GOOGL Alphabet Inc

By Sam Schechner 

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 Tuesday that it will start charging device manufacturers 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 for 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 EUR4.34 billion ($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.

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 also ordered Google to stop restricting phone makers from selling tweaked versions of Android if they also want to sell an official Android phone.

Google said Tuesday 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. Google declined to specify the fee, except to say it will be modest and apply uniformly across all manufacturers.

People close to the company said it applied the fee to guarantee the viability of the Android business model if it can no longer bundle its biggest moneymaking apps in the EU.

The change will have ripple effects on the global mobile phone ecosystem around the world. 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.

Write to Sam Schechner at sam.schechner@wsj.com

(END) Dow Jones Newswires

October 16, 2018 13:01 ET (17:01 GMT)

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