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.

Edited February 21, 2008 by auto123456

[Guest doctormetal]

Actions like this will prevent me from buying anything on handango ever again.

The developers should walk away from handango and offer the products themself or, if that isn't possible, using other shops.

If you are a small development house it seems that you should stay away from handango as far as possible.

Taking 50% in revenue is just wrong.

[Guest Paul (MVP)]

I would love to have the time and resources to really sit down and hammer out a site that could really cause problems for Handango, but sadly, I don't. I wonder if I could work with Mobihand to have some sort of cashback scheme?

Buy from Handango = $20. Buy from Mobihand, also $20 with $x instant cashback.

See what I did there?

:)

P

[Guest Paul (MVP)]

You are right tho, developers have no choice but to list on Handango, as they are currently the biggest store out there. In an ideal world, people could stand up and say this is not acceptable, but due to the fact the WinMo s/w market is so fledgling, it's not feasible to do so, as it's hard enough for WinMo developer shops to pay the bills as it is.

:)

P

[Guest jimbouk]

Free market economy.

Handango provide a delivery system, payment handling system and customers. Without them developers could earn a higher percentage but will their increased costs and decreased customers actually mean less income?

I am sure that developers will vote with their feet either way - either now or in the future if Handango bump the fees up again.

[Guest dreamweavel]

I'm not using Handango again...

[Guest Syphon Filter]

I wonder what the bigger developers out there think about this?

Say SPB?

[Guest Dumdidum]

As a developer, this is really going to xxx me off. I was already veeeery unhappy with the 40% they took, beause their support is ridiculous.

My app is already selling 3$ higher on Handango as directly from my website, and I will change this to an ever bigger amount. It's just not fair from Handango, and: If this Shop would be an European shop, they would be in big trouble due because they are using their market position to fxxx the developers. They are doing NOTHING for that 50%. So my applications will be a lot more expensive on Handango by now...

Btw. you have to fill with IRS, else they take another 30% from your earnings!

[Guest Dumdidum]

Btw. I want to see one single company that makes a million with mobile applications on handango!

[Guest geosta]

This is going to sound like a Labour government focus group report, and I apologise for that in advance, butI think the best way to combat Handango's dominance is through educating the consumer.

Take myself as a good example. I was happy to shop at Handango in the past because it was the biggest shop on the Net for mobile software. You could look at all the software in a particular category and decide which one was best, all on the one site.

But since I read about the way tHandango reams its developers, which ultimately lead to the creation of FairDeal, I haven't bought anything through Handango since. I try to buy directly from the developers, and when I can't do that, through FairDeal.

And yes, I've used the companies name on just about too many occassions in the above comment, in the hope that if everyone else does the same, when a new smartphone user googles handango, this thread might be near the top of the results.

[Guest dearsina]

Ultimately, if you sell 3x as much using Handango, you can expect them charging such a premium. Presumably they do advertising and marketing of their (and by proxy, your) online shop and bring in the business. It's not much different from the model applied by Hollywood.

Lesson to be learned: The money is in distribution, folks.

[Guest Paul (MVP)]

Yes, they deserve a cut, but should they earn the same as the developer? I don't think so...

P

[Guest auto123456]

I would love to have the time and resources to really sit down and hammer out a site that could really cause problems for Handango, but sadly, I don't. I wonder if I could work with Mobihand to have some sort of cashback scheme?

Buy from Handango = $20. Buy from Mobihand, also $20 with $x instant cashback.

See what I did there?

:)

P

Paul,

I think you have something there...

If Mobihand started a simple campaign of "We offer 10% discount on ALL apps EVERY DAY", then the developer would still be setting the "Suggested" Retail price (SRP) in Mobihand's catalog to $19.95 so they won't be violating Handango's agreement, but yet the app is being sold to consumers for 10% less because it's Mobihand offering the lower price, not the developer, so this would use a loop hole to bypass that anti-competitive clause in Handango's agreement.

And this would be a great incentive/reason for people to start making all their purchases through Mobihand and no longer Handango!

[Guest Paul (MVP)]

Yes, that's an interesting idea, a x% discount all the time. Hmmm...

Maybe it's time to give fairdeal an overhaul and have a chat with Mobihand :)

P

[Guest timwells]

(apologies for the long post)

As a developer I haven't paid a huge amount of attention to Handango, here's why: We do about 80% of our retail sales off of our own website. It's possible that many of those people are being "referred" to us from the Handango website (despite efforts not to redirect). I just think its a natural tendency of most people to go to the developer's site directly when buying a product (don't you want to know the type of company you are buying software from?). Plus I don't think that most of us are nearly as pushy in the sales process as Handango (we don't ask for any "data" whatsoever before downloading the trial, does anyone else?). So the majority of our sales are at the higher return to us. We were also one of Handango's "first" developers and absolutely nuked the idea of any sort of exclusive arrangement with them, but I'm told that others got caught up in that.

The sad part of all of this IMO - since about a year ago there has been this continual errosion of the Windows Mobile "ecosystem". The smallest of developers - who were willing to take chances when Microsoft needed 3rd party developers - are now being squeezed by the "big names" in WM. Making a business out of this was hard before, now it's virtually impossible. It could be sinister of me, but it seems that this is an indication of a more serious problem within Handango. Did they take a gift wrapped opportunity and somehow managed to screw it up so badly that they are now faced with a serious profit margin decline?

I want someone who really understands the retail and licensing issues of this market. I haven't gotten that from Handango, maybe others have. Some examples, if Microsoft isn't going to solve the software update problem, then certainly Handango was in a unique place to provide that to their developers. Instead we have all spent thousands building our own incompatible systems. Frankly, no one wants my "auto update" taking up their precious desktop space, nor do they probably want that from the dozen other applications that they have installed, but if there was a single system...(i've seen posts on this site on the topic). I also want someone to make enterprise licensing a non-issue. Today we don't have a good solution for supporting "in-enterprise" install and update, nor do I want to spend the money to create one. There again, Handango would have been in a unique situation to make that happen. And my list goes on...

So, as an open question to developers: What are you looking for in an online partner? What would you need to switch online resellers?

...we'll probably just suck it up unless a great alternative comes along...I'm not holding my breath.

[Guest battletank]

I must admit, I was initially shocked by this, when I read it. Personally, I stopped using Handango the moment they started charging extra for 'buyers protection' - so I need to pay $3 extra to ensure I can re-install apps if I update my phone.

It's clear, however, that there's more to this. Handango undertake a number of marketing activities for their money... they provide mobile sales tools, discounts and loyalty points, all of which encourage sales. As someone said before, it's a free market, and no-one forces anyone to use Handango.

Developers choose Handango, because 100x50% is far better than 10x80%; software doesn't have much incremental cost (support I guess is the only exception), and so every 'unit' that is sold after the cost of development is sunk has a positive value, regardless of price - there's no bottom line.

Edited February 22, 2008 by battletank

[Guest Paul (MVP)]

A shared online update client is coming :)

P

[Guest awarner (MVP)]

I stopped using Handango years ago when they first started to screw the developer, it's bad enough with all the piracy that goes on taking revenue away from the developer. Now the smaller guy is going to wonder is it really worth it and maybe stop developing those one off special apps they we see from time to time.

[Guest timwells]

A shared online update client is coming :)

P

Yeah, I thought about providing ours to outside developers too. We've distributed software on tens of millions of devices, but I still don't believe we have the power to create a "standard". Paul, I wish you the best of luck, but it's a tall order my friend.

[Edit]

And honestly, I want my reseller to manage this process for me. Whenever I post an update to the reseller, it should automatically generate an email to those who have asked for update news after it posts the update. The way it is now we have to manually sort through emails and maintain "opt in" lists for product updates. Handango could have done that for me, they had everything they needed through the purchase transaction.

At the time of the purchase I should be able to decide if I want to be notified by email (with links to the update) or if I want some squirrley little applet running in the background on my PC (that I'll one day mistake for spyware and nuke).

In a similar fashion, my reseller should provide me with bulk email access to my customers. (It doesn't have to be free, but cheap would be good.) Maybe I want to send out a customer loyalty deal where I offer some discount to customers who bought product A at the release of Product B. This stuff would be so easy if it was managed from the beginning of the process.

...alright, stepping off my soap box...

Edited February 23, 2008 by timwells

[Guest DaPutster]

I ran into similar pricing structures about 6 years ago when I started selling some software I had created. The best deal at the time is still one of the best I have found, a company named eSellerate (www.esellerate.net). Now obviously you don't get the automatic exposure like you do from software consolidation sites, but with a little effort on your end, you can keep a majority of your revenues. Six years later I can't say enough about the quality of support & account management I've seen with them.

[Guest auto123456]

Everyone wins if Fairdeal offered a "20% Off All Products, Every Day":

- Consumers get 20% off the prices Handango charges - Making them very happy :-)

- Mobihand gets 20% of every sale, not to mention the increased sales volume as customers switch from Handango

- Developers get an addition 10% for each sale (over a Handango sale)

Why would anyone buy from Handango, when they can get the same product for cheaper from Fairdeal?

The effect on consumer turnover from handango with "Buy from Fairdeal because they have lower prices" will be significantly more then "Buy from Fairdeal for the same price because 80% of the sale goes to the developer" :)

Edited February 23, 2008 by auto123456

[Guest Confucious]

I think all software should be free.

And should be written with my personal requirements in mind.

And all support should be free and instantaneous.

Am I asking too much?

50% does seem a tad high- but supply and demand comes into play - but they have such a dominant position they can do this - they obviously think it's not going to hurt their business too much but I, for one, will be looking elsewhere for my software in future.

[Guest bitbank]

Handango has steadily raised their commissions from 25% to the current 50%. It seems pretty clear that they did this because they CAN, not because they need to. This is pretty bad for developers, but what's much worse is the creation of their RPN key generator. This creates lots of support emails because of spaces in the names or capitalization. It's also easily cracked. One of my releases of SmartGear showed up on a warez site a few days after I released it with a key generator. This one site shows that it has been downloaded more than 120,000 times. Luckily I make most of my revenue from contract work because if I had to rely on retail software sales, I would be out of business.

I stick with Handango for now because they do sell product, but I work with other distributors as well.

After seeing the "download protection" racket, I would be permanently scared to buy anything from Handango, but apparently the consumers are not so easily scared off.

Larry B.