Google will reduce Play Store cut to 15 percent for a developer’s first $1M in annual revenue

Illustration by Alex Castro / The Verge

Google is reducing its long-standing 30 percent cut, which it takes from each Play Store digital purchase for all Android developers around the world, on the first $1 million they make on the digital storefront each year, starting on July 1st. According to Google, that change means that 99 percent of Android developers that “that sell digital goods or services” will see a 50 percent reduction in fees.

Google’s news follows Apple’s announcement of a reduced 15 percent fee last year as part of a new small business program, with one critical difference: Apple’s fee reduction only applies to developers that make under $1 million per year. But if an app maker goes over the $1 million threshold at any point in the year, they’ll be booted from Apple’s program and subject to the standard 30 percent rate.

Google’s program is a flat cut to the first $1 million developers make each year. That means whether you’re a student making your first app or a multibillion-dollar company, the first $1 million you make on the Play Store each year will only get charged a 15 percent service fee by Google. Any money you make after that will then be subject to the usual 30 percent cut. A Google spokesperson says the company felt that applying the reduced fees equally to all companies was a fair approach in line with Google’s goals of helping developers of all sizes.

Google has charged a 30 percent cut for any purchases through the Google Play Store since it first launched as the “Android Market” — although originally, the company claimed that “Google does not take a percentage,” with the 30 percent cut going toward “carriers and billing settlement fees.” In its more modern incarnation as the Play Store, Google now puts that 30 percent cut toward its “distribution partner and operating fees.”

The 30 percent fee has been constant for the lifespan of Google’s storefront. The only exception is subscriptions: in 2018, Google (in another similar move to Apple) announced that it would reduce its cut down to 15 percent for subscription products after users had been subscribed for a full year.

The number of developers that make more than $1 million each year — and will end up still being charged the full 30 percent — is proportionally tiny. Google notes that only about 3 percent of Android developers actually charge for either downloading their apps or for digital in-app purchases to begin with, and only 1 percent of those developers make more than the $1 million threshold that would see the 30 percent cut kick in.

The new policy also comes at a critical moment when Google (and Apple’s) app store policies are under intense public scrutiny, kicked off by the removal of Epic Games’ Fortnite from both the App Store and Play Store and the game developer’s subsequent antitrust lawsuits against Apple and Google.

The issue is also coming to a head in legislation, with states like Arizona and North Dakota debating new laws that would force Apple and Google to offer more alternative software distribution methods and payment options on their platforms.

Epic Games, however, still says that Google’s new measure isn’t nearly far enough, noting that it “does not address the root of the issue,” and arguing that “Android needs to be fully open to competition, with a genuinely level playing field among platform companies, app creators, and service providers. Competition in payment processing and app distribution is the only path to a fair app marketplace.”

Update March 16th, 11:50am: Added Epic Games statement, and clarified Android developer groups that will see a reduction of fees.

Comments

I think 15% on the first million is probably the right way to go. It’s gonna be weird for a developer who is hovering right around a million in sales. If they make $999,999 they get to keep $850k, but if they make one more dollar they lose $150k next year.

I’m sure that, like taxes, it’ll be progressive, i.e. the $1,000,001 dollar will start the 30% rate not apply retro to all dollars before it.

Yeah it’s in the article

Google’s program is a flat cut to the first $1 million developers make each year. That means whether you’re a student making your first app or a multibillion-dollar company, the first $1 million you make on the Play Store each year will only get charged a 15 percent service fee by Google. Any money you make after that will then be subject to the usual 30 percent cut.

It seems though that this is Apple’s way of doing with its program.
I think Google’s approach makes more sense and easier to understand overall.

Apple doesn’t do it this way. If at any point a dev makes more than $1m a year, they get booted from the program and any subsequent revenue is taxed at 30%. And to get back into the program, they have to make under $1m for a year and will get taxed at 30% in that duration.

Imagine a company makes $0.9m year 1, $1.1m year 2, $0.9m year 3.

Under Apple’s system, it’d be 30% year 1 to qualify for the program. Then 15% on the first $1m year 2 since they’re in the program, but then they’d get booted after $1m so 30% on the last $100k, then 30% on year 3 because they have to wait a whole year to get back into the program.

Under Google’s system, it’s a much simpler progressive tax rate of 15% on year 1, 15% year 2 with 30% on last $100k, and 15% on year 3.

Google allows side loading of APK files and 3rd party stores. I am totally OK with google charging whatever percentage and allowing competition to play out properly.

I was so happy when Google banned Fortnite from their store but I was still able to install and play through the Samsung Store.

But realistically how has it promoted any competition if 99% of app sales still all go through the play store? Doesn’t the Play Store perfectly demonstrate how that change doesn’t make it substantially more competitive and that the issues go far beyond not being able to side load? At the moment people can chose between more open and slightly less secure, and Apple’s more closed but more secure, whereas if Apple were forced into allowing side loading you’d actually end up with less App Store choice as they’d be even more alike. Either fix the structural issues or stop tinkering and not helping.

Its not Google’s responsibility to promote competition. Google has provided a way. Its up to the market to take advantage of that.
Samsung is doing a very good job. Amazon is doing a very good job with their store on Android devices.
Try Kindle Fire tablets, those are completely Amazon app store driven.

Yeah, sorry if I wasn’t clear. I think the way Google does it (progressive tax) is easier on the developer. The scenario I was describing is under Apple’s program.

The way I read it is that it applies like a tax bracket. Your first million is 15%, anything beyond that is 30%.

Yeah, I worded it poorly. The scenario i illustrated was under Apples plan. I was suggesting that Google has it right, and Apple should do it that way – like tax brackets.

If this isn’t illegal monopolistic price fixing I don’t know what is!

Nonono you are completely mistaken, this is our glorious free market in action making life better for everyone, price fixing is what happens in communist countries!
/s

Where were all the pitchforks when Google was charging the exact same fee to developers as Apple?

Apple fans – the epitome of siege mentality.

Another win for epic here.

Epic wins with at most $150k with Google, and $0 with Apple?

Honestly I think this is a win for Apple and Google and a shot in the eye for Epic. Apple and Google get positive publicity for helping small developers – everyone loves small businesses – while not giving Epic and other big developers (the ones who actually make money for Apple and Google) much of anything.

It’s only a win for people who have short memories.

So 99% of people outside the industry.

Uh yea sure lol

This was wildly discussed when Apple moved to the 15% rule for small devs.

Its 99% of the devs but only 1% or 2% of Apples App Store revenue..
So its benefitting a lot of people, but barely putting a dent in either OSs revenue.

It’s a clever move, credit where its due

We first need see whether they win anything
If EU/USA/… finds their stores to be anticompetitive and prohibits that business practice (we can debate how good or broken up system will they invent …), this change doesn’t mean a thing and Google and Apple will have to change their stores. I doubt change to lower 15% tax rate will change anything in their conclusion.

The difference is you can have alternate app stores or Google-free distribution on Android, so there’s more of a free market than on iOS.

While that’s true for most users, you can jailbreak an iPhone—jailbreaks are updated all the time with support for new models. Also, how many people actually sideload apps on Android? Other than Fortnite it seems like a tiny fraction. For most people, Android is a walled garden limited mostly to the Play Store.

Honestly, that sounds fine to me. I don’t see a need to force Google to advertise the existence of sideloading. Should those people want to start looking outside the walled garden of Google Play, it’s very easy, just one setting to flip and you’re out.

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