In 2017, Alphabet Inc.'s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google offered a special deal to Netflix Inc. (NASDAQ: NFLX) that entailed a discounted rate of 10% for in-app payments on Android. This proposal was brought to light in the recent Epic v. Google trial.
What Happened: Court documents show that Google proposed the discounted rate to Netflix as part of the "LRAP++."
The deal would have made Netflix a "platform development partner," reducing the revenue share to 10%, provided the streaming giant committed globally to Google Play Billing or GPB, reported The Verge.
This meant that Netflix could keep 90% of the money.
Today, subscribing to Netflix from within the Netflix app on Android is not possible, but earlier the streaming behemoth used to pay Google 15% for this function.
Later, when Netflix had the ability to provide its own payment method, the payment to Google was closer to 3%. Eventually, Google discontinued this option.
However, prior to removing alternative payment methods, Google attempted to entice Netflix with a special 10% deal to voluntarily transition to GPB, aiming to avoid the risk of losing all that revenue to Netflix's independent payment approach.
Paul Perryman, Netflix's VP of business development, confirmed the offer under oath, which was made in September 2017.
In the end, Netflix declined the proposal and directed users to subscribe and pay via a mobile browser after downloading the app via Google Play.
Netflix believed it could potentially lose money even with the discounted rate, estimating a loss of nearly $250 million annually through GPB signups, the report noted, citing one of the sentences in an internal Netflix document.
Google spokesperson Dan Jackson did not directly address the Netflix offer but said, "It's no secret that Google Play offers a range of fees that take into account the varying needs of our developer ecosystem or economics of different industries or app verticals, like streaming video."
He also stated that the tech giant's 2021 Play Media Experience Program includes rates, allowing apps that offer video, music, books, and other services to pay as little as 10%.
Why It Matters: This is not the first instance of tech giants offering significant discounts to major companies. Previously, it was reported that in 2016, Apple Inc. (NASDAQ: AAPL) offered Amazon.com, Inc. (NASDAQ: AMZN) a 50% discount on subscription revenues from its streaming video-on-demand app.
This significantly differed from the usual 30% fee Apple charges third-party developers.
Similarly, in 2021, Apple made extensive efforts to dissuade Netflix from abandoning in-app purchases, as revealed in internal email correspondence during the Epic Games lawsuit against Apple. The streaming giant reportedly only paid 15% of its revenue on iOS.
Meanwhile, earlier this week, Google attorney Glenn Pomerantz piqued the interest when he argued that the court should seal portions of an upcoming exhibit, which discloses details about Google's User Choice Billing agreement with Spotify Inc. (NYSE: SPOT), according to another report by The Verge.
This led to the speculation that the search and advertising giant might not want people to know about the details of this agreement, which essentially allows Spotify to use its own payment system for subscriptions while still providing Google with a share.