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Google to allow Spotify to take direct payments within its Android app
By Chris Cooke | Published on Thursday 24 March 2022
Spotify yesterday announced a new deal with Google which will allow it to include its own payment system within its app on Android devices, meaning it can sell premium subscriptions in-app without using Google’s own proprietary payments system. Although the latter will also be provided as an option.
Spotify has long been critical of both Apple and Google of course regarding the two tech giant’s policies when it comes to in-app payments. Currently app-makers are obliged to use the payment systems of Apple and Google when taking in-app payments on their iOS and Android apps respectively. This is a problem because Apple and Google initially charge a 30% commission on such payments, dropping to 15% on repeat payments after one year.
This has always been a particular issue for Spotify which already hands over up to 70% of its revenue to the music industry. That means that, realistically, to take in-app payments Spotify would have to pass on the Apple or Google commission to the customer, making its subscription streaming service look more expensive than those run by, well, Apple and Google.
The other option, of course, is to just not take in-app payments – so users go to the Spotify website to buy a premium subscription, which they can then access via the app on their phone – but this makes it much harder for Spotify to upsell premium to its free users. And Spotify’s whole business model is built on upselling premium to its free users.
There has been a long campaign led by Spotify and other app-makers – most notably Fortnite maker Epic Games – to persuade or force Apple and Google to allow third parties to integrate their own payment systems into their iOS and Android apps. A long the way Spotify has formally complained to the European Commission while Epic has filed lawsuits in multiple countries, all based on the argument that Apple and Google’s current app rules are anti-competitive.
The battle against Apple’s App Store rules has generally got more attention – partly because its rules are more strict than Google’s – though the basic gripe regarding in-app payments applies equally to both companies, and Epic has sued Google as well as Apple.
But, it seems, Google is looking to compromise, possibly recognising that – while the high profile Epic v Apple court battle last year mainly went in the latter’s favour – regulators around the world seem to be erring towards forcing more flexibility on the tech giants when it comes to their App Store rules. Indeed, South Korea has already passed a law forcing Apple and Google to allow alternative in-app payment options.
Google VP Product Management Sameer Samat wrote in a blog post yesterday: “Recently, a discussion has emerged around billing choice within app stores. We welcome this conversation and today we want to share an exciting pilot programme we are working on in partnership with Play developers”.
“This pilot”, he explained, “will allow a small number of participating developers to offer an additional billing option next to Google Play’s billing system and is designed to help us explore ways to offer this choice to users, while maintaining our ability to invest in the ecosystem. This is a significant milestone and the first on any major app store – whether on mobile, desktop, or game consoles”.
And the first Play developer to participate in this new pilot programme is good old Spotify. It said in its own blog post yesterday: “Users who’ve downloaded Spotify from the Google Play Store will be presented with a choice to pay with either Spotify’s payment system or with Google Play Billing. For the first time, these two options will live side by side in the app”.
“This will give everyone the freedom to subscribe and make purchases using the payment option of their choice directly in the Spotify app”, it went on. “Spotify will continue to freely communicate with users about our premium subscription service, promote discounts and promotions, and give listeners on our free tier the ability to convert to premium directly in the app”.
Quite how this will work is not yet known. We know that Google plans to charge a service fee even on purchases that go through Spotify’s payments system, though the don’t know what that fee is.
And will the cost of going premium via the Spotify payment option be the same as using the Google Play option, or will the latter be more expensive as Spotify passes the extra Google fees onto the customer? I guess we will know the answer to that question once the whole thing goes live.
Both Google and Spotify were quite vague on how quickly this will roll out, although Spotify indicated at some point later this year.
Commenting on all this from Spotify’s side, its Chief Freemium Business Officer, Alex Norström, commented: “Spotify is on a years-long journey to ensure app developers have the freedom to innovate and compete on a level playing field. We’re excited to be partnering with Google to explore this approach to payment choice and opportunities for developers, users, and the entire internet ecosystem. We hope the work we’ll do together blazes a path that will benefit the rest of the industry”.
Meanwhile, on the Spotify tie-up in particular, Samat added: “Android has always been about openness and user choice. This step is an important milestone for mobile app stores and I can’t imagine a better first partner than Spotify. They value choice as much as we do and understand the importance and continued investment in Android and Play to the health of the entire ecosystem. This is an exciting first step and we look forward to adding new partners and learning how this model could be expanded across the platform”.
