In Google and Spotify deal, the devil is in the details — or the lack of them

Google and Spotify announced a multi-year partnership, the first of its kind, to allow the Android version of the music streaming app to accept other payment methods than Google – currently the only option. However, by the disclosed details or the lack of them, the feeling is that this is more of a PR stunt to calm regulators than something promising and concrete. The terms of the agreement are vague and leave room for doubts.

The two companies do not say when, where or how much the change will cost or stop costing Spotify and its users. In Spotify’s press release, we read things like “later this year” “countries around the world.”

The Spotify deal is part of a pilot project by Google, to be extended to a small number of developers, to “offer an additional billing option alongside the Google Play billing system.” The pilot’s purpose, says vice president Sameer Samat, is “explore ways to offer this choice to users while maintaining our ability to invest in the ecosystem.”

READ ALSO: What would app stores look like with alternative payment systems?

The move can be seen as anticipation, albeit a little late, to mounting pressure from regulators around the world for Apple and Google to abandon the exclusivity they grant themselves to process payments for digital items and subscriptions made on their platforms, Android and iOS.

Although it gains less prominence than Apple, Google is also under pressure on this front. Its app store, the Play Store, charges between 15% and 30% of these payments, a percentage that many apps — including Spotify — consider unfair.

Apple and Google are already obliged to offer alternative means of payment in South Korea, for example. In the Netherlands, Apple was forced to allow dating apps to provide their own means of payment.

These local experiences help us foresee what could come out of this pilot program announced with Spotify, but the scenario is not the most encouraging.

In South Korea, according to the Wall Street Journal, Google still charges a 26% fee for apps that are sold via alternative payment systems. In the Netherlands, Apple wants to charge 27% instead of 30% for the same arrangement with dating apps. The country’s authorities were not satisfied with the proposal and continued to fine Apple for around €5 million a week. Apple shows no hurry or interest in pleasing Dutch watchdogs.

In the pilot program of Google and Spotify, Google will receive a percentage of transactions made outside the Play Store. How much? Companies do not disclose. A spokeswoman for Spotify limited herself to saying that “we negotiate commercial terms in line with our standards of fairness.”

This arm wrestling between platforms (Apple and Google) and developers calls into question what this turn of winds would represent for the application market and, in particular, for the end-users — the decision, in the end, will be at their fingertips.

READ ALSO: Boosted by streaming services, global recorded music revenues reached $26 bln in 2021

Solution goes beyond rules and arrangements; It has to do with the user experience.

And then, the question arises: why would a person using Android or iOS prefer to re-register their data directly on Spotify, for example, instead of paying the subscription with a tap using Apple and Google’s systems?

In addition to being more convenient, Apple and Google’s systems free us from entering and storing card data in each application with which we transact and, in the case of subscriptions, allow us to cancel them with a touch — something that is not guaranteed outside of the app stores. (On Spotify, this is pretty easy, but try unsubscribing to a newspaper, for example, outside of app stores; it’s hell.)

The toll on app stores is unfair and should end. In practical terms, however, the great lure for alternative payment systems is the discount — a discount that finds no space in the current and proposed arrangements.

When the applications themselves process payments, they only bear the operation costs, of less than 3% on average. That’s far less than the 15%–30% Apple and Google charge today to do the same job.

It doesn’t take a math genius to realize that if Apple and Google manage to charge 26% or 27% on payments made on systems other than their own, everything changes, and nothing changes at the same time. Moreover, user experience is likely to get poorer and, worse, with no discount at sight.

The devil is in the details, and the few we’ve seen so far are worrisome.

This post was last modified on March 24, 2022 7:42 pm

Published by
Rodrigo Ghedin

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