Music streaming service Spotify recently struck a deal with Google that has raised eyebrows in the tech industry due to its unique and seemingly generous terms. According to new testimony in the ongoing trial between Epic Games and Google, Spotify has managed to negotiate a deal where it pays a 0 percent commission when users choose to buy subscriptions through Spotify’s own payment system. If users select Google as their payment processor, Spotify hands over only 4 percent, significantly less than Google’s more common 15 percent fee.
Google fought to keep the specifics of the Spotify deal private during its antitrust battle with Epic, fearing that the details could potentially damage negotiations with other app developers who might seek more favorable rates. Google’s User Choice Billing program, which was launched in 2022, typically shaves about 4 percent off Google’s Play Store commission if developers opt to use their own payment system, reducing Google’s 15 percent subscription service fee to around 11 percent. However, this arrangement often results in little or no cost savings for developers, as they are required to cover the expense of payment processing themselves. In court, Google has emphasized the benefits of its User Choice Billing program in terms of greater flexibility rather than significant cost savings for developers.
While there has been speculation regarding the fairness of the deal, Don Harrison, head of global partnerships at Google, defended the agreement, describing Spotify’s popularity as “unprecedented” and sufficient justification for the “bespoke” deal. Harrison testified that the proper functioning of Spotify across Play services and core services was crucial for driving the sale of Android phones. As part of the deal, both companies also committed $50 million each to a “success fund.”
In response to Harrison’s testimony, Google issued a statement acknowledging that a small number of developers who invest more directly in Android and Play may have different service fees as part of a broader partnership agreement, which includes substantial financial investments and product integrations across different form factors. Google emphasized that these key investment partnerships enable the company to attract more users to Android and Play, improve the overall user experience, and create new opportunities for all developers.
Related Post
Spotify has been vocal about its dissatisfaction with in-app purchase fees in the past. In mid-2023, the company completely dropped support for Apple’s App Store billing system to avoid paying up to a 30 percent commission. Additionally, Spotify was an early member of the Coalition for App Fairness, a group that included Epic and supported the antitrust suit against Apple and Google. However, while Epic has continued its legal battle against both companies, Spotify appears to have found an easier and more cost-effective way to resolve its dispute with Google.
The details of Spotify’s deal with Google have raised concerns about fairness and transparency in the tech industry. Some industry observers believe that such arrangements could potentially give preferential treatment to select developers, creating an uneven playing field for app developers who don’t have the same leverage and bargaining power as large companies like Spotify. Moving forward, the ongoing scrutiny of deals like the one between Spotify and Google may prompt more rigorous evaluations of the fairness and competition in the digital marketplace.
