Google and Apple will have to be ‘forcibly’ removed from the app fee business, analyst says

    Google (GOOG, GOOGL) recently revealed a pilot program that will allow Spotify (SPOT) users to bypass Google Play’s billing system.

    Spotify is among the companies that have publicly fought Google and Apple’s control over their respective app stores. Apple charges a 30% commission on app and in-app purchases for larger developers, while Google Play charges a 30% or 15% commission, depending on a variety of factors. This seems like a small but substantial turning point to critics, but the move is unlikely to signal that Google is ready to move on, Anurag Rana, senior software and IT analyst at Bloomberg Intelligence, told Yahoo Finance Live (video above). ).

    “This is a very high-margin business for both Google and Apple,” he said. “They are not going to give it [up] easily. You’ll have to force this off their hands. So I think they’re trying to appease regulators right now, but I don’t think it’s going to go away that easily.”

    In 2020, Google raked in $11.6 billion in in-app purchases worldwide, as previously reported by CNBC, which cited an estimate provided by analytics firm Sensor Tower. The Google-Spotify partnership itself, revenue-wise, is slated to be a big win for Spotify and a paltry one for Google, Rana added.

    “The question at hand is whether, you know, Google’s revenue contribution or revenue loss is enough to make a dent,” he said. “… The real impact is for the smaller companies, like Spotify, like Match (MTCH), so they are the ones that benefit from this.”

    Both developers and regulators have been chasing app store fees for some time. Developers like Spotify have long criticized the fees Google and Apple take and are forced to accept, while regulators fear the companies’ app store practices are anti-competitive. Last Thursday, the EU passed the Digital Markets Law, which states that Apple may have to allow alternative app stores on iPads and iPhones.

    The practices of the Google and Apple App Store have been questioned.

    The practices of the Google and Apple App Store have been questioned. Image: Getty

    Avoiding critics, regulators

    This partnership with Spotify could be an effort for the company to loosen its grip on app store fees on its own terms, as the industry becomes increasingly subject to regulatory scrutiny. The move could be an effort to avoid regulatory pressure, in what could be a win for all involved, according to Rana.

    “They are going to experiment to see how many users actually leave the ecosystem and go out and pay,” he said. “…if the loss is not much, they can relax the rules a little more. It makes everyone happy.”

    Elsewhere, tech giants are also facing legal pressure to change how their app stores work. Epic Games finds itself in a now-famous app store showdown, as the maker of Fortnite filed a lawsuit against Apple in 2020 over this very issue. The case is still playing out today, as both companies are appealing a judge’s 2021 decision in the case.

    The saga dates back to early August 2020, when Epic offered Fortnite players the opportunity to pay them directly through a new in-app feature. When Apple responded by pulling the game, Epic filed its initial lawsuit against the iPhone maker in the US District Court for the Northern District of California.

    Google Play also removed the Fortnite app in 2020 and it hasn’t been available there since.

    Allie is a technology reporter for Yahoo Finance. You can reach her at [email protected]. Follow her on Twitter @agarfinks.

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