The 30% app store tax is collapsing

Google breaks stride with Apple

Google made a major announcement yesterday regarding its Play Store commission, and in doing so it dealt what may be a major blow to the standard 30% cut the company and its rival Apple have struggled to defend in recent years.

While both companies compete for developer talent and mobile app revenue, both Apple and Google have always agreed on one important point: a flat 30% commission on all digital goods, with only a few exceptions. Google is now breaking stride with Apple, and it may leave the iPhone maker without an important ally in the many app store regulatory battles on the horizon.

Google will now charge a flat 15% for certain apps. Qualifying will be those that rely on subscription billing, as well as some media apps like music streaming services and e-book sellers. The new rate takes effect Jan. 1.

• Both companies have charged subscription apps 15% since 2017, but only when customers sign up through the app and stay subscribed for one year. That's partly why companies like Netflix and Spotify no longer let you subscribe on an Android or iOS device.
• Google said it recognizes "that customer churn makes it challenging for subscription businesses to benefit from that reduced rate," because many customers don't stick around for a full year. For certain media apps, Google said the new flat rates of 15% from day one "recognize industry economics of media content verticals and make Google Play work better for developers and the communities of artists, musicians and authors they represent."
• Google had already introduced a 15% flat rate for media apps earlier this year if developers met a series of conditions to make their apps multi-platform across various Google platforms like Android Auto, Chromecast and Wear OS.

This is just the latest knock against the 30% cut. Apple and Google have fought for years to maintain the arrangement, knowing that many developers, especially mobile gaming and media firms, were growing disgruntled. Yet the last few years have seen that once-standard commission rate under full-blown assault.

• It all began in 2016 when Apple lowered its commission to 15% for subscription apps with the one-year caveat. Google followed in 2017.
• In 2020, Apple lowered the rate to 15% for developers making less than $1 million, and Google months later did the same (although notably, Google's policy change was more generous and applied to all developers' first $1 million in revenue). This applies to a vast majority of developers, considering most money on Android and iOS is generated by a small number of app makers.
• All the while, both companies used the 30% cut as a bargaining chip, for instance when Apple agreed to lower and then waive it for Amazon and when Google used fee reductions to convince game makers to stick around.

Now, the writing may be on the wall. Epic Games sued both Apple and Google last year, and the events since have seen both tech giants backed into a corner over their defenses of the 30% cut. These legal battles, combined with intense regulatory scrutiny and legislation in the U.S. and abroad, have created a hostile atmosphere for the app store status quo.

• Apple went to bat for its business practices in the Fortnite case this past summer, but it ultimately made a number of concessions after the trial ended to loosen its App Store policies. The judge in the case also knocked down Apple's anti-steering provisions, though the case is now tied up in appeals.
• Google is in an arguably more vulnerable position considering how many federal and state investigations it's under over the Play Store and its broader business.
• A landmark South Korean app store law passed in August, combined with similar proposed laws in the U.S., now has Google playing defense.

It's no wonder then that yesterday's announcement is the first time Google has instituted a major Android revenue split change without Apple, seemingly breaking the lockstep strategy both have used for years.

Of course, these changes don't affect the most lucrative app sector — the mobile gaming market — and it's likely both companies will continue fighting tooth and nail to protect those revenues. But yet another carve-out covering some of the largest app categories on Android is more evidence the 30% cut can't last forever. And the bad news for Apple is that it seems even Google now agrees.

— Nick Statt (email | twitter)

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A bot for your moral plights

Is lying to a parent morally wrong? Should you really kill that annoying bug buzzing around your kitchen? There's an AI bot that can answer questions like these, because of course there is.

"Ask Delphi" was introduced earlier this month as a demo of an AI machine for all the ethical dilemmas in the world. All you have to do is plug in an ethical question like the ones above, and Delphi will let you know whether it's the right thing to do. It is, very obviously, far from perfect, not least because some of the training data is ... interesting, to put it generously? But in case you were wondering, it says lying to a parent is frowned upon, but bug killing is OK.

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