"Thanks But No Thanks": Google Offers Netflix a Sweet (90% Revenue) Deal on Google Play

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In 2017, Google made a special offer to Netflix that allowed the streaming giant to pay only 10 percent for in-app payments on Android through Google Play. This meant that Netflix could keep a whopping 90 percent of the revenue generated. The details of this deal have come to light during the ongoing Netflix vs. Google trial, where the future of Google's app store is being challenged.

Key Takeaways:

• Google offered Netflix a discounted rate of 10 percent for in-app payments on Android through Google Play.
• This offer came to light during the Netflix vs. Google trial.
• Netflix was able to retain 90 percent of the revenue generated from in-app payments.
• Netflix analyzed the potential impact and decided to bypass Google Play for in-app payments.
• The ongoing legal battles have brought attention to app store fees and negotiation outcomes.

Negotiations between Google and Netflix for discounted in-app payments

During the ongoing Netflix vs. Google trial, it was revealed that Google and Netflix engaged in negotiations regarding the fees for in-app payments on Android. Previously, Netflix was paying Google a standard rate of 15 percent for in-app subscriptions through its Android app. However, Google proposed a special deal to Netflix, offering a discounted rate of just 10 percent. The objective was to convince Netflix to switch to using Google Play Billing as the payment method within the app.

According to a Netflix internal document shown in court, Google offered to make Netflix a “platform development partner” under a program it called “LRAP++”. First reported by Sean Hollister (theverge.com), the deal consisted of the following conditions:

“Bring revshare to 10% on the condition that Netflix have a full commitment to GPB globally.”

When questioned in court, earlier this week, Netflix VP of business development Paul Perryman, confirmed under oath that Google actually offered that deal to Netflix in September 2017. The document also stated,

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

But, unfortunately, Netflix did not accept the deal and decided to no longer pay any fees to Google for distribution through Google Play. Despite the discounted rate, Netflix determined that it would still incur financial losses. As a result, Netflix opted to direct its users to subscribe and pay for their subscriptions through a mobile browser instead of using Google Play.

While the details of the negotiations between Google and Netflix for discounted in-app payments are known, it is evident that Google was open to offering different rates and deals to accommodate the needs of various developers. These negotiations shed light on the ongoing challenges and debates surrounding in-app payments and app store fees.

Implications for Both Parties

The negotiations between Google and Netflix regarding discounted in-app payments had significant implications for both companies. Google's offer of a special deal, with a reduced fee of just 10 percent, meant that Netflix could retain a larger portion of the revenue generated from in-app subscriptions. However, upon analyzing the potential impact, Netflix concluded that even at the discounted rate, it would still incur losses.

As a result, Netflix made the decision to direct users to subscribe and pay through a mobile browser instead of using Google Play. By doing so, Netflix was able to retain more revenue and avoid the fees associated with in-app payments, despite the convenience it offers to users. This strategic move allowed Netflix to prioritize its financial sustainability while still providing a seamless user experience.

The decision to bypass Google Play and leverage browser sign-up methods was motivated by the desire to maximize revenue. Netflix recognized that paying fees to Google for in-app payments would ultimately impact its bottom line. By eliminating these fees, Netflix could allocate a larger portion of its revenue towards content production and acquisition.

In addition, Netflix's approach highlights the broader considerations for app developers and content providers regarding revenue sharing and in-app payment arrangements. With mounting scrutiny on app store fees and policies, major companies like Netflix are challenging the existing structures to secure more favorable terms and retain greater control over their revenue streams.

Spotify's Negotiations with Google for Special Treatment

Spotify, one of the leading players in the streaming industry, found itself engaged in similar negotiations with Google for special treatment in regard to in-app payments. While the specific details of Spotify's negotiations were not revealed during the trial, it is clear that Google has been open to offering different rates and deals to cater to the needs of various developers and app verticals.

These negotiations shed light on the ongoing debates and challenges surrounding app store fees and in-app payments. With major companies like Netflix and Spotify seeking more favorable terms, the future of app stores is being called into question. The outcomes of the ongoing lawsuits and negotiations between these companies and app store platforms will undoubtedly have a significant impact on the app store ecosystem and the revenue-sharing models that are currently in place.

Netflix's Previous Arrangement with Apple for Discounted Revenue Sharing

During the Netflix vs. Google trial, it was revealed that Netflix had a unique arrangement with Apple for revenue sharing on iOS. Under this arrangement, Netflix only shared 15 percent of its revenue with Apple, which was half of Apple's standard rate. The terms and details of this special arrangement were not disclosed, but it does highlight Netflix's history of negotiating favorable deals with major app store platforms.

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