Google trial exposes sweetheart deal with Spotify

Oops: Unsurprisingly, Google was not interested in naming other companies it has a similar relationship with. In fact, the company fought to keep its arrangement with Spotify private as it felt it could be detrimental to arrangements it already has in place with other partners.

Google’s going trial with Epic is the gift that keeps on giving, at least for those interested in learning how the sausage is made.

During recent testimony, Don Harrison, head of global partnerships at Google, revealed that partner Spotify pays a zero percent commission when users sign up for a subscription through Spotify’s own payment processor. Should a user sub using Google as their payment processor, Spotify gets a four percent commission.

These figures are far less than the norm, which you may have heard are typically in the ballpark of 11 percent (through Google’s User Choice Billing Program) to 15 percent (the standard base fee). But, zero percent? How is that justifiable?

According to Harrison, Spotify’s “unprecedented” popularity was high enough to justify a “bespoke” deal. Simply put, if Android doesn’t have Spotify working on Play devices and services, “people will not buy Android phones.” In short, both sides realized the importance of one another to their own success.

Google spokesperson Dan Jackson told The Verge that a small number of developers that invest more directly in Android and Play may have a non-standard service fee as part of a broader partnership that may include financial investments and product integrations across different form factors.

In this instance, each side also committed $50 million to a “success fund.”

Now that the cat is out of the bag and everyone knows what sort of sweetheart deals Google is willing to sign, don’t be surprised to see others look to renegotiate their terms. If I am company “B” and I feel I am just as important to the Android ecosystem as Spotify, you better believe I am going to fight for a lower commission or a deal that matches what Spotify is getting.

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