Google is cutting the fee it charges Play Store app developers for digital subscriptions from 30 per cent during the first 12 months to 15 per cent at all times.
Previously, Android developers selling digital subscriptions in their apps endured the 30 per cent rate during the first year, after which the fee percentage would be halved.
The revised price structure, which takes effect January, 2022, puts more pressure on Apple to further trim its iOS fee schedule, already dented by legal and regulatory pressure. Apple currently follows Google’s old model of 30 per cent for auto-renewable subscriptions, dropping to 15 per cent after a year.
Over the past year, lawsuits in the US and UK and regulatory action in countries like Japan and South Korea have eroded the 30 per cent fee that for more than a decade has been the norm in both the iOS App Store and the Google Play store.
That rate still exists, but only for Android and iOS developers earning $1m or more in revenue.
The commission wars kick off
At the start of the year, Apple introduced its App Store Small Business Program, which allowed developers with revenue under $1m annually to apply for a reduced 15 per cent fee on app sales and in-app purchases. In June this year, Google followed suit and adopted a 15 per cent commission for developers under the $1m annual revenue threshold.
Amazon shortly thereafter undertook a more complicated fee reduction, dropping its take to 20 per cent in its Amazon Appstore for Android, with the promise of AWS service credits that are the equivalent of a further 10 per cent rebate.
Sameer Samat, VP of product management, announced the latest change in a blog post on Thursday.
“Our current service fee drops from 30 per cent to 15 per cent after 12 months of a recurring subscription,” explained Samat. “But we’ve heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate. So, we’re simplifying things to ensure they can.”
Google’s price structure isn’t all that simple. There’s also now a potential 10 per cent rate for those enrolled in the company’s Play Media Experience program, which ordinarily charges 15 per cent.
“Ebooks and on-demand music streaming services, where content costs account for the majority of sales, will now be eligible for a service fee as low as 10 per cent,” said Samat. “The new rates recognize industry economics of media content verticals and make Google Play work better for developers and the communities of artists, musicians and authors they represent.”
Google however did not clarify what the criteria for eligibility might be. The company’s FAQs to explain its ostensibly simple fee structure suggest the lower streaming fee will be offered “based on high content costs.”
There may be trouble ahead
App store fees may fall further still if South Korea’s requirement that Apple and Google support third-party payment systems in apps distributed through their respective stores remains in place. Google says it doesn’t plan to fight the law; Apple has reportedly told South Korean authorities that it is already in compliance with the law and doesn’t need to make any changes, setting up a potential challenge from the government there.
With the Netherlands’ Authority for Consumers and Markets having recently told Apple that it needs to accommodate third-party payment systems – something the judge in Epic Games’ lawsuit against Apple also called for in her recent ruling – it looks likely that both Apple and Google will have to make further concessions in their store rules and fees. As a point of comparison, payment processing biz Stripe charges 2.9 per cent plus $0.30 per transaction.
Largely, however, these changes will be irrelevant to the vast majority of Android developers.
According to Google, only 3 per cent of Android developers pay Google any sort of store-based fee, whether that involves in-app digital goods purchases, in-app subscriptions, or app sales commissions.
The remaining 97 per cent of Android developers distribute their apps for free and pay Google nothing, at least not directly. Nonetheless, Google may get paid through ads. If Android developers include ads in their apps, as 38 per cent of US developers are said to do, Google should see somewhere between a quarter and a third of the money these generate. ®