Paying the price
If I suggested that one of the biggest beneficiaries of every Android handset sold was Microsoft you'd think: ‘Yeah, OK Scott, maybe it's time to stop writing for now and gather your senses over the weekend.' But bear with me on this one.
An analyst has estimated that Taiwanese smartphone giant HTC pays Microsoft five dollars for every Android phone it sells, reports Business Insider. Why would it do such a thing? Because Microsoft owns a bunch of patents for technology used in Android, and HTC came to an arrangement with Microsoft a year or so ago to pay it for the privilege of using them. This analyst reckons it comes to five bucks a pop.
The story also mentions that Microsoft is suing other Android handset-makers, looking for around ten dollars per device in that case. However it seems to have singled out Motorola for its legal ire, which is coincidentally one of its few former mobile partners to completely abandon WP7. We're not aware of the likes of Samsung and LG suffering a similar fate, despite both selling more Android handsets than Moto.
And it looks like Microsoft is in a reasonably strong position, thanks in part to the fact that Google has little IP of its own to horse trade with, which is often the way these patent spats are resolved. We have to assume Microsoft had a reasonably strong case, or HTC wouldn't be handing over such a large chunk of its margins, and we also have to assume OEMs not currently being sued by Microsoft have come to a similar arrangement.
Analyst blogger Horace Dediu wasted little time in looking into the implications of this revelation. He reckons Microsoft has admitted shifting around two million WP7 licenses, and at an estimated cost per license of $15, providing revenue of $30 million. But with estimated HTC Android sales of 30 million units, that would mean Microsoft gets five times as much revenue from that source than WP7 itself.
Dediu entitled his blog post Microsoft has received five times more income from Android than from Windows Phone, but that only includes HTC. Surely the likes of Samsung are at least compensating Microsoft in kind for the use of the same patents, so the net benefit to Microsoft of these patents potentially runs into the hundreds of millions.
In fact, the whole Android ecosystem has the potential to be a feeding frenzy for patent litigation, with Apple and Oracle among the other giants to have a go, and Google looking somewhat cavalier about its approach to IP. The worrying thing for Android OEMs is that much of the litigation is directed at them, rather than Google itself.
The icing on the cake for Microsoft could be if, as a result of all this patent litigation, WP7 actually ends up being cheaper than Android, which Google itself charges no license fees for. Maybe Nokia didn't make such a bad call after all.