Google will be decreasing the service fee for subscriptions from 30% to 15% from January 1, 2022, the company announced. This is for developers offering subscriptions. Currently, the fee on subscriptions is 30% for the first year and 15% for subsequent years, and is now being made 15% from the first year itself.
“We’ve worked with our partners in dating, fitness, education and other sectors to understand the nuances of their businesses. Our current service fee drops from 30% to 15% after 12 months of a recurring subscription. But we’ve heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate. So, we’re simplifying things to ensure they can,” Google said in a blog post. It maintained that the 30% fee affected just 3% of developers who offered a paid app or sold in-app digital goods.
It said that this cut meant that for developers offering subscriptions, their first-year subscription fee will be cut in half. In addition, Google announced that ebook and music streaming apps would be eligible for a 10% service fee.
Apple also offers reduced 15% subscription fees from day one, but that's limited to developers who are part of its App Store Small Business Program, which is available to those who earn up to but don't exceed $1 million in a calendar year.
Google has decided to reduce Play Store commission for apps that offer subscription services after widespread pushback from developers. The company is also facing increased regulatory pressure much like Apple.
In India, start-ups have been claiming that Google abuses its monopoly, enforces its billing system, and takes a 30% commission on the transactions. Google had said this wasn't new and its payments policy has always required this.
In a statement, the Alliance of Digital India Foundation called Google’s move a tactic to deflect and distract.
"The fact that Google is able to unilaterally declare and dictate prices, as is evident from this announcement as well, lies at the heart of the issue. What developers are asking for is fairness and not benevolence in the form of “reduced” commission percentages. It has never been about the percentages. Price discovery should be left to the market forces,” it said.
It termed it as a ‘lagaan’, and said the percentage doesn’t matter as long as Google gets to dictate the price.
“The portrayal and grandstanding, as a measure that fully acknowledges and addresses the concerns of developers, is misleading and objectionable,” said Sijo Kuruvilla George, Executive Director of ADIF.
When it had deferred the service fee to 2022, there was also backlash because Google required companies to adopt its billing system.
ADIF’s statement added that Google’s statement does not address the issues raised by developers regarding the company’s earlier announcement on billing, which also comes into force after March 2022.
“Moreover, apart from the additional work they would have to undertake, both with integration and re-onboarding of customers, almost all of them would see their margins get thinner owing to migrating to a much higher commission rate (30%/15%) from the present rates (1%-2%) being levied by their existing payment providers,” it said.