Spotify made a secret deal with Google to avoid paying them a cut

Whenever apps or subscriptions or in-app purchases are sold through an app store, whether it be through Apple’s App Store or the Google Play Store, Apple and Google usually get a cut. This ranges anywhere between 15-30% and is usually applied to all developers who submit apps to these stores.

But it turns out Spotify might have found a way to avoid doing that. During the Epic vs Google trial, Google head of global partnerships Don Harrison took the stand where in his testimony, he revealed that Spotify actually pays 0% commission to Google.

It should be noted that this is only when Spotify users choose to pay for a subscription using Spotify’s own system, but even if they opt to use Google’s own payment processor, Spotify would only need to fork over 4%, a dramatically lower amount than the 15% that Google would normally take.

For those unfamiliar, in the past year or so, Google introduced User Choice Billing. This allows developers to use a different payment processor instead of Google’s. They would still need to give Google a cut of around 11%, but it will be less than the normal rate of 15%, so Spotify paying a mere 4% is quite a huge discount.

It turns out Spotify was allowed to do this because of how big they were. Harrison was quoted as saying that if Spotify was not working properly across Google’s Play services and core services, it would have affected users’ decision to buy Android phones. Google has also since confirmed Harrison’s testimony in a statement to The Verge:

“A small number of developers that invest more directly in Android and Play may have different service fees as part of a broader partnership that includes substantial financial investments and product integrations across different form factors. These key investment partnerships allow us to bring more users to Android and Play by continuously improving the experience for all users and create new opportunities for all developers.”

Google has also declined to name the other developers who are “enjoying” this reduction in rates, but it is interesting to get a glimpse at these types of backroom deals.

Source: The Verge