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Google's Mountain View campus. Photo by Bloomberg.

Apple Pressured by Google-Spotify Deal

Photo: Google's Mountain View campus. Photo by Bloomberg.

It may only be a matter of time before the Berlin Wall of the mobile app ecosystem, Apple’s rigid App Store rules, falls. Google’s announcement today that its Google Play app store will allow a “dual billing option” in U.S. apps, starting with Spotify, puts pressure on Apple to follow suit. Giving consumers a choice about the payment systems they use for in-app purchases, such as subscriptions, is precisely what Apple CEO Tim Cook has long resisted. But as Apple is already battling foreign regulators about this issue and faces legislation in Congress mandating a less restrictive policy, Cook’s stance looks increasingly untenable.

It’s not even clear why Cook is fighting so hard. Yes, the App Store revenues are significant—reportedly accounting for as much as 20% of Apple’s profit. (Google Play may have as big an impact on Alphabet, court filings suggest.) But allowing dual billing likely won’t wipe those revenues out entirely. Google says the “user choice” approach it is launching in the U.S. will be like the arrangement it has introduced in South Korea—after the legislature required it—where apps still pay a service fee on revenues generated from their own payment methods. Apple has also signaled it would continue charging a commission even if it had to comply with a court ruling made last year, requiring it to allow apps to link out of the App Store to alternative payment systems. (The ruling is on appeal).

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