Google offered Netflix a sweetheart deal to pay just 10 percent on Google Play - The Verge

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Illustration by Nick Barclay / The Verge

Spotify isn't the only one that negotiated with Google for special treatment. Netflix did, too.

In 2017, Google offered Netflix a special discounted rate of 10 percent of its in-app payments on Android — meaning Netflix could keep 90 percent of the money — according to documents and testimony in the Epic v. Google trial.

The future of Google’s app store is at stake in a lawsuit by Fortnite publisher Epic Games. Epic sued Google in 2020 after a fight over in-app purchase fees, claiming the Android operating system’s Google Play Store constituted an unlawful monopoly — while Google says its demands would damage Android’s ability to offer a secure user experience and compete with Apple’s iOS.

Follow along with updates here.

Today, you can’t subscribe to Netflix from inside the Netflix app on Android, but that wasn’t always the case. Netflix previously paid Google 15 percent to do that, Netflix VP of business development Paul Perryman said in a 2022 video deposition that aired in the courtroom on Thursday.

Once upon a time, when Netflix could offer its own method of payment, it paid closer to three percent, he said. Google eventually cut that off. But before Google took alternative payment mechanisms away, it tried to offer Netflix the special 10 percent deal to switch to Google Play Billing (GPB) voluntarily— rather than risk Netflix taking all of that revenue away.

Google offered to make Netflix a “platform development partner” under a program it called “LRAP++”, according to a Netflix internal document shown in court today. (I believe I overheard that LRAP stands for Living Room Accelerator Program.)

“Netflix is the only one this is being offered to at this point,” the document continued.

The deal: “Bring revshare to 10% on the condition that Netflix have a full commitment to GPB globally.” Perryman confirmed under oath that Google actually offered that deal to Netflix in September 2017.

Netflix didn’t take the deal, he said. Netflix no longer pays Google anything for distribution via Google Play, pointing people who download the app to subscribe and pay in a mobile browser instead.

That’s partly because Netflix forecast it might lose money even at 10 percent.

“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,” reads a line in another Netflix internal document. (Netflix compared signing up in a browser vs. in-app Google Play payments, it adds, while assuming a subscriber would stick around for 36 months.)

“We don’t see a scenario where Google’s payment system would outperform, or even match our own,” Netflix argued.

Google’s attorney didn’t contest any of this in the video deposition we saw. Instead, Google spent its time confirming that Netflix is available on practically every video-playing device under the sun — effectively pointing out, without saying explicitly, that an app at the scale of Netflix can afford to bypass the store and rely on a browser signup.

Google spokesperson Dan Jackson wouldn't comment on the Netflix offer specifically to The Verge, but suggested it's normal for Google to offer different rates to different developers, saying "it’s no secret that Google Play offers a range of fees that take into account the varying needs of our developer ecosystem or economics of different industries or app verticals, like streaming video." He added that Google's 2021 Play Media Experience Program (introduced after Epic's lawsuit) has rates where apps offering video, music, books, and apps "can pay as low as 10%."

While Netflix didn’t take Google’s sweetheart deal, it did take one from Apple back in the day. Netflix had a “unique arrangement” with Apple to share only 15 percent of its revenue on iOS, half of Apple’s standard rate, according to an email unearthed during the Epic v. Apple trial.

We don’t know how much Spotify pays Google for its special deal. In the end, the numbers weren’t publicly revealed during trial.

Update, 11:12PM ET: Added Google comment.

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