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Amazon.com purchased casual game portal Reflexive back in October. So it came as no surprise when Amazon launched a casual games download service last Tuesday.

Now any of the 88 million yearly Amazon customers can purchase and download casual games for just $9.99 each.

But at the Casual Connect conference in Hamburg, long-brewing pricing tensions are coming to a head.  Developers are not happy, because they see Amazon’s price-point as an attack on the industry.

One executive from Oberon Media said pricing is the elephant in the room.  And Daniel Bernstein, chief executive of Sandlot Games said: “Once the price is down, it stays.”

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Ernie Ramirez, the chief financial officer at Amazon’s Reflexive Entertainment said he doesn’t want to chop up the existing casual games market.  “It’s our goal to bring a lot of new people to the space.”

PopCap Games has dropped Amazon, declining to participate in the new service, says Dennis Ryan, an executive vice president of the company behind Bejeweled.

During a panel discussion, iWin.com’s production director Andy Hieke said, “We pulled all our games down from Amazon when we found out what they were doing.”  Speaking of the new price-point he adds, “We find that completely unacceptable.”

Hieke added that, while he supports the $9.99 price point, it shouldn’t be done at launch and that games should be given the best possible chance of making higher sales –- $19.99, for example.

And he believes that publishers can’t take a game to Wal-Mart if it’s priced too cheaply online.  Each game has a value. Jewel Quest is $19.99, says Hieke, “And that’s the price it should be.”

But the controversy is a tempest in a teapot.  Many casual games are already priced below $9.99 — disguised by price clubs.  Much like the Columbia music and movie clubs, sites like Real can sell full casual games at the price of $5.99 each as long as users purchase several games to fulfill the membership.

The real issue is the iPhone, where games in Apple’s App Store can be as low as $0.99, or even free.  Amazon’s price point is higher than current game clubs and offers the possibility of a new audience.

But the 15 million iPhone users can easily satisfy their casual gaming needs without spending the full $19.99 that a first-run casual game might cost.

So it’s with a certain sense of relief that developers at the conference report a rumor that Apple will start setting their own price points for products in the App Store -– something that takes away freedom but offers a chance of fairly fixed prices.

If you’re interested in the game market, please check out VentureBeat’s GamesBeat 09 conference on March 24.

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