Android: Too Much Choice

  • Posted: 15 January 2011 06:25 PM #46

    I wonder how Google is really doing with Android.  Are they getting enough additional advertising income to offset their development and support costs?

    What started me thinking was a report (I don’t remember where I read it) that the real reason Google is not supporting H.264 is that they don’t want to pay the licensing fees.  I find that hard to believe but then…

    There are problems both with the business plan and the product.

    The business plan presumes that there will be a lot of competition amongst the android based phone manufacturers with only one or two emerging and dominating this market segment.  There has been plenty of competition but no manufacturer has developed enough volume to really become dominant.  This results in high manufacturing costs.  Support from peripheral manufacturers and software developers is difficult because the products are not interchangeable.  Furthermore, the rapid refresh rate of the
    OS leads to short product life times which don’t give the manufacturers or carriers enough time to nail down their profits.

    Android phones have been strongly marketed by Verizon to the tune of a reported 100 million dollars.  What happens now that Verizon has the iPhone?

    What happens to old cell phones?  The iPhones seem to live on.  I know that my grandson loves my old phones.  Indeed, he has passed my original iPhone on and it is being used effectively as an ITouch even though it is no longer fully supported.  What happens to old Android phones?  I suspect that most of them are discarded.  Maybe users get tired of the short battery life?

    All of this may have resulted in development costs for Google to be much higher than they anticipated.

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  • Posted: 15 January 2011 09:07 PM #47

    westech - 15 January 2011 10:25 PM

    What started me thinking was a report (I don’t remember where I read it) that the real reason Google is not supporting H.264 is that they don’t want to pay the licensing fees.  I find that hard to believe but then…

    Royalities are not the issue although Google would like to have you believe that. The following article explains it far better than I can:

    For Google, the license fee is laughably small. Proffitt tsk-tsks at ?millions of dollars in licensing fees? as if it represents a burden. Oh really? Google hasn?t yet reported its financials for 2010, but the combined profits for the four quarters ending on September 30, 2010 were $17.68 billion. The maximum annual license fee for a product like Chrome (or Firefox) is $6.5 million. By my calculation, that figure is less than 4/100 of 1% of Google?s profits.

    There?s no royalty trap. The fear implicit in this entire argument is that when the H.264 license has to be renewed in 2016, MPEG LA will unconscionably raise those rates. If that fear were legitimate, would more than 800 companies, including Google, have already decided to license H.264? Maybe they actually read the license agreement, which specifies that ?the License will be renewable for successive five-year periods for the life of any Portfolio patent on reasonable terms and conditions. ? [F]or the protection of licensees, royalty rates applicable to specific license grants or specific licensed products will not increase by more than ten percent (10%) at each renewal.?

    Much more in the original article, located here.

         
  • Posted: 15 January 2011 10:16 PM #48

    FalKirk - 16 January 2011 01:07 AM

    Much more in the original article, located here.

    Also another version of the same information (different author, same basic premise) here.

         
  • Posted: 15 January 2011 10:42 PM #49

    Thanks for the info Falkirk and Snoozzzer.

    I still wonder how Google is really doing with Android.  Are their expenses offset by their new ad revenue?

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    The measure of the worth of a product is how much people are willing to pay for it, not how many people will buy it if the price is low enough.