A hidden arrangement between Google and Spotify allowed the music platform to avoid paying fees on Android’s app store

 

It was disclosed in the ongoing Epic v. Google trial that Spotify had negotiated a special deal with Google regarding payments made with Android smartphones. Don Harrison, Google’s head of global partnerships, attested to the fact that Spotify did not receive any commission for user subscriptions made via the company’s internal system. But Spotify only had to pay a 4 percent commission if users chose Google as their payment processor—a far smaller amount than Google’s usual 15 percent charge. During the antitrust proceedings with Epic, Google initially sought to keep these Spotify figures confidential, citing the possibility of harm to negotiations with other app developers seeking more favorable rates. Introduced in 2022, Google’s User Choice Billing program aims to lower Google’s 15 percent subscription fee to about 11 percent by reducing Google’s Play Store commission by about 4 percent when developers use their payment system.

However, since many developers must pay for their own payment processing fees, this reduction might not result in appreciable savings for them. Rather than focusing on cost savings, Google has highlighted advantages like greater flexibility throughout the trial. Harrison stressed that one of the main arguments in favor of a special agreement is Spotify’s extraordinary popularity. According to his testimony, it was crucial to make sure Spotify integrated seamlessly with Play services and other essential Android services. In his testimony, he claimed that sales of Android phones were largely driven by Spotify’s seamless operation on Android devices. As part of the deal, Google and Spotify also agreed to contribute $50 million apiece to a “success fund.” Google spokesperson Dan Jackson acknowledged the company’s position in response to Harrison’s testimony. According to Jackson, “A small number of developers that invest more directly in Android and Play may have different service fees as part of a broader partnership that includes substantial financial investments and product integrations across different form factors.” He continued, “These key investment partnerships allow us to bring more users to Android and Play by continuously improving the experience for all users and create new opportunities for all developers.”

Google refused to reveal the identities of other developers who benefited from lower prices. But as the trial progressed, it became clear that Google had offered Netflix a special discounted rate of just 10%, which Netflix eventually turned down. As a result, Netflix stopped offering in-app purchases on Android, and it stopped paying Google any money to distribute its apps. Spotify has expressed its displeasure with in-app purchase fees in a vocal manner. It stopped supporting Apple’s App Store billing system entirely in the middle of 2023 in order to avoid having to pay commissions that could have been as high as 30%. The massive music streaming company sided with Epic and supported the latter’s antitrust action against Apple and Google as one of the well-known founding members of the Coalition for App Fairness. Spotify appears to have discovered a more straightforward—and significantly less expensive—way to end its legal battle with Google, while Epic is still battling both of the tech giants in court.

 

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