In an unprecedented move, Microsoft has dropped licensing fees from at least two Indian manufacturers Lava and Karbonn for using its Windows Phone operating system, reports Times of India. The company had announced at Mobile World Congress, that it had signed a licensing agreement with these manufacturers to release dual-boot handsets running on Android and Windows Phone.
Multiple sources told TOI that Microsoft has been negotiating with Indian phone companies to produce affordable Windows Phone devices since last year. The agreement however, was signed only after Microsoft waved off Windows Phone licence fee. The publication quotes a senior executive as saying that free Windows Phone is part of a strategic partnership. “For both Microsoft and us, it is an experiment. Windows Phone still doesn’t have lot of appeal in the market but now that it doesn’t have any licence fee, it becomes easier for us to experiment with it,” the executive said.
This is a major shift in policy for a company that had depended on licensing fees for revenue. Microsoft’s new CEO Satya Nadella had said that the company will focus on “mobile and cloud-first world” rather than the devices and services mantra adopted by former CEO Steve Ballmer.
The latest deal seems to be exclusive to these smaller manufacturers who have an increasing marketshare in India as of now. It is not clear if the company plans to expand such a deal to mobile manufacturers around the world depending on the response to this concept in India.
Nokia effect? Microsoft was charging licensing fees from Nokia, but it was deducted from the $250 million it paid to the Finnish mobile manufacturer to become a Windows Phone only smartphone manufacturer. However, ever since Microsoft announced the acquisition of Nokia, other manufacturers have pretty much stopped making Windows phones. By offering it for free, Microsoft has made it an option again for these OEMs who make Android devices only as of now. There are also reports of Microsoft asking HTC to put Windows Phone operating system as a secondary option on its Android handsets for a significantly reduced (or even zero) license fees.
It’s not clear if this dual-boot strategy will work, but this way, it’s easier for Microsoft to convince OEMs to put their OS on the devices. It is also easier for OEMs to sell these devices rather than trying to peddle phones that run only Microsoft’s mobile operating system.
Monetisation: Microsoft can still make money when people purchases apps, or in-app products from Windows Store in these phones. Vineet Durani, Director, Windows Phone category at Microsoft had told Medianama in October last year that it is working with telcos for enabling carrier billing on this store. The company has unified billing payment system for PC, Mobile and Xbox platforms last year. This gateway however supports only credit card, which a lot of Indians don’t have. So carrier billing is an important part of the company’s strategy in India.
Microsoft reportedly also earns $2 billion from Android royalty payments and it’s not clear how that will be affected by this dual-os strategy. Will the company waive off these fees for phones that also run Windows Phone OS?