Google struck a secret deal with Spotify to let it avoid paying any Play Store fees
At the Google antitrust trial yesterday, it was revealed that Google has a special deal in place for Spotify where the music streaming platform pays 0 percent in commissions to Google for any transactions that are directly through Spotify.
The Google antitrust trial, to determine whether or not the company's Android marketplace, Google Play Store, has put in place monopolistic policies to keep competition out and impact any app's distribution that does not want to be placed in its marketplace due to its high commission fee, is still ongoing. On its ninth day, when Epic Games CEO Tim Sweeney also gave his testimony, Google's own representatives also made a shocking revelation where it was found that Spotify gets preferential treatment from Google and does not pay any commission fee for the transactions that take place directly on the platform's end.
As per a report by The Verge, Google's head of global partnerships Don Harrison revealed the shocking information and said Spotify pays “zero percent if they process their transaction and 4 percent if Google processes their transaction”. Additionally, both parties have committed 50 million dollars towards a success fund.
Spotify's deal with Google raises more questions
To break down the Spotify deal, this is how you can understand it in simple terms. Google charges the apps that carry out transactions on its platform by taking 30 percent of every transaction that occurs through Google's payment service. A similar amount is levied by Apple, Sony, Microsoft, and other marketplaces as well, with the only notable exception being the Samsung Galaxy Store which charges as less as 12 percent. The payment is slightly less or similar (depending on particular app deals) when the transaction occurs entirely on the app and through its own payment channels.
Now, as per Google's policy, it does not allow any apps to offer any lucrative deal to incentivize users to prefer on-app payment options instead of those provided by Google. Violation of this rule led to the delisting of Epic Games' Fortnite when it began offering more V-bucks at a cheaper rate when purchased directly from the game.
So, why exactly did Google offer that deal to Spotify? Because Google needed Spotify more than it needed the Android marketplace.
During Harrison's testimony, a passage from his old email was read out, which was captured by The Verge. It said, “The reason we are proposing this bespoke deal with Spotify is because of its unprecedented position and bargaining power in the market and we had to offer a creative solution to bring their full value to the Play ecosystem”.
Harrison admitted to it and said, “Listening to music is one of [the phone's] core purposes... if we don't have Spotify working properly across play services and core services, people will not buy Android phones”.
This deal in itself is not enough to prove the antitrust charges on Google, but it is enough to draw raised eyebrows about alleged preferential treatment.