In the last few months, regulators across the world have pulled up their sleeves to force Apple and Google to allow third-party payment methods in app stores.
While these regulations might take a while to implement, the Big G has preempted it by announcing a new pilot with Spotify that will allow third-party payments for the music streaming service. Here’s how that will work for users like you and me, and what it means for app developers and service providers.
How will it work?
The concept is pretty simple. When you want to subscribe or renew your subscription to Spotify on Android, you’ll see a bunch of payment options, including Google Play Billing and Spotify’s own system in the streaming company’s Android app. You can choose the one you like to make that payment.
But we don’t know how exactly this will pan out. According to Spotify, the company will work with Google to experiment with different ways on how multiple payment systems will live on one screen.
This new payment system, called “User Choice Billing,” will roll out later this year.
What’s in it for Spotify?
Spotify has been one of the loudest voices — especially against Apple — protesting high fees charged by app stores while not allowing developers to support alternative payment options.
While its fight with Apple will continue, it could find an ally in Google.
Notably, Spotify’s Android app already has links to its website to purchase subscriptions. Plus, it sends notifications to users about various offers on the subscription.
But for the streaming company, there’s much more at stake. In its press release, Spotify says this new option will give users the freedom “to subscribe and make purchases using the payment option of their choice directly in the Spotify app.”
I want to highlight the “make purchases” part. Spotify already has stuff like paid podcast subscriptions, merch, and paid live streams If the company can let people purchase all these things without leaving the app, it would earn a ton more revenue.
And don’t forget, NFTs could be coming soon.
What’s in it for Google?
When it comes to app store fees, Apple faces more scrutiny because of the closed nature of iOS and the App Store.
Android has more options for developers and users. You can download an alternative app store to use instead of Google Play, and also sideload apps. Plus, apps still have options to promote subscriptions through links (at least till March 31).
What’s more, last year, Google lowered its fee for recurring subscriptions to 15% in 2021 — as compared to Apple’s 30%.
But all of this might not be enough for the Mountain View-based tech giant to escape regulators’ wrath.
With the new pilot, it’s allowing “a small number of participating developers to offer an additional billing option next to Google Play’s billing system.” That means it’s looking for options to fall back on in case there’s a new rule from lawmakers.
Plus, the company also needs to figure out how third-party payment systems will work when it extends to other developers. Working with a large company might benefit in testing out different use cases.
So when lawmakers force alternative payment regulations, Google can easily enable this process for developers.
What’s in it for developers?
Google’s timing of this announcement is curious, as its mandatory Play Billing adopting rule will kick in from April 1, just a few days from now.
Under this rule, developers will have to use Google’s own billing system, and can’t even include links to external payment options. But Spotify is getting a reprieve from this.
Not everyone is happy or impressed by Google’s decision.
ADIF (Alliance of Digital India Foundation), an industry body of the country’s startups, said this move from Google is “a clear admission of guilt that the existing policy is unfair and discriminatory.”
The alliance said this move feels more like headline management than a constructive step for developers:
User choice billing should be made a rule for all developers and not an exception for a select company. Extending this to only a few companies without much clarity on the terms & commission rates reeks of preferential treatment – again unfair & discriminatory.
Question is if this is going to be available only to powerful upstream apps with existing user bases & loyalty, while the firms that control operating systems and app stores squeeze smaller players to the bone to compensate. It’s why we need real platform neutrality.
— Marshall Steinbaum 🔥 (@Econ_Marshall) March 23, 2022
Interesting. But only one company and doesn’t say whether Spotify is still paying Google commission on payments using its own system (as Apple has required)
— Benedict Evans (@benedictevans) March 23, 2022
Apple made it very complex for dating app developers in the Netherlands to incorporate alternative payment methods by forcing them to submit a country-specific binary.
What’s more, It reduced its cut from 30% to 27% — not much of a discount there. There are no details as to how much of a cut Google’s taking out of this deal with Spotify.
In South Korea, where Google (and Apple) have had to allow developers to use alternative payment systems, the search giant is taking a more modest 11% commission. But the streaming service might be getting a bigger discount.
While Spotify was able to get a sweet deal with Google, smaller developers might not be able to do that. It’s important for them to know if incorporating other payment methods is worth the effort and money. That’s why details are important.
The next logical step for Google would be to be transparent and lay out terms and conditions for this plan to all developers. But we might have to wait for a while for that, given the pilot has just been announced.