Microsoft might drop licensing fees for Windows Phone and Windows RT to combat Android

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There’s no denying the massive market share that Android currently has in the mobile landscape. Android is basically crushing the competition globally. For example, 81.0% of all handsets shipped were running Android in Q3 2013. Compare that to iOS at 12.9% and Windows Phone at 3.6% for the same period.

Why is Android so dominant? Is it the number of apps in the Google Play store? Maybe it’s the “openness” of the platform and the ability to customize every aspect of the phone? Or could it be the licensing costs that OEMs pay Google to use Android (aka nil)? It could very well be those licensing costs since Microsoft is considering doing the same with both Windows Phone and Windows RT in the future.

Sources with The Verge have revealed that Microsoft is considering free versions of both Windows RT and Windows Phone. These plans are under heavy consideration by Terry Myerson. As part of the reorg at Microsoft this summer, Terry Myerson became executive vice president of Microsoft’s new operating systems division. Which makes him responsible for the software on Windows, Windows Phone, and Xbox.

So when is free Windows RT and Windows Phone coming to OEMs? According to those sources, they may be part of the “Threshold” update to Microsoft’s various products in 2015. The plans to remove licensing costs for Windows RT and Windows Phone aren’t close to being finalized within Microsoft, but they are being considered heavily

Traditionally Microsoft has made a lot of money off of their software licensing fees to OEMs, but Android has more or less pulled the rug out from under Microsoft. To combat the threat of Android, Microsoft is willing to drop these licensing fees from their partners. To make up for the loss of revenue from licensing Windows Phone, Microsoft would push for consumers to subscribe to software subscription services like Office and SkyDrive. Revenue could also be generated from the ads inside Microsoft apps.

This isn’t the first time we’ve heard rumors of Microsoft potentially cutting out the licensing fees for Windows Phone, although it is the first time we’ve heard of it for Windows RT. In early October, Bloomberg reported that HTC and Microsoft were in preliminary talks to drop the Windows Phone licensing fees for HTC handsets.

It’s a pretty risky thing for Microsoft to offer Windows Phone and Windows RT for free to OEMs. Pull up your finest armchair for analysis and let us know what you think.

Source: The Verge

Sam Sabri
Sam Sabri
101 Comments
  • Why couldn't they drop the fee earlier than 2015?  MS moves to slowly.  Once the decision is made, why can't it go into affect immeditiatly.
  • bureaucratics I'd have to guess.
  • Yeah, well... The Verge are claiming sources said this and that when the story had already been on the web. We really don't know what's happening behind the walls. Lets wait and see for ourselves. (F*ck the verge by the way)
  • Probably want to wait till android has 99% market share, you know how Microsoft likes to make those comebacks.....
  • What comebacks have Microsoft made
  • You're right, they've always been on top.
  • Spreadsheets. Word Processors. Browsers. Media players. Network servers. The unofficial "rule of MS" is that they get things right on the third try. WP still has a full generation to go before it's "good" by this logic.
  • Best decision MS will make in long time. Really this is no brainer. That's the only way to attract top cats (Samsung, Sony, HTC, ext) to start producing and backing Windows mobile hardware. The question is is it too late? Better late then never. Go ahead MS, don't let Google run with it.
  • Windows Mobile?
  • People keep bringing back WinMo into dicussion, but please remember that WP8 is of an entirely different breed. The jump is as high as he transition from 9x to NT at the beginning of this century.
  • What the OP meant is Windows mobile hardware aka Windows Phones, not Windows Mobile hardware.
  • I would imagine that a company as large as Microsoft, who has millions of investors to answer to, couldn't just change their business model that they've used for decades over night.  They've made their living on licensing the OS's to manufacturers.  There's all sorts of business cases that have to be made to the board of directors and investors.
  • But their market share for phones are 4% worldwide, something needs to change. They also lack in market share for tablets. The business model that they have used for decades for PC's and still have around 90% share worldwide is not going to change.
  • I agree, I wish things could move fast.  But when it comes to money and investing, particularly in a company as large as Microsoft and one that has been around as long, people don't like change.  They like what works.  So it's going to take a lot of convincing that Microsoft should shift gears and go the way of Android, even if it only is just the two OS's.  Even with the small market share in phones and tablets, Microsofts stock price has gone from ~$28 this time last year, to ~$38 today. 
  • The veracity of this statement depends, in large part, on what you consider a tablet.
  • Well said, that is light years in the mobile market which would make the move almost valueless by then.
  • Why do people keep saying this? Light years is a measurement of distance, not time.
  • If this came to fruition, hopefully there would be some sort of screening process to decide which OEMs are actually worthy of creating a WP handset. The last thing I want is a flood of no-name, sub-par Chinese phones tarnishing the platforms good name. There are many, many downright terrible Droid phones, the same cant be directed at WP8. YET (maybe)
  • Dropping the license doesn't mean anyone can use it. The current hardware guidelines and enforcements would still be in play.
  • That's true. If so, I could rest easy. I couldn't see this being anything but great for us as consumers.
  • This won't affect consumers at all. The price we pay for a device will remain unchanged. The only difference is that for every WP device sold, a larger chunk of the selling price will go to the OEM, which unfortunately still won't make WP ROI-competitive against good selling Android devices, simply due to the lack of WP sales volume. This move is also about convincing OEMs to stick with WP, despite MS now owning its own smartphone hardware design division (ex Nokia). Only by giving it away can OEMs be convinced that they have a fair chance to compete with MS' own devices.
  • +8x Nik :) they can drop the licence fee but don't immediately need to give it to everyone.
  • Not necessarily Chinese makers, but 3rd party manufacturers make pretty sick handsets for android. They basically make models of iPhones/samsungd, and put android on them. They are made be themselves, and they aren't very reliable. You are very lucky to get a working one, but they are great value and many people buy them who i know. Would be great to have them on windows phone!
  • It is not just Chinese. We can say in general there other developers who do not design quality phones. Even OS looses its quality when they built such devices.
  • Doesn't matter if it's No-name Kia from Bangledesh or Nokia from Finland, they all have to follow the minimum Chassis requirement.
  • Both use silly language. Jealous is the real racist, its always the racist that flaps the race card.
  • About time MS figured this out
  • This will be amazing, and hopefully really push the ecosystem further.
  • Great news. :-)
  • I personally hope they decide not to do this.  I'm afraid it will lead to them having to Scroogle us in some way to make the revenue up.  See above where they mention potentially putting ads in Microsoft apps.  For that to generate revenue the ads would have be relevant to the person seeing it and how would they do that?
  • They still have lots of patents they make money from. The revenue from Windows Phone (and probably Windows RT as well) isn't that massive to start with, so it's not a big loss, and could potentially result in a revenue gain because of cross-selling.
  • I think the ad-model will be different, the same way on outlook.com. Basically, they offer random ads without mining your data for relevance. I should be ok with that. Also, I would not mind pay extra to remove ads. Again, I am not like the average users.
  • They get 30% of app sales. There will be no need to Scroogle.
  • Once Microsoft absorbs Nokia, there will be almost zero revenue gained from Windows RT and Windows Phone licensing fees. The RT market is currently only Microsoft and soon-to-be-Microsoft Nokia, and the Windows Phone market is 90% Nokia as well.
  • Once again, too slow Microsoft. So tired of these "announce today, release in a few years" business models.
  • Not announced today, either. Just a leak of something that they are considering.
  • Revenue could also be generated from the ads inside Microsoft apps.
      Yes, who doesn't want to have ads in his apps.
  • Well, if the apps are free, why not? If you pay for them like I do XBOX MUSIC or XBOX LIVE, Then I don't condone it one bit.
  • I'm okay with seeing ads in third party apps since small developers need to make money as well.   But seeing ads in skydrive and other OEM apps from Microsoft? Screw that. I paid Microsoft to buy their phone and their OS, I do not want to see ads in their original apps.
  • Someone hasn't used any of the Bing apps on Win8/8.1 or an Xbox 360, or played something like Shuffle Party on their Windows Phone. There are a BUNCH of Microsoft original apps that have ads in them.
  • I know actions usually take a long time in big companies like MS, but waiting until 2015 to drop these fees is really too long of a wait.  They should drop the fees sooner while WP8 has some momentum.
  • Umm, could they put in a way for me to pay a fee or something so I don't have to deal with ads and what-not.
  • +++this...let consumers decide.
  • Agreed. Adding ads is basically turning unto Google.
  • Fees is only partial to Androids success. Android success relies on OEMs and Carriers wanting to differentiate themselves with skins and forks to standout.
  • I disagree. The decision to embark on developing an Android phone in the first place is most of the time predicated on the fact that Android is free. Look at Amazon. They probably would have never created the Kindle using Android as the platform if they had to pay a $8 or $9 fee for every device sold. Also since they don't need access to the Play store, they pay Google basically nothing. 
  • Notice I said partial in my statement. Fees are only part of the problem.
  • Android has the market share it does because it was the only real "reasonably-priced" competition to Apple, and offered device customization that was unavailable on iOS.  Had WP8 come along a couple of years sooner, then it may well be in the 30-40% range instead of where it is now.  Like a lot of successful products, Android is as much a result of good timing as anything else.
     
  • As far as updates are from Microsoft and OTA, manufacturers cannot mess up the OS and that they do not, God forbid, put ads in Microsoft apps; then I'll be merrry about it. Then again, how will Microsoft then be paid? Paradox? Oh, yes.
  • Some MS apps already have ads in them on Windows 8 and Windows Phone.
  • I'm not sure if this makes much sense since Microsoft is buying Nokia. On one side this could make the WP OS grow but it will also bring a lot more competition to the phones made by Microsoft (ex- Nokia).
  • Microsoft is buying a Nokia division (they buy the people who want to be be bought and the installations), not Nokia itself.
  • That distinction isn't a big deal for most people on here
  • So is this a good thing ?
  • They should drop the fees from tomorrow. MS took a long time to understand that the key is to spread the user base for more people using the services and advertising.  Droping the licence fees will speed that process.
  • Don't the android OEM's pay licensing fees to Microsoft for patents? There IS a cost to using Android. This whole argument is moot. OEM OS cost has nothing to do with MS's slow growth
  • They also pay Google for Google apps and services.
  • Not necessarily. I don't think Amazon pays for any MS patents inside of Android. The argument isn't moot because there are ways around MS's patents while using Android as a base.
  • they still pay ms only @ a discount rate as long as they publish apps for wp/w8/rt
  • The article is arguing that MS will do better if free because Android is free and it has done really well. The basis of that argument is false because Android IS NOT FREE. MOST android OEM's pay a not insignificant amount to MS for every android device they manufacture.
  • This would be a bad decision. How about make at least one killer, must have feature that no one else has. Bam. Problem solved.
  • Is a nice move .. They should also try to work on there APIs so we can get more features on different apps
  • I would have to sell off my Microsoft stock.
  • When your OS doesn't sell, your plans fail and you're seeing disaster come your way, you do what you can to survive. That's the point Microsoft has reached with WP and WRT.
    The dropping of the fees on WP is certainly to *try* to convince OEMs to produce WP once Nokia's gone. Except for OEMs to do it, there would need to be consumer demand. And lets face it, there isn't that much consumer demand for WP. Because the marketplace is still small compared to Android and iOS. This no-fee worked for Android because the only one they were competing with was iOS. That helped them present the OS as a customizable, open and free alternative to what OEMs had on their phones until then. The openness of Android helped them build quickly a big marketplace.
    Windows Phone has none of that. It's a closed OS with very little possibility of modifications, its market is closed like Apples and they have licensing fees. Now, even if you dropped the fees, you'd still be left with a closed OS and a small marketplace. That will still not incentive developers to waste resources on it.
    WP can not follow Android's path. Because it won't work. They should have been more concerned in these almost 4 years in developing an OS on pair with all the others and a step further. But no.
    Microsoft spent almost 4 years slacking, under developing and allowing distinguishable features like the Xbox-Games integration, die for lack of support from developers who got sick of burocracy.
    Now it's late. Even if they cut the fees and get some OEMs to produce some phones (Samsung, HTC and the Chinese. I don't see any other OEM joining in) that won't increase the consumer demand for them. Actually, if anything, Windows Phone is less attractive now than it was 3 months ago.
    And with the destruction of Nokia, there's absolutely no incentive for a regular consumer to pick a WP device now that no one is releasing Xbox titles anymore. Youll lose the Nokia quality in a few months, you lost distinctive features...the only thing left is Office. And even that will most likely end up arriving on Android and iOS sooner than later. Pretty much the same applies to Windows RT but in a larger scale since what takes consumers away from RT is the Pro version Windows itself.
  • Except Nokia is not "gone", it's under the Microsoft umbrella and Xbox game titles was the least reason why people would buy WP's.
  • 1 - Nokia is NOT under Microsoft's umbrella. Jesus Christ people, get your facts right. Nokia will be gone from the phone manufacturing business. They'll still exist. Microsoft will be paying Nokia for every single Nokia patent they use to build smartphones. What Microsoft bought was the people and the infrastructures. Nokia employees who wish to work for Microsoft and the installations in which Nokia had its D&S division is what was sold.
    So yes, Nokia IS gone from the phone manufacturing business (at least until 2016). 2 - Xbox games was the ONLY feature (apart from office) that distinguished WP from Android and iOS. I said its death made WP less attractive because now WP has basically NO feature that can make it stand out from Android and iOS. On the contrary. It has a lack of features that make it stand out for the worse.
  • If you wanted to get specific everybody knows that. We know the name isn't going to Microsoft and neither is their communications or HERE mapping service, just D&S. You make it sound like because the name is different that it won't have the same quality and innovation that they provide now. How would you know?  Yes Nokia is leaving the phone business, and it'd be stupid for them to make phones again after 2016. Why would they? Design teams gone to MS, all the people who brought the great phones to life are at MS. They'd have to rebuild manufacturing or outsource it to someone new and untrusted which is money Nokia doesn't have to do over again ESPECIALLY if they have to pay the Indian government. No kidding we know there is features missing. At the same time, not all people need them clearly.  Did Xbox titles make it distinguished? Sure it did. Were the games top notch like any of Xbox Live offerings? No. Did people care enough to buy it because of that unique ability? No. And that my friend is the origin of my comment. NO one cared about Xbox titles on mobile at the time, that's why it's been removed. In the future? Maybe and mobile devices will have much more graphics capabilities to make it worthwhile.    
  • Oh just dump your WP for an Android or iOS and be done with it already!
  • You wrote this useless comment on your iPad, did you?
  • How did you know!?  Buy my iPad looks very similar to a white L920...weird!
  • We're dooooooooooomed I tell you dooooooooooooomed. Oh and you missed the bit where MS purchased both the Lumia and Asha product lines but apart from that we're dooooooooooooomed.
  • Good idea. Time to get serious about this fight.
  • And they make money from the apps sold. More users on the platform, more potential app buyers, hence more income for Microsoft.
  • My understanding is that the patent royalties which are paid to MS in respect of an Android device are higher than the WP licensing fee for a device. The problem here isn't necessarily one of cost, it's more related to being late to market. If MS had a zero licence fee for WP, it still wouldn't make nearly the same money that Google makes from search. That's because most people would change the search engine from Bing to Google. MS couldn't require people to use Bing, because that would be against competition law.
  • Should have dropped it from the start
  • I've been saying this for OVER A YEAR now. For MS to pick up more OEM support and enthusiam, they need to seriously reduce or kill the licensing fee.   Killing the fee outright would pretty much send HTC full time to WP. Why keep paying those Android royalties to MS AND the Google services fee to Google when you can just go WP and only pay MS the developer license fee to upload apps to the WP store? It's a win-winfor MS & the OEMs.
  • I thought the licensing fees worked out better for OEM's to lower the Android royalties?
  • They should just drop licence fees now!! No one cares if adverts are in almost all apps. People don't mind paying to remove ads if an app is originally free but ads which take up time will really tick people off so Microsoft need to think carefully about how they implement advertising. Who agrees with me?
  • Free Licensing is not going to help wee bit against android.
  • Who cares about licensing fees when the platform is locked down and Microsoft is getting the $$$ from all app/content sales, not to mention records of your personal data and activities?  The license fee model was just a holdover from the old days of selling Windows and Office.  Abandoning the license fee would just mean that Microsoft is finally catching up to Google/Android in another area.  One down, a thousand more to go. I doubt this move is going to make WP/RT any more attractive to OEMs.  WP/RT continue to have miniscule market share because consumers choose other platforms that just plain work better: Android, iOS, and to a lesser extent Windows 8.  Even Microsoft's own software, Skype, works the worst on Windows Phone out of all the mobile OS's.  This kind of crap sends a clear message to consumers, developers, and OEMs that Microsoft is not serious about making a competitive platform.  Well, maybe they can make it to 10% market share in another 4 years thanks to cheap products like the Nokia 520/521 ... we'll see!
  • I work for a company that makes stuff people want, we are sold out through 2015. If MS really wants to speed up market share build something better than everybody elses. That is your problem MS. I love my Lumia, but it is seriously lacking. MS built WinXP and Win7 and could make WP8 the best if they wanted too.
  • Xbox titles failed because there were (are) no good exclusive Xbox titles. The years it took to get a very dull halo game didn't help. Microsoft put zero effort into games.
  • This may help increase market share but it doesn't matter until WP OS has the same features as Android and IOS.  C'mon, do they realize they will never reach parity until they speed up their update process.  I'm a big MS fanboy but it get's hard to keep defending them.  How many times can one say the next update will catch them up?  2 yrs and counting...
  • +1
  • I would take it a step further. Gives OEMs a revenue stream beyond the handset and share some of that 30% cut of app sales. I would propose 20% to Microsoft ,5% to the manufacturer of the device the sale was completed on, and 5% to the carrier or store that sold and supports the device. It costs MS nothing until they make something, and gives incentives to the whole channel to support MS. Keep the licensing fees, just do this.
  • In my opinion, the WP platform needs major improvements at it's whole - both OS & mainstream apps ecosystem. I cannot say for sure if this move will cause this improvement. For many reasons, maybe yes maybe not. Plus MS is very slow as many of you mention in your comments.
  • What about the apple route where ms makes its own phones.
  • Why would it be risky??
  • Good move.
  • This has been an entertaining thread to read. LOL
  • This is all conjecture as it's only a rumor from what I have read, but it makes a good deal of sense. Allow the transition of the Nokia service embed into Microsoft for a term, and give the other partners the free licensing incentive to continue to bring out devices based on RT and Windows Phone which would promote hardware competition in the ecosystem and give the consumer choice in hardware. It would be interesting to see it come to pass and sooner too if it actually is being considered.
  • Random but why couldn't they get the yellow 8x for that picture with all the phones? Yellow and white phones and then then the blue one smh
  •   They need to drop the licensing fees. Why would any OEM want to pay money to license the #3 mobile OS in the world and then probably take a loss on either unsold devices or low end hardware when they can get the #1 mobile OS in the world for free? As much as I love my 928 and and make fun of my friends for having to do soft and hard resets when things don't work on their Androids/iphone devices, the fact of the matter is that Microsoft isn't doing themselves any favors by charging companies for their mobile OS.
  • No, because then Microsoft will also have to follow in Google's foot steps of selling users' data to ad companies for revenue.
  • So many yellow Lumias, what a shame I couldn't get one!
  • hell no, the time i see ms pushing ads and bs is the time i stop using it, thats why i hate google for gods sake
  • Would seem a no brainer. Charge nothing for OEM to use their Mobile OS. Add the lower price or rising market share to the fact they receive fees for every Android device sold and it seems a win-win scenario.
  • I dont think MS will give the OS free to anyone. So I think the fears of Cheap Chinese WP is unfounded. MS is more likely to reach agreement with Individual OEMs to provide them with free OS.
  • Look at the list of the Windowsphone uservoice, i think if they could clear all those features requested, i think it would be a good start, We are unable to do a lot of things that was possible on symbian. A lot of these missing features frustrate a lot of users, They took us years back then start to move forward at a snails speed to catch up and upto now we haven't yet reached where we were!  Here in third countries, HERE maps shows old maps, we update them but it takes not less that 1 year for the update to be effective, With Google, its just few days. Nokia concentrate on those areas where Google is dominant ignoring us here. If i am able to navigate using Gmaps, why can't i do it on HERE Drive+ (on L920) Those small (old) features they ignored matters to us, it depends on which Country you are in. Right now in my Country Nokia used to be a the best brand everyone wished to have but right now the phones are nowhere to be seen, most phones in shops are Samsung phones.
  • Just love the catfights people here!Great for me i read more than just news here!!!Keep fighting people!!!LOlz
  • If MS is going to put ad even in Office and Skydrive, even the current 3+% will get reduced. I'm using Windows Phone because of no-ad reason atleast in core applications. If they start putting ad, in going to switch to iPhone.