Google lowers Play Store fees for subscriptions and music streaming apps

Illustration by Alex Castro / The Verge

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.

Comments

It’s fascinating that the duopoly existed with the exact same rates for years without any market pressure to drive down the price. But when regulators begin sniffing they suddenly realize that the previous rates were to high. Good news for developers at least and good on Google in trying to get ahead of what’s to come.

Now we just need Apple to fall in line.

Apple will lower the rates by 1% and spin it as the best thing ever for developers

No… they will increase the rates and spin it as the best thing ever.

Indeed…

If the economics of the Play Store are similar to Apples App Store then the vast majority of the profit is from in-app purchases in games. Notice the commission rate for games remains unchanged at 30%. Google is just making concessions on the minor revenue streams hoping it relieves pressure to lower the rate on the the real money maker…gaming.

For sure it’s the case with Google as well, just smaller total numbers.

Dropping gaming percentage would gut their profits. Subscription services, especially those where many do go outside of the store to sign up and pay directly, are a drop in the bucket in comparison.

This is an empty gesture.

The 30% fee on everything else needs to go down, too. The 10% fee for music streaming is definitely intended to ease antitrust pressure, since Google already competes with these other services through YouTube Music Premium. But, it’s great to have Google reduce its fees and put pressure on Apple to reduce their fees. Every bit counts.

I appreciate the philosophy of more money per sub going to musicians, but none of these machinations move the bar in their favors. Anecdotally, independent musicians can net better terms, but the hegemons that control revenue streams globally (Big Music, if you will) behave kind of like large philanthropic endeavors, in that they always find a way to internally and externally justify greater and greater overhead costs by claiming that "once we get our affairs settled and staff responsibilities taken care of, our first order of business is to serve our clients more efficiently," etc. The music business isn’t Bandcamp writ large. Not even Patreon-esque. It’s 90% Livenation.

What do folks consider an acceptable amount? I am not a developer and I have no idea how much it costs to actually run the respective app stores. I assume they are charging enough to make a profit at this point, but what’s the line where they stop making a profit? How much profit do people think is acceptable?

I feel like I’ve said before that the take of Apple and Google is too much, but in all honesty that was a bit uneducated. I can’t actually say what I think a good number is other than "lower". Is there somewhere that’s done the analysis? Like if there was fair competition and 10 stores on each mobile OS but all were at least somewhat profitable, what would the costs look like?

I’d rather see additional options. Maybe a distribution-only fee where they just host your app and you’re responsible for payment processing and so on. Another "give me everything", which is similar to today. I’m fine with whatever they charge as long as there are sensible options.

It’s hard to say with certainty because these companies purposely make operational costs opaque, but we’re pretty confident that a handful of giants make up a majority of the revenue.

I especially feel for streaming and other subscription services because their apps are just pretty interfaces into complex systems they own and maintain. Spotify without the backend is nothing.

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