Antitrust scrutiny forces Google to let apps offer alternative billing options

The news: Google is piloting a program for alternative payment methods for apps like Spotify, per The New York Times.

How it works: Google will allow some apps to bypass its existing payment systems, which will undercut the commissions it demands from each sale.

• The test program comes just as Google and smartphone rival Apple face growing complaints from regulators on their monopolistic pricing and commission structures.
• In context, South Korea passed a bill in September stopping the smartphone duopoly from forcing the use of their respective payment systems.
• Google’s pilot project allows apps like Spotify to present their own billing options alongside Google’s payment facility, giving Android users a choice on how they’d like to pay.
• “This is a significant milestone and the first on any major app store,” said Sameer Samat, a Google vice president who oversees the Google Play store, in a blog post.
• Spotify noted that it had supported ”platform fairness and expanded payment options,” stating in a blog post that it expects billing choices to become available later this year.
• Consumers spent $72.3 billion in the Apple App Store in 2020; rival app store Google Play brought in $38.8 billion in gross revenues in 2020, per Sensor Tower. 

Duopoly in danger: Spotify, considered to be the leading cross-platform music-streaming app, has been the most vocal critic of the duopoly’s payment systems lock-ins and commissions.

• Apple was initially looking to allow subscription-based apps like Netflix and Spotify to point to external websites for alternative, commission-free payment options. 
• These plans were quashed in October when Apple submitted an appeal in the Epic Games case, preventing alternative payments until the case’s resolution, which could last years. 
• While Google no longer offers its own music streaming service, Apple Music competes directly with Spotify, which could further complicate any openness to alternative payment options. 
• Google now has the advantage of being able to build on its experience of offering users choice in billing systems in South Korea.

What’s the catch: Smaller developers who don’t have Spotify’s market share could be at a disadvantage in negotiating an exit from the duopoly’s commission-based payment structure. 

A pilot program under Google’s control means the company could cancel alternative billing at any time or simply choose one-off arrangements with individual apps and services.