Google app suite costs as much as $40 per phone under new E…


Android manufacturers will have to pay Google a surprisingly high cost in Europe in order to include Google’s Play Store and other mobile apps on their devices, according to documents obtained by The Verge. A confidential fee schedule shows costs as high as $40 per device to install the “Google Mobile Services” suite of apps, which includes the Google Play Store. The new fees vary depending on country and device type, and it would apply to devices activated on or after February 1st, 2019.

But phone manufacturers may not actually have to shoulder that cost: Google is also offering separate agreements to cover some or all of the licensing costs for companies that choose to install Chrome and Google search on their devices as well, according to a person familiar with the terms. Google declined to comment.

Google’s licensing terms are changing in Europe later this month on account of a European Commission ruling that barred the company from requiring phone manufacturers to bundle Chrome and search with the rest of its suite of apps. In public statements, Google has been cagey about exactly how the new licensing fees will be structured, but documents reveal the deal with EU manufacturers will be rated by country and pixel density.

EU countries are divided into three tiers, with the highest fees coming in the UK, Sweden, Germany, Norway, and the Netherlands. In those countries, a device with a pixel density higher than 500 ppi would have to pay a $40 fee to license Google’s suite of apps, according to pricing documents. 400 to 500ppi devices would pay a $20 fee, while devices under 400 ppi would pay only $10. In some countries, for lower-end phones, the fee can be as little as $2.50 per device.

It’s unclear why pixel density is so central to the pricing scheme, but it is likely being used as a proxy for the price of the overall device, as higher pixel density devices usually cost more. (Samsung’s Galaxy S9 has a pixel density of 570 ppi, for example.) Tablets would also face an entirely different pricing tier, applied evenly across countries and capping out at $20 per device. It’s possible that some manufacturers could negotiate separate deals, but a source familiar with the structure said it’s unlikely they would vary significantly.

Beyond offsetting the upfront fees, manufacturers that don’t preinstall Chrome could also miss out on search revenue from the browser, a long-standing incentive to prioritize Google and its apps. According to the new agreement, Google would not pay search revenue sharing for devices that do not preinstall Chrome and place it in the phone’s home screen dock. “If the Company elects not to place the Google Chrome browser on the Application Dock for any Qualified Device(s) supplied into the EEA [European Economic Area],” the agreement reads, “Company will not be entitled to any portion of revenue generated from Google Chrome for such Qualified Device(s).”

The European Commission ruling does not explicitly require Google to charge licensing fees, but Google is required to break apart its traditional bundle of apps. The court ruled that by bundling search and Chrome within Android, Google stifled innovation and cut off opportunities for device makers to sign better deals around preinstalled browsers and search engines. Handed down in July, the ruling also came with a $5 billion fine, although the forward-looking unbundling measures are expected to be more significant. The commission sees this breakup as a way to increase competition, which could lower costs or add more options for consumers in the long run.

Chrome and search are where Google’s profits come from, and without them in the bundle, it’s chosen to fund the distribution of the rest of its apps and services with this per-device fee. If phone or tablet companies want to include any of Google’s apps, they’ll have to pay, and then decide whether to make a separate browser-and-search deal with Google to make back some of the costs. Most will likely come to some kind of agreement since Google’s Play Store is where the vast majority of Android apps are distributed. If companies want Facebook, Instagram, Snapchat, and other major apps on their devices, paying Google is the easiest way in.

Critics of the commission’s judgment see it as a new cost to be passed on to consumers, a view that may be driven home by the new licensing fees. One of Google’s strongest selling points to manufacturers was the lack of an associated fee for Android — a major advantage over Microsoft, which offered its alternative OS for a cost. Now that companies will be paying per-device in Europe, there’s a strong chance that’ll translate to higher overall device costs in order to make up for lost revenue.

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