January 29, 2013
Microsoft has been paying $250 million per quarter since 2011 in platform support payments to Nokia for using the Windows Phone brand. While this amount has exceeded what Nokia pays Microsoft to use its software, this is about to change. Nokia recently announced that it plans to pay Microsoft $1 billion in royalties for Windows Phone mobile software usage.
“To date the amount of platform support payments received by Nokia has exceeded the amount of minimum royalty commitment payments to Microsoft,” wrote Nokia in its latest earnings report. “Thus for the remainder of the life of the agreement the total amount of the minimum software royalty commitment payments are expected to exceed the total amount of the platform support payments.”
“This essentially means that the amount of money Nokia will pay Microsoft (the software royalty commitment payments) will be greater than the amount Microsoft needs to pay Nokia to use its mobile software (the platform support payments),” reports Digital Trends.
The arrangement has been in place since Nokia’s decision to use Windows Phone for its mobile devices. “However, this is the first time that the software royalty commitment payments will outweigh the platform support payments,” notes the article.
“What’s more, this exchange suggests that Nokia may increase the volume of its flagship line of Lumia devices. The manufacturer managed to sell 4.4 million Lumia-brand handsets in the last quarter of 2012, showing a sharp increase from the one million units it sold in 2011.”
Although Android and iOS still hold the mobile market share lead, Windows Phone continues to climb. “Microsoft’s mobile operating system only accounted for 2.6 percent of the market in 2012, but is expected to jump to 11.4 percent by 2016, according to the IDC.”