Google has recently announced that all subscription-based apps will now pay a fee of 15 percent. It’s also says that ebooks and on-demand music streaming services will be eligible for a fee as low as 10%.
Google said that the reason for the cheaper prices on ebooks and music streaming apps is that content costs account for the majority of sales and that the rates recognize industry economics of media content verticals. It’s unstated but also surely true that regulatory pressure and public pressure from companies like Spotify have factored in to Google’s decision.
Currently, signing up for a Spotify subscription on Android redirects you to Spotify’s website to enter your payment information.
The lower fee structure for music streaming is still at Google’s discretion, both for which apps are eligible and how low that fee will be.
A Google spokesperson said: “Developers can review program guidelines and express interest now and we’ll follow up with more information if they are eligible.”
The new change simplifies that by offering 15 percent right off the bat and is likely a strong incentive for developers to switch over from one-time payments to subscriptions. Google says that one reason for the change is that we’ve heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate.
Google already has a program wherein the first million dollars a developer earns through Google require a 15 percent cut, instituted in March 2021. And since so many apps are ad-based and therefore free, the company claims that 99 percent of developers qualify for a service fee of 15% or less.
Recently, South Korea ruled that Google must allow third party payments in its Google Play ecosystem and Google has said that it would comply.
In an interview with The Verge, Google CEO Sundar Pichai spoke to the importance of Google Play revenue to the overall Android business model for Google.
He said: We don’t take a share of the device sales, not a share of the carrier revenues. So in some way we have to sustain our ecosystem. We have a different model. Google Play is an important way. In fact, it’s the main source of revenue. It supports Android as a whole. I think we’ll make that viewpoint clear, but we’ll engage in conversations. I’ll leave it to the team to figure out the right next steps.
One big source of revenue is in-app payments for games. Google is also facing a lawsuit filed by a coalition of 36 state attorneys general over antitrust concerns with the Google Play store.
A spokesperson said: “Google has a long history of evolving Android and Play’s model based on feedback from our developer ecosystem on what they need to be successful on Play.”
The pressure on Google and Apple to lower their app store fees is already having an effect. Despite these changes, it still seems that the pressure will lead to actual legal action — either via the courts or Congress.
