Netflix was offered a big discount on the Play Store's "Google Tax"

An interesting piece of information has come out of the Discovery process for the Epic v. Google trial that started earlier this month. Epic, as you might know, is suing Google claiming that the latter's Play Store is a monopoly. Google, like Apple, takes a percentage of the revenue collected for in-app purchases. Originally pegged at the same 30% as the so-called Apple Tax, two years ago Google reduced the "tax" on the first million dollars of revenue to 15% reverting to 30% once that threshold was crossed.

Epic decided to offer its V-bucks in-game currency for its big hit Fortnite bypassing Apple and Google's in-app payment process thus eliminating the fees it would have to pay Apple and Google. Both tech firms responded by booting Fortnite and Epic out of their respective app storefronts. Epic sued Apple mostly to no avail, and now the game developer has its day in court against Google.

Epic, as you might expect, wasn't the only company to complain about the payments that they had to make to Apple and Google. Spotify and Netflix both also complained about the "commissions" they paid. Android users can no longer subscribe to Netflix from the Android app. According to The Verge, a 2022 video deposition of Netflix VP of Business Development Paul Perryman revealed that Netflix paid Google 15% of in-app subscription revenue before Netflix decided to stop offering it as an option to subscribers.

Perryman also said that before Google took away the ability of Netflix to offer its own in-app payment processing, Netflix was paying Google only   3% of subscription revenue. Evidence shown in court yesterday included testimony showing that before Google took away alternate forms of subscription payment options from Netflix, it offered the company a special deal that would drop the percentage of in-app revenue that Google would receive down to 10%.

The reduction in the percentage taken by Google would be allowed if Netflix joined Google Play Billing (GPB) on its own. A Netflix document stated that Google offered to make Netflix a "platform development partner." The document said that Netflix was the only company being offered this partnership.

Netflix executive Perryman testified under oath that the deal, offered in September 2017, would "Bring revshare to 10% on the condition that Netflix have a full commitment to GPB globally." But Netflix turned it down because even after paying 10%, the video streaming firm forecasted that it would lose money. A Netflix internal document noted, "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."

Today, Netflix simply tells those Android users who download the Netflix app to subscribe to the service via the mobile browser on their devices. As a result, it currently pays Google 0% of its revenue although Android users can not sign up directly from the app. As for Android users, it's a small inconvenience that probably wouldn't stop most people from signing up for a subscription.