Google today announced a major change to the Play Store commission structure affecting subscription apps. Starting on January 1, 2022, all subscriptions sold by app publishers on the Play Store will incur a 15% commission.
This is a change from the current 30% / 15% commission. Presently, the commission is 30% during the first 12 months of a subscription. Then, the commission goes to 15% for each auto-renewing period thereafter.
The current commission incentivizes long-term subscription retention which has been a challenge for many app publishers.
According to Google, the Play Store commission change was motivated by discussions with app publishers like Duolingo and Bumble. Churn rates in year 1 can be high in categories like dating and fitness.
“We’ve worked with our partners in dating, fitness, education and other sectors to understand the nuances of their businesses. Our current service fee drops from 30% to 15% after 12 months of a recurring subscription. But we’ve heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate.” - Sameer Samat, VP Product for Android and Google Play
The reduced Play Store commission is welcome news for app publishers, but only a part of the story. In 2020, consumers spent nearly 2x more on the App Store than Google Play. It remains to be seen if Apple will follow Google’s lead.
While a short term win for app publishers, it doesn’t matter what the subscription commission if they don’t reduce churn. Ultimately, the best way to combat churn is to build a customer base of happy subscribers.