Sunday, May 22, 2022

Spotify may soon be able to bypass Android billing, but Google is still getting paid

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For years, a loose coalition of companies, including Spotify and Epic Games, protested the so-called app store tax. revenue. They claim they are stuck with overpriced billing, hosting and management services that sometimes hurt more than they help.

So it came as a surprise when Google unveiled a pilot program with Spotify on Wednesday that would allow some developers to bypass Google Play billing on Android — allowing Spotify and possibly others to use their own payment platforms instead. But if you think that means Google is giving up its share of the action, think again. Reading between the lines, it’s clear that Google is still getting its money’s worth.

Here is how Bloomberg put it

If a user chooses to pay Spotify directly instead of using Google’s billing system, Spotify will not have to pay Google the full 15%, according to a person familiar with the matter. A Google spokesperson said the company has not yet settled the financial terms.

And here is TechCrunch

Spotify was asked for comment and declined to say what kind of commission it would pay Google as part of this pilot test, noting that the agreement was confidential. But a company spokesperson suggested the commercial terms met Spotify’s “standards of fairness.”

Google also declined to provide details about the commission structure. However, it noted that billing at the user’s discretion, as is the case in South Korea, will still incur a service charge regardless of which billing system the user chooses.

There will still be a fee. There will be a committee. As Google’s ‘first partner’, Spotify has just had to negotiate a new deal for itself. We just don’t know how much it is — just that Spotify seems happier these days than when Google announced that “on-demand music streaming services” are “eligible” for a fee “of just 10%.”

And we know that Google and Spotify are hesitant about it. Google spokesperson Dan Jackson would not confirm Google’s comments Bloomberg and TechCrunch on the plate. Spotify spokesman Taylor Griffin also wouldn’t go on the record.

I suspect many app developers are wondering why Google is launching a limited pilot program all the way, allowing big companies like Spotify to get dibs and negotiate favorable backroom deals. Why not open up the Play Store to alternative payment processors, period, and let the market set the price?

Sweetheart deals were already a thing in these app stores. For example, the Epic v. Apple trial revealed that Netflix had a “unique arrangement” to share just 15 percent of its revenue on iOS when the going rate was 30. Microsoft gave many of its top app partners a “store policy exception” so they can pay differently. That’s not the message that indie developers really get a fair shot at these marketplaces.

I’m also curious what it means for that loose coalition of companies battling the app store tax – organized as the Coalition for App Fairness – now that prominent member Spotify has negotiated this deal for itself. The CAF has been completely silent on Google and Spotify’s announcement publicly and has replied to us today with a blanket statement on how “CAF is committed to the fight for systemic change.” (It’s also reportedly) lost its executive director earlier this week.) Epic Games, another founding member of the CAF, also wouldn’t officially speak to us.

the CAF has argued that a 5 percent fee is the “upper limit on fees charged by other payment providers for purchases” – so if developers end up paying more than 5 percent to use their own payment processors through Google, it would be hard for them to make the move a win from Google.

But if it’s less than 5 percent and it’s available to everyone, it could be a different story. We’ll have to wait.

“While this is a great deal for Spotify, it does nothing to help the millions of small businesses and entrepreneurs who are being crushed by exorbitant app store costs,” reads part of a statement from House Antitrust Chairman David Cicilline. through Bloomberg “Self-regulation is not a solution.” Cicilline is one of several sponsors of the Open App Markets Act, legislation designed to curb anticompetitive behavior in the iOS and Android app stores.

Update, 4:19 PM ET: Explanation of Cicillin added.

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