“Google said it would halve to 15% the fee it charges most developers selling goods or services through the Google Play app store,” The Information reports.
Why It Matters: Google and Apple have both been highly criticized for their 30% App Store commission they take, which has resulted in several bitter legal battles. Epic Games brought a suit against both companies which the government is currently investigating. Google’s decision to slash its fee is the latest sign that the pressure is working, and “tech giants are responding to political pressure over how they run app stores.”
Numbers To Consider:
- The Google Play Store recorded sales of $38.6 billion last year, which resulted in a take of $11.6 billion. Apple’s App Store generated $72.3 billion.
- Parent company Alphabet earned $182.53 billion.
- If this change had been enacted last year, it would have only cost an estimated $585 million.
Legal Consequences: “Arizona’s legislature is considering a bill that would prevent both companies from forcing app developers to use their in-app payment system, which takes the cut of transactions.”
The Outlook: Google said it will enact the change starting July 1. It only applies to the first $1 million in revenue earned by a developer in a given year, but the company said that would make an impact on 99% of developers.
- Apple made a similar move in the fall.
We’ve been expecting the App Store “toll” to fall over time. Apple and Google have essentially run a duopoly on mobile usage and thus have been able to charge exorbitant 30% fees on software sold on these platforms.
The economics just seem too high at 30%. Steam takes 30% of games sold on the platform as well. Developers are willing to pay this fee because distribution is the most important thing for them. But developers did 100% of the work to build the application, not to mention they also bear the cost of marketing the app.
Another industry that has analogous dynamics is the movie and television industry. And app makers are starting to move towards what the “creators” in that industry did – unionizing. I believe Apple and Google are getting ahead of this and reducing fees to mitigate this risk.
All-in-all, 15% seems more palatable. For all we know, this move may be net accretive to value, as developers that otherwise have been avoiding releasing monetized iOS and Android apps may be convinced at the lower price point.