Ever wonder how some big streaming services are able to offer such generous subscription deals? Well, it seems Google struck an incredibly favorable deal with Spotify that allowed them to avoid extensive app store commissions.
During the Epic v. Google trial, Google executive Don Harrison disclosed that Spotify actually paid nothing in commissions when users subscribed via their own payment system. Impressive, right? But it gets better – when Google processed the payments, Spotify only handed over 4%. For context, Google normally takes a hefty 15% cut from subscriptions.
You’d think Google fought to hide these sweetheart numbers, and you’d be right. They didn’t want other developers getting ideas about demanding better rates. Under their new User Choice Billing, Google claims developers can save around 4% by using their own payments. However, processing those transactions yourself often negates any savings.
So how did Spotify swing such an incredible arrangement? According to Harrison, Spotify’s massive popularity was leverage enough. He pointed out that subpar app performance could discourage Android phone purchases. Both companies also contributed $50 million to jointly fund new projects.
A Google spokesperson confirmed the testimony, stating a “small number” of top investors may receive “different service fees” due to substantial financial commitments. In other words, if you throw enough money and influence at Google, you too can chisel out a special concession.
Google offered Netflix a discounted 10% rate as well, though Netflix declined and removed in-app payments altogether. As for Spotify, they ditched Apple’s App Store payments long ago to avoid higher commissions. While Epic continues battling tech giants in court, it seems Spotify found a far simpler path to app store freedom through good ol’ fashioned negotiating. Their monumental success as a business ultimately gave them the clout to demand preferential treatment.
