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Windows Phone 8 and the battle for relevancy

Windows Phone 8 has been fighting for relevancy in the market since its release. It has slowly but surely gaining market share in the US and Europe has recently seen an explosion of WP8 adoption partially due to very low cost hardware.  Microsoft and Nokia have been continuously pricing their full featured phones lower than the competition in an attempt to drive adoption.  One of the main problems is their are not very many models of Windows Phones on the market, but that soon could change.  Bloomberg has reported that Microsoft may be interested in dropping the licensing fee to HTC all together in order to saturate the market with more Windows Phone devices.
general-screen-start-screenThe general belief is that Android is free for third party manufacturers like Samsung and HTC. when actually both companies (in addition to others) have licensing agreements with Microsoft to use technologies incorporated in Android on their phones.  Microsoft makes approximately $8 per Android phone sold on patent royalties that pertain to Android.  If Microsoft does indeed drop the Windows Phone 8 licensing fee for HTC then it is cheaper for HTC to sell WP8 phones than it is to sell Android phones.
Why would Microsoft do this?  How would they make money if they give their software away for free?  I can think of two big reasons for this.

  1.  Microsoft is having a hard time convincing 3rd party vendors like HTC, Samsung and LG to create Windows Phone devices.  This has no doubt become more difficult with the acquisition of Nokia and Microsoft needs its third parties to help make Windows Phone successful.
  2.  Like Google with Android, Microsoft will make money on the devices once people are using their services and buying apps in the Windows Store.  The more devices being used on the market using your services, the more money Microsoft makes.

Dropping the licensing fee is not the only detail worthy of news.  The report states that Microsoft is trying to convince HTC to allow customers to choose the OS they want on the device at purchase.  This would be an unprecedented move.  By giving users control over which OS to load on their phone, HTC no longer has to assume risking the design and manufacturing costs associated with an entirely new handset.  They can streamline their product lineup and sell both Android and Windows phones with minimal risk.
If the report is accurate this could be good for HTC, good for Microsoft and great for consumers.  Imagine receiving an HTC One (HTC’s flagship phone) with Windows Phone 8 pre-installed…

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Brian ODonnell

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