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Google offered Netflix a lower app fee, but it would have still lost money

The streaming service ultimately chose to remove the option for customers to subscribe through its Android app.
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Published onNovember 10, 2023

samsung galaxy a54 netflix display
TL;DR
  • Google has been offering large publishers “sweetheart” deals that bring down the percentage of revenue they have to pay under Google Play Billing.
  • Both Spotify and Netflix have been reportedly offered these deals, though Netflix declined it as it would have still lost money.
  • Google has also reportedly offered incentives to Activision Blizzard to ensure its games launch on the Play Store alongside rival platforms.

Google is currently embroiled in the Epic Games vs Alphabet Inc. legal battle, and the process is giving us access to some astonishing facts about how the Google Play Store works. While the process is quite known for small-scale developers, large developers play by a special set of rules, with incentives and lower app fees to keep them on the Play Store.

Recently, it came to light that Google offered $360 million in ad credits and co-marketing to Activision Blizzard to ensure its games launched on the Play Store alongside rival platforms. New reports now indicate that other large developers also got various preferential treatment.

For instance, The Verge reports that Google has reportedly given Spotify a “sweetheart” deal on Android app store fees under the User Choice Billing program.

The Verge reports that Netflix also got a “sweetheart” deal back in 2017, but it apparently declined the same. Under this deal, Netflix would pay only 10% of its in-app payments revenue to Google (in contrast to the usual 30% in that era, which has since been revised to 15% for subscription payments). Netflix had already been paying only 15% to Google to let users subscribe to its services from within the Netflix app but then switched to its own payment method, bringing its outflow down to only 3%. Google cut that out, but before doing so, it offered the special 10% deal to Netflix to have it switch to Google Play Billing (GPB) globally.

With how things stand currently, we know that Netflix declined the deal. The company forecasted that it would continue to lose money at even the discounted 10% rate. An internal document from Netflix, cited by The Vermentionstion, “Assuming all Android in-app signups came through GPB, Netflix would lose ~$250M USD on 1 year of signups, even when accounting for the incremental uplift.”

Google spokesperson suggested to The Verge that Google does offer different rates to different developers.

Under Google’s 2021 Media Experience Program, apps that offer video, music, books, and apps can pay as low as 10%.