What Google's deal with Spotify means for Apple

Excerpts from the reactions that caught my eye.

Amit Daryanani, Evercore ISI: Google Allows Third Party Payments for Spotify. Is Apple Next? It is unclear how Apple will respond to this news, but they have had a relatively contentious relationship with Spotify. Simplistically, if AAPL were to follow Google and allow just Spotify to use third party payments would actually be a net positive for the bottom line as currently Apple collects no revenue from Spotify. If the program rolled out wider (which we think is logical), we could see a more negative impact although we remain unconvinced that consumer adoption of alternative payment systems is a foregone conclusion. It is more likely that Apple may respond to competitive pressure by lowering the fee it charges.

Martin Peers, The Information: Apple Pressured by Google-Spotify Deal. It may only be a matter of time before the Berlin Wall of the mobile app ecosystem, Apple’s rigid App Store rules, falls. Google’s announcement today that its Google Play app store will allow a “dual billing option” in U.S. apps, starting with Spotify, puts pressure on Apple to follow suit. Giving consumers a choice about the payment systems they use for in-app purchases, such as subscriptions, is precisely what Apple CEO Tim Cook has long resisted. But as Apple is already battling foreign regulators about this issue and faces legislation in Congress mandating a less restrictive policy, Cook’s stance looks increasingly untenable.

Mark Bergen, Lucas Shaw and Mark Gurman, Bloomberg: Google Tests Letting Apps Like Spotify Offer Own Billing. The move isn’t likely to spur Apple to make similar changes. For one, the company has said it doesn’t make revenue deals with individual developers, regardless of their size. More importantly, the iPhone maker last year said it would allow media apps, including music apps like Spotify, to link users to the web to complete payments, which would circumvent Apple’s 15% to 30% fee entirely. However, that solution wouldn’t allow Spotify to build an embedded payment system within their app as will now be allowed on Android.

Sarah Perez, Techcrunch: Google Play to pilot third-party billing option, starting with Spotify. Ahead of this change, Google had already reduced commissions from 30% to 15% for the first $1 million of revenue developers earn using Play billing system each year, following a similar move by Apple. The company said that due to this pricing model shift, 99% of developers qualify for a service fee of 15% or less on its app store.

Damien Geradin, The Platform Law Blog: Spotify and Google Announce User Choice Billing: A preliminary assessment. These announcements put further pressure on Apple to alter its payment policy to authorize app developers to use the in-app payment system of their choice, as well as communicate with their users through the app. Despite being subject to multiple investigations, Apple has refused to make any concession. It a rather unprecedented move, Apple has also so far refused to comply with the order of the Dutch Competition Authority, whereby it has to allow dating app developers on the Dutch Store Front to use the in-app payment system of their choice and/or to provide links to off-app payment solutions. In this respect, the Google agreement with Spotify destroys Apple’s justifications for not allowing app developers to use the in-app payment solution of their choice as this would allegedly create security issues and would also prevent Apple from collecting its commission.

Daisuke Wakabayashi, New York Times: Google, facing antitrust scrutiny, says it will let apps like Spotify offer alternate billing systems. The move would allow those apps to bypass Google’s own payment system and the main commissions that it charges. The change comes as Google and Apple, the two biggest app store operators, face complaints from regulators and developers that they are abusing their dominance in mobile software to force companies to use their proprietary billing methods.

Ren Brody, Protocol: Your move, Apple. Apple is the elephant in the room. Google’s move certainly puts pressure on Cupertino. So long as Google and Apple basically held to the same fees in the same form, the commissions were basically a fact of life that developers and consumers had to accept. (Plenty of people would call that a duopoly.) Now that Google and Apple are splitting in their approach, everything is up for grabs, and the forces of antagonism led by Spotify, Epic, Match and others may be scrambling.

Kif Leswing, CNBC: Google will allow Spotify to offer its own billing on Android. Google and Spotify said on Wednesday that a future version of the Spotify app will allow users to sign up inside the app to pay Spotify directly for a subscription. The move is the most significant concession so far from a major mobile app store to allow third-party billing systems inside apps. The move also puts pressure on Apple, which is firmly against third-party billing on its iPhone App Store.

Meghan Bobrowsky and Tim Higgins. Wall Street Journal. Google to Allow Alternative In-App Payments for Spotify Users, a New Step in App Battle. In the Netherlands, Apple is fighting with the regulator there which has ordered alternative payment methods to be implemented in dating apps. Apple responded while still charging apps a fee, 27% of revenue instead of 30%. The changes haven’t satisfied the Dutch authorities, who are fining Apple more than $5 million a week... Late last year, Apple said it would allow media apps, such as Spotify, to create in-app links to sign-up pages outside of the app to end an investigation by Japan’s antitrust regulators.

10 Comments

  1. Jerry Doyle said:
    Interesting how folk view matters differently. Martin Peers says “…. Google’s announcement today that its Google Play app store will allow a ‘dual billing option’ in U.S. apps, starting with Spotify, puts pressure on Apple to follow suit.” Damien Geradin says, “…. These announcements put further pressure on Apple to alter its payment policy to authorize app developers to use the in-app payment system of their choice, as well as communicate with their users through the app.” Ren Brody says, “…. Google’s move certainly puts pressure on Cupertino.” Kif Leswing says, “…. The move also puts pressure on Apple, which is firmly against third-party billing on its iPhone App Store.”

    Poppycock! Quite the contrary from my perspective. Consumers now have “more choice.” If consumers desire the new available choice, then they can leave the iOS platform and convert over to the Google Play App Store on another OS. Google’s App Store runs on Android. That is a much larger platform offered through many more providers.

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    March 24, 2022
  2. Miguel Ancira said:
    good point…didn’t think of it that way

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    March 24, 2022
  3. Greg Lippert said:
    I also read that they are still going to charge a fee on the alternate platform.

    I’m more concerned about sideloading and opening up the platform to nefarious apps.

    Let alt payment platforms exist, charge a fee from them but keep the platform secure.

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    March 24, 2022
  4. CG said:
    If Apple is forced to allow alternative methods of payment and in addition is forced to forgo collecting any fees when that alternative method of payment is utilized the remaining wild card would be whether or not Apple would be allowed to enforce some sort of pricing parity upon the developer regardless of the method off payment.

    As long as pricing is the same whether using Apple’s payment method or the alternative method of payment I see very little motivation for anyone to use the alternative method of payment. Even for those that opt to use the alternative method of payment, there is still a chance that they will use the Apple Card.

    The internet is still the Wild West- as a consumer I benefit and appreciate the sanity and safety that Apple brings to their ecosystem by putting in place many of these controls that seem to be under constant attack.

    In the off-chance that app developers are able to offer discounted pricing for using their payment method a simple solution would be for Apple to charge app developers a fee directly, perhaps based upon downloads or active installs etc..

    I believe we are still a long way (if ever) from Apple taking a discernible hit to app store revenue.

    CG

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    March 24, 2022
  5. Kirk Burgess said:
    This isn’t as big a deal as many people would have you believe. Google is still charging Spotify a commission/fee (both companies refused to disclose the amount of this commission/fee).

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    March 24, 2022
  6. Daniel Epstein said:
    Isn’t Google just making a less secure platform even more insecure? Perfectly fits the way they have worked with Android in the past. Will users leave Apple ecosystem so they can pay Spotify directly? Regulators may say that because Google can do it than Apple has to as well but customers likely won’t demand that IOS is identical to Android in this case. I am sure Apple can write the software needed to allow this without too much direct cost. How much it actually changes IOS users is also debatable. Most developers may not benefit much at all either. My guess is even if this ends up worsening the mobile experience for everyone Apple will still look better than the alternatives for the current and potential Apple customer. Still think that writing laws for 1 companies product to be the same as others will be a legally dubious exercise. Not quite the same thing as writing standards so companies can compete in a category or marketplace. Next they will say MAC OS has to have the same interface as Windows.

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    March 24, 2022
  7. Robert Paul Leitao said:
    In today’s 60/24/7/365 digital environment, much is said before a full understanding of the details. I dismiss comments by pundits made quickly in response to corporate announcements and before all facts are reviewed. I’m not seeing any real news here. Google and Spotify will act out of self-interest (similar to all enterprises). All the Coalition for App Fairness has are claims of “unfairness.” We’ll see how those claims work out over time. Please keep in mind Spotify lacks consistent profitability and management is under intense pressure on more than one front to improve the company’s performance.

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    March 24, 2022
  8. I look at this in-app purchase thing as a selective racket. I buy & sell rather expensive products from 9:30 to 4pm several days each month. I only use a free app to this. I pay or receive $1,000s each time I complete transactions in the app. Never once paid any fee to Apple for trading equities (securely I might add) using an iPhone. Same with Amazon or major BHPhoto purchases. Yet if I download Warriors v Wizards and buy a magic spell for a buck, Apple gets 30 cents.

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    March 24, 2022
  9. If you have really deep pockets you buy a major chunk of Apple real estate, say the Safari browser Search feature priority like GOOG does every year, for a cool $10 billion or more.
    I understand the App Store business model but it does have more holes than Swiss cheese.

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    March 24, 2022

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