Lawsuit alleges Google's Play Store revenue share policy just copies Apple

nanoguy

Posts: 981   +14
Staff member
Why it matters: Google's Play Store may not be as profitable as Apple's App Store, but the two app distribution platforms operate in a similar way when it comes to extracting revenue from developers. That has landed Google in hot water with antitrust regulators, so it's only a matter of time before it will have to alter its Play Store policies to avoid more legal headaches.

Last month, Google was hit with its fourth antitrust lawsuit in recent years, where 36 attorneys general and one district attorney accused the company of anti-competitive behavior related to the Play Store. Specifically, the search giant is accused of making it difficult for developers to distribute their apps through alternative app stores and signing contracts with phone makers and carriers that prevent them from creating their own competing app stores.

According to court filings that were unsealed this week, the Play Store generated revenue of $11.2 billion in 2019, $8.5 billion which was profit. While this isn't quite on the same level as the earnings generated by Apple's App Store, the profit margin is a healthy 62 percent, which compares quite favorably with the 80 percent margin achieved by the latter app distribution platform.

This suggests that just like Apple, Google could very well afford to charge developers a much lower fee and still make a profit from essentially hosting their apps and weeding out the malicious ones. The company currently takes up to a 30 percent share of app revenue, but internal communication suggests the number is just a reflection of what Apple was doing with its App Store. The lawsuit even cites internal figures that show Google's Play Store could break even on a revenue share of just six percent.

Perhaps a more troubling finding is that Google offered to take a "significantly reduced" cut of the Play Store revenue for Netflix after the latter company expressed its "displeasure" with the standard fee. Netflix, Tinder, Spotify -- and most famously, Epic -- have all tried circumventing Google's Play Store billing system in recent years, but the search giant wouldn't have it for fear of losing more than $1.1 billion in annual revenue. This behavior also looks like a carbon copy of what Apple has done with companies like Amazon and Netflix.

A Google spokeswoman told The Verge that "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."

However, these programs have largely mirrored those of Apple. For instance, the one introduced in March slashed Play Store commissions in half for developers who have yet to make over $1 million in lifetime sales. Apple rolled out a similar program last year for developers who publish their apps to the App Store and make less than $1 million per year.

Apple recently decided to change its App Store rules to allow developers to advertise alternative payment options for users using their contact information, which is admittedly only a small step in the right direction yet one that Google has yet to take. If anything, the pressure of four antitrust lawsuits might finally push the search giant to copy Apple once again.

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Tom Yum

Posts: 125   +265
There is a substantial difference between. Apple's and Google's policies in regards to small developers. Google charges 15% commission in the first $1million in revenue, whereas Apple charges 15% for developers who have less than $1million in revenue. The problem with the Apple model is that once the $1 million revenue is exceeded, the commission defaults back to 30% for ALL revenue, not just the amount over $1 million. For a small developer who might get close to or just exceed $1 million in revenue, that is a big difference.
 

Norsiiii

Posts: 85   +110
There is a substantial difference between. Apple's and Google's policies in regards to small developers. Google charges 15% commission in the first $1million in revenue, whereas Apple charges 15% for developers who have less than $1million in revenue. The problem with the Apple model is that once the $1 million revenue is exceeded, the commission defaults back to 30% for ALL revenue, not just the amount over $1 million. For a small developer who might get close to or just exceed $1 million in revenue, that is a big difference.
Umm ... are you sure about that? How exactly would that work in practice?

If what you're saying is true, then that would mean that if a developer earned $999,000 gross sales over, say, their first 5 years making and publishing apps, and has already taken home their $849,150 in net revenue, then when they tick over the next $1,000 in sales you reckon they suddenly owe Apple $150,000 in back-commissions dating back 5 years...?

Or do you mean on an annual basis? Even then, how exactly would THAT work, since you'd have the same issue for any growing developer who juuuuust ticks over $1M right at the tail end of the financial year - do they suddenly owe Apple $150,000 for the extra commission supposedly back-payable on sales that occurred over the 11 months prior and have already been received, remitted, booked and accounted for? Absurd
 

Tom Yum

Posts: 125   +265
Umm ... are you sure about that? How exactly would that work in practice?

If what you're saying is true, then that would mean that if a developer earned $999,000 gross sales over, say, their first 5 years making and publishing apps, and has already taken home their $849,150 in net revenue, then when they tick over the next $1,000 in sales you reckon they suddenly owe Apple $150,000 in back-commissions dating back 5 years...?

Or do you mean on an annual basis? Even then, how exactly would THAT work, since you'd have the same issue for any growing developer who juuuuust ticks over $1M right at the tail end of the financial year - do they suddenly owe Apple $150,000 for the extra commission supposedly back-payable on sales that occurred over the 11 months prior and have already been received, remitted, booked and accounted for? Absurd
That is exactly how it works (it is based on annual revenue, I should have mentioned that), with Apple once you exceed $1million annual turnover, you owe 30% commission on all revenue, not just revenue past the $1million. It is absolutely absurd, but this is poor, struggling Apple we are talking about, not some rich multibillion dollar company.

 

Norsiiii

Posts: 85   +110
That is exactly how it works (it is based on annual revenue, I should have mentioned that), with Apple once you exceed $1million annual turnover, you owe 30% commission on all revenue, not just revenue past the $1million. It is absolutely absurd, but this is poor, struggling Apple we are talking about, not some rich multibillion dollar company.

That's not actually what their policy says:
"
1. Existing developers who made up to 1 million USD in proceeds in 2020 for all their apps, as well as developers new to the App Store, can qualify for the program and the reduced commission.
2. If a participating developer surpasses the 1 million USD threshold, the standard commission rate will apply for the remainder of the year."

This states that if they exceed the $1M threshold the normal 30% rate will apply from then onwards.

It seems to me like the writer of that Ars article has been pretty vague and loose in their explaining of how Apples policy actually works, and/or the author didnt actually understand it properly to begin with.
 

Tom Yum

Posts: 125   +265
That's not actually what their policy says:
"
1. Existing developers who made up to 1 million USD in proceeds in 2020 for all their apps, as well as developers new to the App Store, can qualify for the program and the reduced commission.
2. If a participating developer surpasses the 1 million USD threshold, the standard commission rate will apply for the remainder of the year."

This states that if they exceed the $1M threshold the normal 30% rate will apply from then onwards.

It seems to me like the writer of that Ars article has been pretty vague and loose in their explaining of how Apples policy actually works, and/or the author didnt actually understand it properly to begin with.
Fair enough, I stand corrected. Though, there is still differences in that the program only applies to developers with revenue less than $1million who then qualify for the small business program. Once they exceed $1million in revenue, they pay 30% on the excess (like Google) but then the following year don't qualify for the program at all unless they can show their revenue has dropped below $1million the following year. Google's applies to everyone for the first $1million in revenue, which is still a fairer and more consistent system. Your revenue doesn't need to drop below $1million again to requalify, you just only get the 15% for the first $1million.