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9/1/2010
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Ed Hansberry
Ed Hansberry
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Android Is Not Free

Much has been made recently about the cost of Microsoft's licensing fees for Windows Phone 7 and how it is model out of sync with the realities of today. Android is open source and has no licensing fees, so why would anyone pay Microsoft up to $15 per Windows Phone license when you can pay $0 for Android?

Much has been made recently about the cost of Microsoft's licensing fees for Windows Phone 7 and how it is model out of sync with the realities of today. Android is open source and has no licensing fees, so why would anyone pay Microsoft up to $15 per Windows Phone license when you can pay $0 for Android?Henry Blodget went so far as to call Microsoft's business model a fantasy since Android was free. In fact, if there is any revenue sharing agreements between Google and its licensees like HTC, Motorola and Samsung, Google may actually pay you to license its software.

It isn't so simple though. Someone familiar with the Microsoft model has responded to the "Android is free" meme. Yes, OEM's may not be writing checks to Google for the platform, but there are costs involved that you don't have with a fee based license model. Some of the reasons include:

  • Potential legal fees to defend against third parties are non-existent for Microsoft licensees. This is not the case though with Android. Just look at the Apple/HTC suit. Regardless of whether or not anything comes of that, fees for lawyers are surely already into six digits at least and could to seven or eight figures if Apple wins. If anyone sued HTC over its implementation of Windows Phone 7, as long as HTC complied with the license agreement, Microsoft steps in and defends the suit. In fact, Microsoft stepped in the Apple/HTC suit. It is estimated HTC is paying $40-$80 per Android phone to Microsoft to license MS tech (which may be part of the Microsoft/Apple cross-licensing patent agreements) to shield it from Apple's suit. $15 is looking pretty cheap right about now huh? Of course, Google may step in and help HTC in the suit, but that would be a act of charity, not a contractual obligation.
  • Android is not as feature complete as Windows Phone 7 is. The article explains that Motorola licenses Skyhook for improved location based services. Other companies want a richer set of audio and video codecs which generally cost money. Now that you've purchased the license for the improved software, you have to integrate it into your particular build of Android. Internal and external costs add up.
  • Android's UI isn't competitive with other smartphones, so most OEM's develop their own, like HTC's Sense or Motorola's MotoBLUR. These enhancements not only add to the internal cost of OEM's, but to the costs some third party developers incur in ensuring their software works well with them. Ironically, this was a serious problem for Windows Mobile 6.x and Microsoft let OEM's customize the platform, thus fragmenting it. Lesson learned. Microsoft has halted that practice, choosing uniformity and consistency over eye candy. Microsoft just as to make the WP7 UI competitive, and by all early reviews it is. Google, on the other hand, can make no such demands of its licensees.

There are other reasons listed, some less or less persuasive than the three I picked above depending on your viewpoint. No one reason may be enough to warrant the switch from "free" to a for fee model, but together they make a compelling case that Microsoft's business model is far from a fantasy, and that before you assume free is equal to zero, you should do a bit of due diligence.

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