Spotify managed to circumvent Android app store fees through a confidential agreement with Google

Spotify managed to circumvent Android app store fees through a confidential agreement with Google

Spotify secured an unconventional deal with Google, allowing the music streaming service to evade fees typically imposed on Android apps. Testimony during the Epic v. Google trial revealed that Spotify paid zero percent commission when users purchased subscriptions through its system, as opposed to a mere 4 percent when users opted for Google as the payment processor. This rate was significantly lower than Google’s usual 15 percent fee.

Google was reluctant to disclose Spotify’s specific figures during the antitrust dispute with Epic, fearing potential repercussions in negotiations with other developers seeking more favorable rates. While Google’s User Choice Billing program purportedly reduces its Play Store commission to around 11 percent for developers using their own payment systems, the actual savings for developers are often minimal since they absorb payment processing costs. In court, Google emphasized the advantages of flexibility rather than emphasizing cost reduction.

However, Google’s head of global partnerships, Don Harrison, highlighted Spotify’s extraordinary popularity as the reason for a distinctive and tailored agreement. He testified that a smoothly functioning Spotify across Android services was crucial for encouraging Android phone purchases. As part of this arrangement, both companies committed $50 million each to a “success fund.”

Although Google acknowledged Harrison’s testimony, they did not disclose the identities of other developers receiving more favorable rates. During the trial, it was revealed that Netflix was offered a discounted rate of 10 percent by Google, which Netflix declined. Consequently, Netflix no longer offers in-app purchases on Android and does not pay Google for app distribution.

Previously critical of in-app purchase fees, Spotify had stopped using Apple’s App Store billing system in mid-2023 to avoid a potential 30 percent commission. Spotify was also an early member of the Coalition for App Fairness, aligned with Epic in the antitrust lawsuit against Apple and Google. However, while Epic continued its legal battle, Spotify seemingly found a simpler and significantly more cost-effective resolution with Google.