Microsoft earns billions from Android, so why do they feel ‘Scroogled’?
The realm of mobile technology has a lot of nuance. Whether it’s HTC trying to rebuild their brand, Huawei leaving the US market, or Samsung continuing to steamroll the world, we always have something interesting going on. Part of that discussion is patent technology, and how it affects the changing landscape.
Often ambiguous, the amount earned per device for licensed patents is still interesting. We’ve seen some court cases, but those are often for past damages. We never see the out-of-court decisions, or other closed-door deals that are negotiated.
Not unusual, but still curious, are analyst estimates of just how much these patent licences earn. Speculation is often wild, though never proven. If we take a look at Microsoft, and their licensing agreements with the various Android OEM’s, the patent situation becomes muddled… but still fascinating.
Some analysts estimate Microsoft makes an average of $1 for each device, while others cite ‘sources’ who point to $8/device as a solid number. Those sources are equally mysterious to the numbers they spew forth, meaning this is still a game of intrigue. Recent reports are no different, and like the rest, based on a very educated estimate of alleged fact.
A recent projection by tech analyst Gartner suggests Microsoft could earn $8.8 billion from Android licenses by 2017. Of course, this is all based on roundly speculative earnings. This number of $8.8 billion is assuming Microsoft earns an average of $1 per device in royalties. If that number were $8 per device, Microsoft stands to earn $3.4 billion in 2013 alone.
Again, these estimates are mired in anonymous hearsay and innuendo. If they are accurate, so much more about the mobile technology space starts to erode. If Microsoft, which has a stranglehold on the PC market is actually doing so well from Android licensing, why take such an aggressive approach against it?
With steady declines in computer sales annually, it may represent a loss for Microsoft. Device sales can be directly linked to new MS Office licenses, or other software purchases. Microsoft also earns a royalty from each Windows PC sold.
So, why is the PC not selling? With other devices occupying our time, and an increasing move to mobile, we just don’t use them as much. A laptop is a great, low-profile solution… but they’re hardly mobile. An uptick in phone and tablet sales cannibalize PC sales, which fell 14 percent last quarter alone.
The PC has also become more reliable, for a longer time. The rapid growth in processor speed and need for memory has given us low cost PCs that last for years. Compound that reliability with lower use and other devices, then it only further complicates sales of the PC.
Even if the estimates are accurate, and Microsoft actually makes $4-8 per device, they clearly feel they can do better with their own OS. Windows 8 is meant to be the first true cross-platform operating system for Microsoft. It missed the mark for many of us, but is still a really good first step. Sales of PCs are slow, and the expensive Surface tablet continues to sputter. Windows Phone is a niche device right now, but Microsoft has bigger plans for all three markets. It seems as though they fully understand the ground they’re losing is not easy to find again.
If Microsoft can leverage Windows 8 against the user, it could persuade us into upgrading our tech. It could also bring customers back to Microsoft. The declining PC market, a very small share of the mobile market, and no mobile platform to speak of cost Microsoft valuable time. Now that the customer has gone elsewhere, and invested in a new ecosystem, Microsoft has to battle to earn them back.
Those Android patent licenses are solid ground in which to stand and fight. Nobody can petition a court to revisit a decision with no new evidence, and waging war against Google or Android is not anti-competitive. Android is also massively successful, so the flow of income from those licenses isn’t going to erode like Microsoft’s market share and sales have.
It’s about money, and Microsoft wants as much as they can cobble together. Their methodology for doing so may be questionable, but their motive is sound. To lob hand grenades against the very platform that earns you so much in royalties seems ludicrous, but Microsoft has nothing to lose. Literally.