As regulatory pressure on the Play Store for Android increases, Google is once again making changes to its business structure. It has announced that more categories of apps will be eligible to pay significantly less than the usual 30 percent fee. The company is announcing 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’s stated 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. When asked how exactly developers can know if they qualify for the reduced fees, 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.”
As for subscriptions, Google’s previous structure was similar to Apple’s: 30 percent the first year, 15 percent thereafter. 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.”
South Korea recently 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 last week, CEO Sundar Pichai spoke to the importance of Google Play revenue to the overall Android business model for Google (emphasis ours below):
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. On that front, Google is in a legal battle with Epic Games over Fortnite, which is not available in the Google Play store (but can be side-loaded through a relatively onerous process). Google is also facing a lawsuit filed by a coalition of 36 state attorneys general over antitrust concerns with the Google Play store.
Add it all up and it’s obvious that Google is doing what it can to set up release valves for all that pressure by reducing store fees where it feels it can. Google lined up positive quotes from both Bumble and Duolingo in support of its lower subscription fees, a message surely aimed at regulators. And the company is likely to continue to bring out developers who aren’t angry at the Play Store business model at its developer summit next week.
We asked Google to comment if these changes were in response to regulatory pressure, and a spokesperson replied, “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.”
Still, it isn’t going to bring Fortnite back to the Play Store (since it won’t qualify) and it’s far from clear that the lower fees are going to appease regulators anywhere. 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.