The industry practice of “70/30” revenue cuts between developers and app store owners have been put under a microscope in the past few years, especially after Epic Games made some big noise about it. It did force a few platforms to make changes to their policies, usually reducing the so-called “developer tax” under certain circumstances only. In general, however, storefront owners still take 30% of the profits by default, but Google is making a significant change in that policy to push subscriptions to the forefront.
Like many things in businesses, the 70/30 revenue split became a de facto standard without any explicit consensus among industry players. Giving store and platform owners 30% of profits might have worked well for the likes of Steam, where each product often sells in double digits, but it didn’t translate well to the mobile app market. Unfortunately, that has been the status quo for many years, which really hurt developers that sold their apps for an average price of $4.99 or even less.
It may be even worse for apps and services whose profits may come on a monthly or annual basis. At the same time, however, the likes of Google and Apple are trying to push the subscription model as a more viable and sustainable strategy compared to one-off payments for apps. In order to incentivize this model, Google is making it more attractive for developers to switch to subscription fees by lowering the tax they have to pay.
Starting January next year, the service fee or anything sold via Google Play Store will be reduced from 30% to 15%, meaning developers and publishers take away 85% of any of the revenue they make. Previously, Google allowed that same cut but only after 12 months of a recurring subscription. This change follows another big move last April when it cut the revenue cut to 15% for the first $1 million of a developer’s revenue.
Google is also adjusting some of the figures for ebook publishers and on-demand music streaming services. They can get their service fee reduced to as low as 10%, but only if they take part in Google’s Play Media Experience program. This program, the Android maker says, encourages publishers to target most or all of the devices where Android is available, making sure that the same experience and content is present in cars, TVs, and even smartwatches.