Mar 23, 2022 - Economy

Google to offer Spotify users alternate in-app payment method

Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images

Google on Wednesday said it inked a multi-year deal with Spotify that allows Spotify users to pay for their subscriptions using an alternate billing system that isn't Google's, so long as users still have the option to use Google's system.

Why it matters: The Spotify deal is the first partnership in a bigger Google pilot program with other developers. The pilot program marks an important milestone for app developers that have long argued app store fees are too high, and as a result, anti-competitive.

Yes, but: Neither Google nor Spotify said how much commission Google may be getting from Spotify as a part of the new deal.

Catch up quick: For years, developers have been forced to conduct subscription transactions via the payment systems of major app stores, like Google Play and Apple's App Store. Otherwise, users were forced to pay for subscriptions via a separate website.

  • Those app stores would collect a fee, typically around 30% for the first year, which developers argued cut into their potential earnings.
  • Spotify has long argued that such app store fees were anti-competitive, and it still doesn't allow its users to buy subscriptions via Apple’s App Store.

Details: In a statement, Google said the deal with Spotify is the first in a small pilot program that will allow a small number of participating developers, "to offer an additional billing option next to Google Play’s billing system."

  • The pilot, Google said, "is designed to help us explore ways to offer this choice to users, while maintaining our ability to invest in the ecosystem."

The big picture: Google has been experimenting with ways to lower app store fees for months, largely in response to public pressure, but also to expand its relationship with the developer community that its Android operating system relies on.

  • In November, Google debuted a plan in South Korea to reduce its app store fees and allow users to pay through third-party payment providers in response to new South Korean legislation.
  • Google said Wednesday it will be "exploring user choice billing in other select countries."
  • In July, it introduced a program to cut app store commissions in half for some large developers who agreed to support Android on non-phone devices, like cars, TVs and tablets.

The big picture: Google isn't the only tech giant to begin reconsidering its app store fees.

  • Apple said in late 2020 it would take a smaller cut from App Store sales (15% instead of the standard 30%) for businesses earning less than $1 million selling their apps.
  • Microsoft last year cut the commission it takes on PC games sold through its Windows App Store to 12%.
  • Microsoft CEO Satya Nadella told Axios' Ina Fried that app stores, including its own Windows app store, should cut their commission fees over time.
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