Google is cutting fees for developers making less than $1 million from their apps. The company estimates that 99% of developers will benefit. If the discount was given last year, it would have reduced Google’s $11.6 billion in commissions by only $585 million. That means 1% of Google’s app developers were responsible for 95% of commissions.
Apple has implemented a very similar system for its smaller developers. The strange part is, usually, companies reward their biggest moneymakers. If you’re selling widgets, you’re more likely to discount to the wholesaler buying 3,000 widgets than to the retail customer purchasing one. Google and Apple, rather than rewarding the major money-makers like Netflix and other popular apps with lower commission fees, instead are rewarding their startup competitors.
That decision reveals the strategy being implemented by Apple and Google. That strategy is to appease anti-trust regulators who are skeptical of the companies’ app store policies.
Tripp Mickle and Sarah E. Needleman report for The Wall Street Journal:
The changes coincided with a Justice Department investigation into the company’s business practices, culminating with an antitrust lawsuit filed last year. Separate suits have been brought by Texas and Colorado. Google has said that the Justice Department’s suit is deeply flawed because consumers aren’t forced to use its services, which are largely available at little or no cost.
The debate over app-store fees intensified last year after Epic Games launched a public campaign against Google and Apple by adding a payment system inside “Fortnite” that circumvented the typical 30% cut due for digital purchases. Google and Apple retaliated by kicking the combat game out of their stores, an action that led Epic to file an antitrust lawsuit.
Apple declined to comment on Google’s change.
A spokeswoman for Epic said Google’s move doesn’t address the root of its beef with the company. “Whether it’s 15% or 30%, for apps obtained through the Google Play store, developers are forced to use Google’s in-app payment services,” she said. “Android needs to be fully open to competition, with a genuinely level playing field among platform companies, app creators and service providers.”
Last year Epic and several other companies formed a nonprofit to pressure the major app-store operators to make changes to their marketplace rules. Founding members of the Coalition for App Fairness also include Spotify Technology SA and Tinder owner Match Group Inc.
A Google spokesman declined to comment further on the timing of the change. “As a platform, we do not succeed unless our partners succeed,” the company said in its blog post.
Both Google and Apple have defended their app-store fees, saying they help cover expenses related to user privacy, security and other services.
Google’s decision to apply the lower fees as developers book sales on the Play store contrasts with Apple’s approach. To secure the lower 15% rate, the iPhone maker requested developers apply to a program to show their earnings in 2020, a process that will give it insight into annual business growth of the apps in its store. Had Apple implemented that change last year, it would have reduced its $21.7 billion take of app sales by about $595 million, Sensor Tower estimates.
The companies also have different approaches for app distribution: Apple requires iPhone and iPad users to download apps exclusively from its App Store, while Android device users can access the Google Play store in addition to other app marketplaces.
Apple has said it prohibited third-party app stores so it can vet apps and protect iPhone users from malware and other software issues.
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