Android Licensing: HTC Capitulates as Samsung Stands Fast

by Matt Klassen on November 15, 2012

In May of 2011 I wrote a piece detailing the revenue Microsoft was able to generate off signing lucrative licensing deals with the smaller Android partners. It was a delicious piece of irony, given that at the time Microsoft signed the deal with HTC it was estimated that the Redmond Company made more off every Android phone sold then it did off licensing its own Windows Phone brand.

Now almost two years later HTC is unfortunately losing out once again, having recently capitulated to Apple’s legal pressure, forced yet again to sign a licensing deal worth hundreds of thousands of dollars per annum in order to settle its ongoing patent dispute. One positive—for Apple fans and those sick of patent wars—in all of this, some analysts say, is that HTC’s loss might finally persuade Samsung to follow suit, finally settling its global patent war with Apple.

But while it’s easy to pick on the lesser lights of the Android world, it’s a little more difficult to twist Samsung’s arm, as the Korean company has categorically stated that it will not negotiate with Apple on their patent infringement claims, stating that ultimately the courts will prevail on Samsung’s side…or at least some of them. But what does all of this mean for Android itself? Can it survive this patent war?

While Apple has claimed the most significant victory to date in this ongoing patent war, having won in California, the dispute continues to rage across the globe, with both companies winning and losing in key markets. But following HTC’s capitulation we were once again reminded that this battle won’t resolve itself soon, as both Samsung and Apple have dug in for what is shaping up to be a drawn out (and quite boring) war of attrition.

The interesting story for me in all this, however, is that despite Samsung’s refusal to negotiate the terms of a licensing deal, it seems that competitors are slowly yet consistently nibbling at the edges of Android’s profitability. Sure Google offers its popular Android operating system free of charge, the problem is that its not free for its Android partners, as almost every company using Android has signed one licensing deal or another with Microsoft or Apple (or both), deals that ultimately make Google’s OS look less attractive to this struggling to survive in the Android ecosystem.

I can’t help but think this is all quite frustrating for Google as well, given the fact that all of the revenues the search engine giant generates off Android are linked to advertising and not to licensing, meaning that Google sits idly by while it arch-enemies make money of the growing popularity of Android devices. That said, however, I’ve often remarked that this exact scenario is how Google keeps its partners suckling from the Android teat.

In the end, I can’t help but think that given the struggles of every Android partner save Samsung it will only be a matter of time before producing Android phones will simply no longer be profitable. But what options do companies like HTC really have in an OS market dominated by two (perhaps three) platforms? Simply put, they settle, they lose money, and they continue to lean on Android until they fade into irrelevance. Not much of a long term business strategy I would say.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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