Google allegedly offered Netflix a break on the usual Play Store commission – The Verge4 min read

https://www.theverge.com/2021/8/28/22645974/google-netflix-class-action-antitrust-play-store-commission

An antitrust lawsuit filed against Google and its Play Store by several state attorneys general echoed the Epic vs. Apple battle, and a new document highlights how and why Google’s app store is so similar. MLex senior correspondent Michael Acton points out the new complaint, which arrived Friday night from lawyers appointed to represent consumers (that’s us) in a potential class-action lawsuit that joins the states and Epic Games in accusing Google of abusing its monopoly power and of anti-competitive behavior.

“Similarly, Netflix, Spotify, and Tinder, some of the nation’s largest and most popular subscription services, have repeatedly sought to bypass Google Play Billing. In particular, Netflix wanted an alternative payments system. Apparently in an effort to ameliorate this displeasure, Google offered to take a significantly reduced revenue share percentage to Netflix. Not all developers, however, have met with Netflix’s success, even though many have sought to use their own payment systems.”

Image: MLex, CONSOLIDATED FIRST AMENDED CLASS ACTION COMPLAINT, CASE NO. 3:20-CV-05761-JD – 42

Perhaps most telling is a mention that popular subscription services like Spotify, Netflix, and Tinder have tried to find ways around Google Play Billing and that 30 percent cut. This is no secret, as the direct collection of credit card info by Netflix and Spotify reportedly resulted in Google posting a “clarification” explaining that Play Store apps must use Google’s billing system and giving them a year to change. In this filing, the lawyers accuse Google of offering Netflix a “significantly reduced revenue share” with the apparent intention of squashing its desire to use an alternative payments system.

While we haven’t seen the details or timing of this supposed pitch, it’s a direct reflection of things we learned in the Epic vs. Apple trial, where Apple emails show it offered a series of sweeteners to keep Netflix on its in-app purchase system.

In a statement to The Verge, a Google spokeswoman says, “All developers are subject to the same policies as all other developers, including the payments policy. We’ve long had programs in place that support developers with enhanced resources and investments. These programs are a sign of healthy competition between operating systems and app stores and benefit developers.” Whether that’s a sign of healthy competition is arguable, as Google’s efforts largely match those from Apple, including cutting the commission on subscriptions by half after a year. However, it does go further in offering a 15 percent cut to developers on their first $1 million in revenue.

Google’s standard 30 percent commission is still a major target, as the suit cites internal Google figures suggesting the break-even level for revenue sharing is actually about six percent. The complaint quotes Google internal communications that admit setting the “arbitrary fee” at 30 percent has “[n]o rationale, other than copying Apple.”

And as far as competition, the lawyers cite Google estimates that say even a major player like Samsung could only manage $100 million in revenue for 2019, while the Play Store raked in around $4 billion just from Samsung phones. At the same time, Reuters reports that an unsealed filing in the state AGs antitrust case against Google reveals the Play Store brought in $11.2 billion in total in 2019, with $8.5 billion in gross profit and $7 billion in operating income.

Google’s response to the state AGs in June said the Play Store “provides more openness and choice than others,” and that on Android, “you can choose to download the app from a rival app store or directly from a developer’s website.” However, this filing pokes holes in that argument as well, pointing out that Google’s OEM agreements with phone manufacturers interfere with making other app stores as easy to access as the Play Store, which they must include on a device’s home screen to pre-load Google apps like Gmail and Google Maps.

For apps distributed through the Google Play Store, Google in its DDA with app developers imposes multiple anticompetitive restrictions. First, it prohibits developers from distributing to their existing customers outside of Google Play, either by (1) using customer information to contact them directly or (2) steering those customers within the app to another store or to the developers’ own website.

Image: MLex,CONSOLIDATED FIRST AMENDED CLASS ACTION COMPLAINT, CASE NO. 3:20-CV-05761-JD – 53

In a timely call-out, it cites the Google Play Developer Distribution Agreement that forbids developers from using information about customers that they get from the Play Store, like email addresses, to reach them directly. You can read the relevant section below.

4.9 You will not engage in any activity with Google Play, including making Your Products available via Google Play, that interferes with, disrupts, damages, or accesses in an unauthorized manner the devices, servers, networks, or other properties or services of any third party including, but not limited to, Google or any Authorized Provider. You may not use user information obtained via Google Play to sell or distribute Products outside of Google Play.

That makes it “impossible for developers to directly reach customers to offer alternatives to Google Play Store,” according to the suit. Allowing developers to use information from the App Store to contact customers with emails including information about alternative payment options is one of the small concessions Apple made in its proposed class action settlement earlier this week. However, companies like Spotify and Epic say that doesn’t go nearly far enough.

Update 6:08PM ET: Added information from Reuters reporting on the total Play Store revenue in 2019.

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