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THE INVESTOR
June 30, 2022

Market Now

Google’s in-app payment policy leads to content price hikes

  • PUBLISHED :May 25, 2022 - 09:14
  • UPDATED :May 25, 2022 - 09:14
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In this file photo taken on April 15, 2022 in Moscow shows Google‘s logo on a tablet screen. (AFP-Yonhap)

With Google poised to begin removing applications that disobey its mandatory in-app payment policy from June 2, South Korean content providers are raising consumer charges as the global IT giant’s billing rules require hefty fee rates.

Google’s in-app payment system means that consumers must use the internal payment system developed by the app market operator, also Google, when purchasing paid content from apps in Google’s Play Store.

For app developers using Google’s in-app billing system, each pay a 15 percent commission to Google for the first $1 million in annual revenue, while anything over that is charged at a 30 percent rate. Due to the heavy cut Google takes, major Korean app developers used to have their own external billing systems so they did not lose any commission in the payment process.

In order to cope with Google’s mandatory billing policy and the substantial fees, the country’s leading webtoon service providers -- Naver and Kakao -- have announced that they will raise the prices of their in-app cash tokens between 10 and 20 percent.

Kakao Entertainment, Kakao’s webtoon subsidiary, said the increased fee rate will take effect from June 1. Naver Webtoon initially planned to enforce the hiked prices from Monday, but postponed the implementation due to technical issues.

Despite the technical issues, a Naver Webtoon official said the new rates will take effect before next Wednesday, a day before Google’s purge of noncomplying apps. 

According to both companies, the fees will not be increased for the transactions made through the web as Google’s billing policy only affects in-app payments.

Seo Bum-gang, chairman of the Korea Webtoon Industry Association, says the phenomenon of content providers raising their fees is “very unnatural and negative.”

“The price hike requires certain conditions, steps and process. But what is happening is that a blow of air from Google made our country’s entire content industry move.”

Seo stressed that the bigger concern is that most consumers will likely think that content providers and app developers drove the price increase, not Google, and blame the industry as a whole.

Other content providers have already revised the prices of their app services. Domestic video streaming operators including Wavve and Tving increased their subscription fees by 15 percent last month. Music streaming services -- Flo and Naver’s Vibe -- also upped their prices by 14 and 16 percent, respectively.

According to Rep. Yang Jung-suk’s office, consumers of these streaming services will have to pay an additional 230 billion won ($182 million) this year with the increased subscription fees.

Last week, the Korea Communications Commission began to review app market operators such as Google, Apple and One Store to see if any of them violated the Telecommunications Business Act after it received complaints from the Korean Publishers Association over reports that Google’s billing policy forced certain payment methods.

Under the law, app market operators are prohibited from removing or blocking apps that use their own payment methods instead of operator-developed systems. The KCC said it would respond sternly to any violations of the law.

But Seo pointed out that the government’s approach is naive in that it is looking for damaged cases and victims before it takes action.

“How many app developers will have to give up on their businesses before the authorities actually do something about it?” he said.

The Coalition for App Fairness, an independent nonprofit organization based in the US, encouraged the Korean government to implement legitimate legal measures to crack down on any attempt to bypass Korean law and continue anti-competitive practices.

“The choice of payment method should be protected as a basic consumer right,” said Rick VanMeter, executive director at the CAF.

“With many countries around the world preparing or legislating similar acts with the same aim, the firm establishment of this Korean (In-app Payment Prevention) act will serve as an important precedent,” he added.

According to big data platform Mobile Index, Google Play Store’s share of the South Korean app market reached almost 75 percent last year.

South Korea became the first country in the world to pass the landmark law, dubbed as the “anti-Google law,” which banned app store operators from forcing developers to use operator-developed in-app payment systems in September.

By Kan Hyeong-woo (hwkan@heraldcorp.com)

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