3 ms·

One of the things Microsoft has done well is to pick the right pricing plan and the right industry. By making it a per unit fee on Smartphones you make it easy

One of the things Microsoft has done well is to pick the right pricing plan and the right industry. By making it a per unit fee on Smartphones you make it easy for manufacturers to pass the cost on to the consumer who then subsidizes it through a contract with their provider. The $5 per unit HTC pays Microsoft is only $.20 a month when passed directly on to the consumer and spread out over 2 years.

marcf 15y ago
It undeniably hurts HTC's profits though. Sucks for those that have to pay this Microsoft tax. And it also does hurt Google in the sense that this cost is being passed to Google's customers rather than Google taking this burden.
- protomyth 15y ago
  I would imagine the S3 purchase has the nice side effect of offsetting some of the costs per phone and gaining HTC their own licensing property. I also see the S3 purchase as helping them in the whole customized ARM game. Cell phones are massive chunks of patents and HTC knows the space well.
- nextparadigms 15y ago
  HTC is paying $5 per phone, but they also get protection against Apple. I don't think HTC would've signed the deal with Microsoft, if it wasn't for the Apple lawsuit.
  - marcf 15y ago
    I figure though HTC's profit per phone is likely on the order of $20 or less? (I'm guessing here but I should be in the ballpark.) Thus $5 per phone is hugely significant.
    - darklajid 15y ago
      Are you really serious/sure? http://www.isuppli.com/Teardowns/News/Pages/HTC-Droid-Incredible-Carries-163-35-Bill-of-Materials-iSuppli-Teardown-Reveals.aspx http://www.isuppli.com/Teardowns/News/Pages/HTC-Droid-Incred...
      - woobar 15y ago
        Bill of Materials is just a fraction of their expenses. We can estimate per phone profit from the quarterly report [1]. - Q1 after-tax profit was NT$14.83bn - Handset shipment for 1Q was 9.7mn units ~ NT$1500 per phone (~US$55/per phone) [1] http://www.corpasia.net/taiwan/2498/irwebsite/index.php?mod=announcedetail&id=391 http://www.corpasia.net/taiwan/2498/irwebsite/index.php?mod=...
SwellJoe 15y ago
This, of course, has the side effect (or possibly even intended effect) of making Windows Phone seem more cost-effective. "Free" software isn't free, if it includes a Microsoft tax, anyway. I just hope the large Android ecosystem starts pushing for patent reform, and soon. This is just fundamentally broken market behavior...Microsoft is getting protection money. They don't even have to provide products people want, and they still make money on every smart phone sold.
- btilly 15y ago
  Microsoft loves arrangements where you have to pay them whether or not you're using their product. In fact this was the subject of the first anti-trust case against them which was settled out of court. (Not many people remember this one.) See http://www.associatedcontent.com/article/467487/the_antitrust_cases_against_microsoft_pg2.html?cat=37 http://www.associatedcontent.com/article/467487/the_antitrus... for confirmation.
  - joelhaus 15y ago
    Doesn't this practice violate the 1994 consent decree with the FTC? The linked article states that MS could only charge computer manufacturers if MS software was installed. I guess the decree must have expired, because it seems that the Android OS situation directly applies. BTW, fascinating article, thx! At the time, all of the MS anti-trust stuff seemed so distant, but given the current tech landscape, it seems to have taken on much greater importance.
    - SwellJoe 15y ago
      It certainly does seem to tell us something about the deep-seated character (or lack thereof) within the company.
    - btilly 15y ago
      The decree was that they couldn't charge by the machine, regardless of whether MS software was installed. I believe that Microsoft's response was to charge by the CPU instead, which technically wasn't covered in the decree, but had almost the same effect. In this case they aren't charging by the CPU, they are charging by the operating system that ships with Microsoft's "intellectual property". If they got away with the per-CPU crapola 15 years ago, nobody will blink an eye at the current arrangement.
nextparadigms 15y ago
I don't understand that logic. It's $5 taken from the cost of the device, and because of those $5 baked into the cost, it probably makes the devices $10-$15 extra at the retail store. Also they are planning on charging Samsung $15 license fee, so that would be a lot for a $150 phone.

marcf 15y ago

It undeniably hurts HTC's profits though. Sucks for those that have to pay this Microsoft tax. And it also does hurt Google in the sense that this cost is being passed to Google's customers rather than Google taking this burden.

protomyth 15y ago
I would imagine the S3 purchase has the nice side effect of offsetting some of the costs per phone and gaining HTC their own licensing property. I also see the S3 purchase as helping them in the whole customized ARM game. Cell phones are massive chunks of patents and HTC knows the space well.
nextparadigms 15y ago
HTC is paying $5 per phone, but they also get protection against Apple. I don't think HTC would've signed the deal with Microsoft, if it wasn't for the Apple lawsuit.
- marcf 15y ago
  I figure though HTC's profit per phone is likely on the order of $20 or less? (I'm guessing here but I should be in the ballpark.) Thus $5 per phone is hugely significant.
  - darklajid 15y ago
    Are you really serious/sure? http://www.isuppli.com/Teardowns/News/Pages/HTC-Droid-Incredible-Carries-163-35-Bill-of-Materials-iSuppli-Teardown-Reveals.aspx http://www.isuppli.com/Teardowns/News/Pages/HTC-Droid-Incred...
    - woobar 15y ago
      Bill of Materials is just a fraction of their expenses. We can estimate per phone profit from the quarterly report [1]. - Q1 after-tax profit was NT$14.83bn - Handset shipment for 1Q was 9.7mn units ~ NT$1500 per phone (~US$55/per phone) [1] http://www.corpasia.net/taiwan/2498/irwebsite/index.php?mod=announcedetail&id=391 http://www.corpasia.net/taiwan/2498/irwebsite/index.php?mod=...

SwellJoe 15y ago

This, of course, has the side effect (or possibly even intended effect) of making Windows Phone seem more cost-effective. "Free" software isn't free, if it includes a Microsoft tax, anyway. I just hope the large Android ecosystem starts pushing for patent reform, and soon. This is just fundamentally broken market behavior...Microsoft is getting protection money. They don't even have to provide products people want, and they still make money on every smart phone sold.

btilly 15y ago
Microsoft loves arrangements where you have to pay them whether or not you're using their product. In fact this was the subject of the first anti-trust case against them which was settled out of court. (Not many people remember this one.) See http://www.associatedcontent.com/article/467487/the_antitrust_cases_against_microsoft_pg2.html?cat=37 http://www.associatedcontent.com/article/467487/the_antitrus... for confirmation.
- joelhaus 15y ago
  Doesn't this practice violate the 1994 consent decree with the FTC? The linked article states that MS could only charge computer manufacturers if MS software was installed. I guess the decree must have expired, because it seems that the Android OS situation directly applies. BTW, fascinating article, thx! At the time, all of the MS anti-trust stuff seemed so distant, but given the current tech landscape, it seems to have taken on much greater importance.
  - SwellJoe 15y ago
    It certainly does seem to tell us something about the deep-seated character (or lack thereof) within the company.
  - btilly 15y ago
    The decree was that they couldn't charge by the machine, regardless of whether MS software was installed. I believe that Microsoft's response was to charge by the CPU instead, which technically wasn't covered in the decree, but had almost the same effect. In this case they aren't charging by the CPU, they are charging by the operating system that ships with Microsoft's "intellectual property". If they got away with the per-CPU crapola 15 years ago, nobody will blink an eye at the current arrangement.

nextparadigms 15y ago

I don't understand that logic. It's $5 taken from the cost of the device, and because of those $5 baked into the cost, it probably makes the devices $10-$15 extra at the retail store. Also they are planning on charging Samsung $15 license fee, so that would be a lot for a $150 phone.