4% isn't an amazing deal on payments from Spotifys point of view, and 10% for Netflix seems like in insult for processing payments. Normal payment processors are closer to 1.5 - 2%.
It's a pretty impressive list of publishers, actually (scroll to bottom): https://cloud.google.com/solutions/games
Now that Netflix knows that Spotify pay 4%, why would they ever agree to anything more?
But that makes the deal even weirder, Spotify doesn't have a choice, yet they have a completely insane deal.
https://developer.apple.com/support/reader-apps
Many companies (like Google) move Apple's subscription fee to end users, so don't feel too pity about them. Just compare YouTube premium cost as an in-app purchase and on the website. €15.99 vs €11.99 here in Ireland.
Google had a choice not to offer the YouTube subscription as IAP and just link people to the website. But the conversion rate for IAP is way higher compared to the website link, so they just punish their users, who pay €4 extra every month.
I should also note, that up until recently, Apple specifically had clauses that you couldn't have the link to the website bit AND they had a 'you can't pass the price onto customers' rule.
I would suspect, they have a special deal as well.
Unarguably, they don't need to do that. They want to, because a monopoly on payment processing makes a lot of money.
If 4%/15%/30%/whatever is what Google needs to charge to run their payment processing business, that shows that they're extremely inefficient/incompetent, and the market would be more efficient if other companies were able to offer that service instead. Last I checked, Stripe charges 2.9%, which is even less than what Google charges Spotify in this unicorn deal.
EDIT: the same goes for "store infrastructure" or whatever. If Google offered publishers the option to run their own infrastructure for distributing apps/updates/whatever, everyone would take that deal rather than pay Google's nonsense fees.
Crypto offers no protections so no fees need to be taken.
The reality is these fees are for access to an audience. Google spends a lot of money developing Android and creating a storefront that huge numbers of people see every day.
Casting that as "payment processing fees" is like complaining it's outrageous for a farmer's market to charge $200/day for a 10x10 booth because 100sf of parking lot can be had for $10/day somewhere else: you have to willfully misunderstand the business for the argument to make any sense.
I suppose the question is, did the farmers market threaten all the other land owners if they allowed a competing farmers market to open up? Or throw metaphorical wrenches in the way to a competitor?
Google's exclusivity agreement makes it much harder for alternatives to emerge. Even with this though, I get that they are funding open source development and need to protect it somehow lest it be stolen (cough by Amazon cough) and made a competing platform. I'm quite unsure where the balance should be.
App store monopolies aren't built on threats. A mall giving an anchor retailer a sweetheart deal isn't threatening nearby malls.
They are, however, built on economies of scale.
App stores, like payment processors, have economies of scale in the sense that you need a critical mass of users to sign up for them and trust them with their payment info, so you're not going to have a thousand of them, but you could certainly have a dozen. At which point they would have to compete on things like fees and keep each other in check.
But not if each platform has only a single dominant payment processor.
Unless I'm mistaken, Google has made threats, such as "if you include a competing app store, then you don't get any of the google apps, google play services, etc, and you can't use the Android trademark.
We saw in the early 00s a proliferation of "Android" devices that didn't have the Play store, and they were mostly DOA
> and they were mostly DOA
Maybe those stores should have invested a few dozen billion dollars in building up a comprehensive first-party app ecosystem that made them attractive to users.
Economies of scale, and all. Nobody's going to your farmer's market, because everyone's going to the mall that has a Walmart.
Anyways, to your point about audience: That's BS. The reason Google Play is the dominant store definitely has a lot to do with that, because nobody is going to publish on "My Awesome Android Store" if it doesn't have users. However, the reason they have that audience is because of their anticompetitive tactics. It's all a cycle that feeds into itself, and it's how they're able to become the only game in town and charge literally whatever they want.
Epic has the ability and resources to potentially build a store with enough of an audience to attract more developers and compete with Google Play, but it won't happen as long as Google is allowed to continue acting anti-competitively.
This is called a monopoly rent and is the sort of thing antitrust law is intended to prevent, when it's working properly.
> Google spends a lot of money developing Android and creating a storefront that huge numbers of people see every day.
Google gives Android away for free. They choose to do that, and if they didn't then it would lose to a competitor that did, because operating systems are a classic example of somewhere that free software works in the absence of anti-competitive behavior. If Google didn't develop Android then Samsung and Amazon and Canonical and Mozilla would do it, and parts of it would be more like Debian, which would be better.
> Casting that as "payment processing fees" is like complaining it's outrageous for a farmer's market to charge $200/day for a 10x10 booth because 100sf of parking lot can be had for $10/day somewhere else: you have to willfully misunderstand the business for the argument to make any sense.
Does the farmer's market also take actions to interfere with you being able to build your own storefront?
You are of course right that there is more work involved beyond a traditional payment processor. However, 30% of everything?? Even the standard 3% that payment processors take is ridiclously high. It's rent-seeking all around.
Google gives no shits if random app developer isn't on Play. And so holds firm on their cut.
Play without Spotify makes a lot of users ask "Why isn't Spotify on Play?" And probably follow-up with "How do I get Spotify? Download another app store? Okay, I'll do that."
So essentially, the money that Google ceded to Spotify was approximately what they thought discouraging users from installing alternate app stores was worth.
To prevent Spotify from filing more EU antitrust complaints as they did for the Apple Appstore? [0].
Plus, 4% sounds low, but nominally 4% from all Spotify subscriptions on Android with their imense user base is a very large sum compared to any minor 2-3 person App studio that is charged 20-30%.
[0]: https://www.fastcompany.com/90836299/spotify-vs-apple-eu-app...
The real issue though is that there isn't a good way to handle every app. In a normal world, every app would cost money to buy, and they would only be charged on the purchase prize. But in a world where most apps are free and then there are in-app purchases, there isn't really any other way for those to be monetized but to take a cut of transactions. But obviously these things don't scale the same.
Spotify pays no feed to Google when they handle the payment processing themself, via some credit card processor and honestly why the hell should they. So Google decide that in an attempt to get even the tiniest amount of payments to go through them, they'd drop the price to 4%... Why is that so important to them?
It sounded to me that, in exchange for that favorable per-subscription rate, Spotify paid $50,000,000 into a “success fund,” whatever that means. $50mm / .11 = $454mm... sounds like they’re basically paying the equivalent of Play Store commission on half a billion’s worth of revenue, without any guarantee that they’ll actually be able to sell that much new growth through Play Store. That feels like sharing the risk in a way that isn’t too out of the domain of reason.
From [0], they added about $2bn in revenue year-on-year in 2022. Although we don’t know the term of this Play Store agreement (or what a “success fund” is), paying an amount equivalent to the normal commission on 1/5 of that total annual growth figure seems like a pretty nontrivial amount to commit.
The other stuff they provide exists to sweeten the deal.
When you start applying that 30% to $15 spotify subs, $50 uber rides, $60 video game, then a bunch of in-app purchases ranging in value; the math falls apart and if you have scale to do it, the negotiated rate makes more sense for those businesses given the average transaction amount.