Microsoft apps pre-installed on Android devices. New strategy, or old strategy revised?
Articles like this one are catching my attention. Not for what they explicitly say, but what I think that they may be saying between the written lines.
There isn't any inherent reason for OEMs to agree to this. Especially since Android has competing 1st party offerings for much of these. Also, with Samsung being mentioned as one of the original partners I think there is a clue here as to what is actually happening. But, I don't know for sure, as none of this is explicitly stated. Anyway, here is what I think is happening.
I think mention of Samsung here is interesting because not long ago they stopped paying Microsoft royalties for patents which Microsoft says Android violates and which Samsung subsequently uses in their phones. It was mentioned a while back that they eventually came to an agreement, but I'm not sure if the details of that were ever made public. But, I suspect that this is either the form of that agreement of part of it.
Basically, it is possible that Microsoft either reduced or even eliminated the royalty demands in exchange for pre-loading MS software on their devices. It would save both companies plenty in legal fees and save Microsoft the risk of potentially having the asserted patents invalidated. At a time when Microsoft is trying to cement its position in some areas and re-attain it in others, this could actually be quite lucrative for them. Lets not forget that the apps Microsoft is bundling here all have rather explicitly means of being monetized, not to mention, if they go over well with the audience could help with brand image.
Word, Excel, Power Point and One Note all have tie-ins back to Office 365, which of course has a subscription model. It also promotes the purchase of perpetual licenses for Office if subscription isn't your thing. OneDrive sells additional storage as any other online storage provider does (or, incidentally, a HUGE amount of free storage also comes with the aforementioned Office 365 subs). And, lastly, Skype can be used to make calls to landlines at a cost.
Obviously, only a small percentage of users will actually spend additional money. But, it would allow them to reduce the risk of long term legal battles while still having some amount of additional more PR friendly revenue.
It has been a while since I looked at the Windows Phone versions of these offerings where applicable, but ad revenue is another possible way these could be monetized in their free forms.
This would also explain where the explosion of partners is coming from. Many of those listed are also known to be licensing those patents from MS already. And, if such a deal could lessen or eliminate royalties you can bet that pretty much every small fry OEM would jump on board. Android phones have long been a race to the bottom and margins are scarce. Every little bit helps.
I'm also guessing that Samsung helped prove that the model "works". I don't think MS would bother with such a move unless it was generating revenue for them from Samsung (even if this isn't about altering existing royalty contracts).
Of course, it is a smart move either way. If you phone comes with a word processing application pre-installed and it does the job, then you're unlikely to go looking for a competing app. This was the premise behind the IE anti-trust suit years ago.
And now we leave the realm of well founded speculation and dive into the realm of pure speculation:
I think the smartest play here is OneDrive. The Internet of Things (or IoT) seems like all but an inevitability as the next tech revolution. But most IoT devices are storage constrained. Even a phone or tablet has considerably less storage than a standard laptop or desktop and the average person needs a place to store things like pictures, music and videos which can then be accessed across devices easily. OneDrive isn't 100% of the way there yet... but the recent changes in Xbox Music and a deeper integration into iOS and Android might mean that in short order Microsoft will have the only truly convenient, cross platform solution to this problem. And as more and more storage constrained devices emerge OneDrive will likely become the victor here.
If data plans can become cheaper over time, this could become a means of eradicating a concern with on board storage size. I doubt flagship phones will ever rebound back to something like a 4-8GB storage, but if this caught on it could be a valid reason to save money by not trying to go beyond the current 32-64GB models that are common.
The piece that is missing today is a means of easily subsidizing the cost of additional OneDrive storage. But, it isn't insane to think that if adoption becomes great enough that you might see cell carriers absorbing the cost (think of it being sold as getting free 1TB of OneDrive storage for life your contract). Carriers negotiate a lower price in exchange for a huge volume of customers and work out some mechanism of linking a paying customer with a MSA and end users don't have to see that they are paying for this. That would be brilliant by the way!
Not sure it will pan out like that. As I've mentioned in the past, MS tends to be well behind the curve in advertising and negotiating new agreements. But the upside is neither of their two largest competitors has shown any interest in such a cross platform strategy. Apple only cares about Apple and Google goes out of their way to shun Microsoft. What Microsoft has to offer is a solution that benefits you regardless of your current or future platform. And in that respect a carrier can justify making it a part of their plans because it shouldn't matter which (smart) phone they bundle it with. Since BlackBerry carriers seem to have tried to avoid OEM specific device plans. Even iPhones sell on the same plans as Android and Windows phones today, which is why I believe we haven't really seen much in this area historically.
But, if they could swing it, this would be infinitely more valuable to Microsoft than the royalty fees ever were.
And that is, in my opinion, where the real money. Carriers hold the power. Mortgage companies, cell carriers and car companies are the companies which are the most successful at subscriptions. Anything that can justifiably be tied into one of those has a high chance of success. The only thing making the carriers a hard sell is that they don't want to give up their margins and their customers don't want to pay more, hence the speculation that this would only start off in higher tier plans if it happens at all.
The bottom line is simple though... if Microsoft of carriers were to advertise this right, they have the only solution today which I think is viable to bundle with a carriers service contracts. And that makes it potentially quite lucrative and could make this whole pre-bundling with Android an even smarter move. If they can convince Apple to pre-load it as well, prior to such a move they would be in an even stronger position (but I doubt that will happen).
There isn't any inherent reason for OEMs to agree to this. Especially since Android has competing 1st party offerings for much of these. Also, with Samsung being mentioned as one of the original partners I think there is a clue here as to what is actually happening. But, I don't know for sure, as none of this is explicitly stated. Anyway, here is what I think is happening.
I think mention of Samsung here is interesting because not long ago they stopped paying Microsoft royalties for patents which Microsoft says Android violates and which Samsung subsequently uses in their phones. It was mentioned a while back that they eventually came to an agreement, but I'm not sure if the details of that were ever made public. But, I suspect that this is either the form of that agreement of part of it.
Basically, it is possible that Microsoft either reduced or even eliminated the royalty demands in exchange for pre-loading MS software on their devices. It would save both companies plenty in legal fees and save Microsoft the risk of potentially having the asserted patents invalidated. At a time when Microsoft is trying to cement its position in some areas and re-attain it in others, this could actually be quite lucrative for them. Lets not forget that the apps Microsoft is bundling here all have rather explicitly means of being monetized, not to mention, if they go over well with the audience could help with brand image.
Word, Excel, Power Point and One Note all have tie-ins back to Office 365, which of course has a subscription model. It also promotes the purchase of perpetual licenses for Office if subscription isn't your thing. OneDrive sells additional storage as any other online storage provider does (or, incidentally, a HUGE amount of free storage also comes with the aforementioned Office 365 subs). And, lastly, Skype can be used to make calls to landlines at a cost.
Obviously, only a small percentage of users will actually spend additional money. But, it would allow them to reduce the risk of long term legal battles while still having some amount of additional more PR friendly revenue.
It has been a while since I looked at the Windows Phone versions of these offerings where applicable, but ad revenue is another possible way these could be monetized in their free forms.
This would also explain where the explosion of partners is coming from. Many of those listed are also known to be licensing those patents from MS already. And, if such a deal could lessen or eliminate royalties you can bet that pretty much every small fry OEM would jump on board. Android phones have long been a race to the bottom and margins are scarce. Every little bit helps.
I'm also guessing that Samsung helped prove that the model "works". I don't think MS would bother with such a move unless it was generating revenue for them from Samsung (even if this isn't about altering existing royalty contracts).
Of course, it is a smart move either way. If you phone comes with a word processing application pre-installed and it does the job, then you're unlikely to go looking for a competing app. This was the premise behind the IE anti-trust suit years ago.
And now we leave the realm of well founded speculation and dive into the realm of pure speculation:
I think the smartest play here is OneDrive. The Internet of Things (or IoT) seems like all but an inevitability as the next tech revolution. But most IoT devices are storage constrained. Even a phone or tablet has considerably less storage than a standard laptop or desktop and the average person needs a place to store things like pictures, music and videos which can then be accessed across devices easily. OneDrive isn't 100% of the way there yet... but the recent changes in Xbox Music and a deeper integration into iOS and Android might mean that in short order Microsoft will have the only truly convenient, cross platform solution to this problem. And as more and more storage constrained devices emerge OneDrive will likely become the victor here.
If data plans can become cheaper over time, this could become a means of eradicating a concern with on board storage size. I doubt flagship phones will ever rebound back to something like a 4-8GB storage, but if this caught on it could be a valid reason to save money by not trying to go beyond the current 32-64GB models that are common.
The piece that is missing today is a means of easily subsidizing the cost of additional OneDrive storage. But, it isn't insane to think that if adoption becomes great enough that you might see cell carriers absorbing the cost (think of it being sold as getting free 1TB of OneDrive storage for life your contract). Carriers negotiate a lower price in exchange for a huge volume of customers and work out some mechanism of linking a paying customer with a MSA and end users don't have to see that they are paying for this. That would be brilliant by the way!
Not sure it will pan out like that. As I've mentioned in the past, MS tends to be well behind the curve in advertising and negotiating new agreements. But the upside is neither of their two largest competitors has shown any interest in such a cross platform strategy. Apple only cares about Apple and Google goes out of their way to shun Microsoft. What Microsoft has to offer is a solution that benefits you regardless of your current or future platform. And in that respect a carrier can justify making it a part of their plans because it shouldn't matter which (smart) phone they bundle it with. Since BlackBerry carriers seem to have tried to avoid OEM specific device plans. Even iPhones sell on the same plans as Android and Windows phones today, which is why I believe we haven't really seen much in this area historically.
But, if they could swing it, this would be infinitely more valuable to Microsoft than the royalty fees ever were.
And that is, in my opinion, where the real money. Carriers hold the power. Mortgage companies, cell carriers and car companies are the companies which are the most successful at subscriptions. Anything that can justifiably be tied into one of those has a high chance of success. The only thing making the carriers a hard sell is that they don't want to give up their margins and their customers don't want to pay more, hence the speculation that this would only start off in higher tier plans if it happens at all.
The bottom line is simple though... if Microsoft of carriers were to advertise this right, they have the only solution today which I think is viable to bundle with a carriers service contracts. And that makes it potentially quite lucrative and could make this whole pre-bundling with Android an even smarter move. If they can convince Apple to pre-load it as well, prior to such a move they would be in an even stronger position (but I doubt that will happen).
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