Microsoft Says the Hidden Costs of Android Are Expensive

[Jason Dunn]

<div class='os_post_top_link'><a href='http://gizmodo.com/5625796/microsoft-android-hidden-costs-are-expensive' target='_blank'>http://gizmodo.com/5625796/microsof...s-are-expensive</a><br /><br /></div><p><em>"According to Business Insider, Microsoft says that Android's hidden manufacturing costs are much higher than their own $15-per-unit Windows Phone 7 license. They have some very good points, but others are not so good. Here are their arguments..."</em></p><p><img src="http://images.thoughtsmedia.com/resizer/thumbs/size/600/wpt/auto/1283397990.usr1.jpg" style="border: 1px solid #d2d2bb;" /></p><p>Go check out the article and tell me what you think - is Microsoft right? Are the costs of a "free" operating system higher than most people think? I think there's definitely something to be said for an off-the-shelf experience that doesn't require customization to work properly, but thus far, the deficiencies in Android's offering hasn't exactly been slowing down the adoption rate...</p>

[randalllewis]

Gizmodo's argument is simplistic and overstates the argument Microsoft is making. Microsoft did not claim that the hidden cost they listed were ALL in play with every Android phone. The point was that in any case where a manufacturer wanted to give an Android phone more than the basic OS that Google provides free, that there is a cost to each addition that would not be present with a WP7 device.

Gizmodo then includes rumors (Google secretly helping HTC fight Apple), opinion (you don't need Office integration) and circular argument (the cost of drivers is a "not-so-good" argument but Google wants OEMs to differeniate and thus the cost of drivers is necessary).

These extra costs, any number of which may be imbeded in a particular Android phone, are real and partially offset the free OS. Microsoft didn't claim that this model is somehow bad and I am certain they've noted how successful it has been for Google thus far. Microsoft was responding to a blogger who made a rather bold assertion that Microsoft's model of charging $15 per unit for the OS is DOA because free is always better.

[Stinger]

The problem with the $15 license fee is that it doesn't scale very well. When you're selling a million devices a year, the fee is probably worth it in saved development costs.

However, we're now at the point where the biggest smartphone manufacturer is selling around 100 million units per year and growth is still strong (850%+ YoY for Android). Suddenly, adding your own finishing touches vs. spending $1.5 billion on per-unit license fees is a no-brainer.

Windows Phone 7 will never gain significant marketshare until Microsoft changes its licensing structure.

[Fritzly]

From MS blog:
"While the final integration of Windows Phone 7 with our partners’ hardware, software, and networks is underway, the work of our internal engineering team is largely complete."

So WM7 is not a turn key product; the bottom line though is that, as others already pointed out, the verticalization of the costs: if your development costs are spreaded over one million units or one hundred million ones the incidence per unit change dramatically; even the cost of the hardware would, in a more limited percentage of course, decrease.

But in the end these arguments are not what will make the product succesfull or not: users acceptance is the key. The iPhone is expensive still sells without problems. MS Office is expensive and still is the most relevant source of revenues for MS.

IMO the most important factor will be how MS follow up with its promises of OTA updates, how fast we will see the first ones, how often etc. etc. This factor is one of the key of "Windows" success: I buy a Dell but I do not have to wait for Dell to release fixes and updates.
The past history is not very reassuring but I hope that MS will keep up with teir promises.

[Craig Horlacher]

Wow, talking about TCO before their product is even released?!?!? That seems strange to me.

I'm pretty sure it's a non-factor. People will consider things like features and having a billion songs they already bought locked to iTunes rather than TCO. Some people will really want XBox Live integration on their phone and they will get WinPhone 7.

[Steven McPherson]

Adding "finishing touches" isn't going to be free. It will come at a cost. Depending on the "touch" it might be more than $15/device license fee.

I think all carriers can co-exist and be succesful with both models. I'd be more concerned about how successful Microsoft will be with the OS, but the license fee isn't going to be a limiting factor. I think the real question still is Can Microsoft bridge the gap between the world of "personal", "work" and "media" communications and use cases with a single device.

From what I've seen, the answer is yes, but only time will tell.

[Sven Johannsen]

Well, in the words of Steve Balmer, and I heard it first hand, "There is no such thing as a free puppy." In either case, I bet there are way more intricacies than anyone here, or there, knows about.