Amazon Payments vs. OBS: A Cautionary Tale (Guest Poster Pete Spahn)

I have a couple of guest posts in the hopper. This one kinda jumped the line as it it relevant to the current hot topic in our corner of the universe...

Amazon Payments vs. OBS: A Cautionary Tale

OBS and censorship is in the news now. You can look up the details if you need to. Suffice to say, a product was released on OBS, it was deemed offensive and removed, and now there's going to be some type of reporting/flagging system to arbitrarily help decide what's offensive and what's not.

Knowing gamers like I do, I'm gonna take a wild guess and say that there's already someone out there purposely creating a product that's guaranteed to be offensive. When that happens, I guess it'll be flagged and reported. And then someone at OBS is going to decide to remove it.

There will be an outcry from the public. The internet will shake. Monitors will crack asunder. Keyboards will ignite with the typing of a thousand keys. And then, based on some of the comments I've seen over the past few days, it'll be time be time to put up or shut up. Publishers will have to decide whether or not they want to continue selling their products through the largest and most visible retail channel in the industry, or turn their backs on OBS and seek greener pastures.

I'm not here to sway anyone on that decision. I have my opinion obviously, but that's not what this article is about. This article is a warning to publishers that not all distributors are alike and some of them are potentially ruinous for a small press publisher.

How so?

Well, the tale begins almost a year ago when I engaged in one of several successful Kickstarters (TROPES: Zombie Edition). At the time, Kickstarter was attached to Amazon through their Amazon Payments program. How it worked was that you registered with Kickstarter, who handled the processing of all pledges, and you registered separately with Amazon Payments, who handled the actual distribution of said pledges to your bank account. Both organizations took their little piece of the pie of course, which ended up being about 10% of the total funding (give or take).

TROPES: Zombie Edition funded and was released on time along with all the perks and Stretch Goals awarded to various Backer levels. Yay!

I moved on. MONTHS passed. I started working on other projects and began preparing the campaign for my next Kickstarter.

Then, out of the blue I receive an email from Amazon Payments. Apparently, one of my mid-level backers had initiated a chargeback dispute with their bank/credit card company saying they had never received their products. What???

OK, these things happen. First thing I did was check to see what the backer was entitled to. Then I checked the backer mailing addresses (snail mail and email). I then checked my RPGNow confirmation emails to make sure PDF links to all products had been sent to the proper email address and print copies had been shipped to the proper mailing address.  Everything checked out on my end.

So, here's where it gets interesting.  Apparently, the way Amazon Payments handles a chargeback dispute is by giving you two options:

1. you can either refund the money to the customer.
2. you can have Amazon Payments act as an intermediary between you and the customer's bank/credit card.

Amazon Payments does not have a third option where you can talk to the bank/credit card and try to resolve the dispute yourself.

So, here's the kicker---Amazon Payments charges you $10 for Option #2, REGARDLESS OF WHETHER OR NOT THE DISPUTE IS RULED IN YOUR FAVOR.

Read that last sentence again and then I'll recap here, so we're all on the same page.

You sell a product. You ship a product. Customer contacts Amazon Payments and states they never received said product. You can either refund the customer's money or pay an additional $10 to let Amazon Payments arbitrate.

This means that at minimum, you are out $10, just for collecting emails, shipping confirmations, etc. and sending them to Amazon Payments. And to top it all off, any customer can initiate a chargeback AT NO COST TO THEMSELVES. All they have to do is say they never received your product!

And keep in mind, this is $10 PER CHARGEBACK! So if you have numerous disputed transactions, the cost gets higher and higher.

Don't believe me? Read it here:

https://payments.amazon.com/help/201749650

https://payments.amazon.com/help/201749690

I contacted Amazon Payments customer service several times to verify and we exchanged some lengthy (somewhat irate on my part) emails about the fairness of this policy. I explained that this could easily ruin a small press publisher, or even a seller of low-cost items and here is how:

Let's say you want to sell an OSR sticker for $5 per sticker. Let's say it costs you $1 for the sticker and envelope, so you're selling a hundred stickers or so a month, making a nice profit without overcharging, and feeling pretty good about yourself.

Now let's say I'm a sketchy businessman. I too want to sell OSR stickers, but you've already cornered the market. So what I do is get a hundred of my sketchy online friends to each order a sticker. You ship the stickers in good faith. But then me and my buddies file chargeback disputes, saying we never received the stickers, because remember, there's NO FEE at all for us to do so.

This presents two options for you as a seller. Remember, you are already out $100 worth of product (100 stickers at $1 per sticker).

1. Refund their money. Which puts you out a total of $600 ($100 in materials plus the $500 you refund, which if you're like me you've already spent on new product)
2. Get Amazon Payments to arbitrate. Which puts you out $1,000 ($10 for every transaction).

So how does that apply to us in the RPG industry? Well, say you're a small press publisher who decides to jump ship from OBS and start selling through Amazon. Say you're one of those controversial publishers like RPGPundit or Zak Smith or even James Raggi at times and you've got a ton of people who hate you and what you represent. How hard to you think it would be for some of these dysfunctional keyboard warriors to drum up 100 or 500 or 1,000 other dysfunctional keyboard warriors (many of whom might not even know what an RPG is) to put you in your place? They order your products (books, zines, mins, etc.), and then initiate chargeback disputes saying they never received them. Then you can refund their money and be out product costs or have Amazon Payments dispute and be out thousands of extra dollars.

Oh, and I just checked Amazon Payments to see if they had changed their policy at all and surprise, surprise, they have! THEY NOW CHARGE $20 PER CHARGEBACK DISPUTE!

I honestly don't know what OBS's policy is for resolving similar disputes. I'm going to assume that since they handle all sales and distribution it won't cost you nearly as much (if anything). This post was not meant to be an OBS rallying cry---just a friendly warning to make sure you read all the Terms and Conditions and know what you're getting into before you sign up.


Pete Spahn
Small Niche Games