Google rejects fee changes due to impact on revenue

NEW YORK: Alphabet Inc’s Google considered changing its app store pricing model to circumvent a regulatory crackdown, but abandoned a proposal to charge a set fee per app after it became clear that could cost the company billions of dollars, according to documents released late Thursday.

Google created Project Everest in 2021 to reconsider the Play Store billing model, according to the documents, which were released as part of an antitrust suit by Epic Games Inc.

Google last week lost the suit brought by the maker of Fortnite when a federal jury found the tech giant abused its monopoly power over the app store.

Sparked by mounting pressure from regulators and developers over Google Play’s hefty 30% commission, the presentation showed the search giant was concerned about staving off what it saw as potential regulatory overreach.

“We can defend the status quo for a few months,” Google said in the presentation.

“Making proposed changes sooner may help support reasonable legislation, position Google as a leader, and prevent more draconian legislation.”

Project Everest explored charging developers piecemeal service fees for putting their apps or games in the Play Store, with additional fees for user downloads, updates and referrals.

But the company estimated that model created “potential for significant loss” from US$1bil to US$2bil for apps and US$6bil to US$9bil for games.

Instead, employees recommended allowing app developers to process payments themselves in exchange for paying Google a lower fee.

The company estimated the change would reduce the store’s annual revenue between US$250mil and US$1.3bil, depending on how many users opted for the other payment choice.

That solution essentially mirrors the US$700mil settlement Google announced last week with a group of state attorneys general.

Google’s loss to Epic threatens to roil an app store duopoly with Apple Inc that generates close to US$200bil a year and dictates how billions of consumers use mobile devices.

Epic has spent years railing against the Apple and Google’s practice of charging commissions of as much as 30% to software developers who typically have few other options.

Google’s loss is likely to accelerate the weakening of app store rules, which have already come under fire from regulators and lawmakers around the world.

Mobile app developers have long complained that Google’s commissions are too high and require them to charge consumers more, a grievance that has led countries like South Korea to require the company to open its app stores to other payment systems.

New European Union rules set to come into effect in March will also require Google and Apple to open up their stores. — Bloomberg