For phone makers selling devices in Europe, Google-owned apps like Gmail, YouTube and Google Maps are about to get a new feature: a price.
Alphabet Inc.’s Google said that it will start charging device manufacturers license fees to pre-install Google apps on devices running the company’s Android operating system in Europe, a stark shift in the business model for an advertising-dominated company that has until now distributed its consumer software free on mobile devices.
The company disclosed the shift as part of its plan to comply with the European Union’s antitrust order in July that fined the search company $5.03 billion for allegedly abusing Android’s dominance. Google has appealed the decision, but faces an Oct. 29 deadline to implement it or face further fines.
The license fee is the first major sign that the EU’s Android decision—the bloc’s second against Google in as many years—will have an impact on Google’s business model. The EU contends that Google has abused the dominance of the Android operating system, which powers more than 80% of the world’s smartphones, to promote its own mobile-advertising services at the expense of rivals.
As part of the decision, the EU ordered Google to stop forcing phone manufacturers to pre-install its cash-cow search engine and the Chrome Web browser if they want to pre-install Google’s Play store, which is the dominant way to download Android apps. It argued that Google’s bundling of its search and browser apps reduced the incentive for manufacturers to pre-install competing search apps.
Google said that it has dropped those restrictions. But it will start charging an unspecified per-device license fee for manufacturers to pre-install the suite of apps that includes the Play store. Those that pay the fee will then have the option to pre-install Chrome or Google search if they choose. Google declined to specify the fee, except to say it will be modest and apply uniformly across all manufacturers.
The company’s decision to implement license fees for its apps will have ripple effects on the global mobile phone ecosystem. While the new fees only apply to devices sold in Europe, phone makers in Asia, the U.S. and elsewhere will have to adjust their cost structures in Europe—one of the world’s most mature smartphone markets. Consumers bought more than 94 million new Android smartphones in Europe last year, according to research firm IDC.
