TechCrunch has an article which says that "Microsoft to pay more than half a billion dollars to jump-start Windows Phone 7" and quotes Deutsche Bank's telecommunications analyst Jonathan Goldberg who estimates that Microsoft could spend US$ 400 million on marketing alone for the Windows Phone 7 launch. However, according to his researches, this is expected to be the marketing spending only and doesn't include the extra-millions Microsoft has already committed to pay for "non-recurring engineering" costs that help offset development costs for handset manufacturers.
All together, TechCrunch estimates that Microsoft could spend a half-billion dollars or more in marketing costs, payments to developers and handset manufacturers to subsidize the expense of building phones and apps, so that the Windows Phone 7 ecosystem is well-seeded at launch.
According to Goldberg, "This is make-or-break for Microsoft. They need to do whatever it takes to stay in the game, it's still wide open. They don't have to take share from Android or Apple, so long as they can attract enough consumers switching from feature phones."
On a visit earlier this month to the company's headquarters in Redmond, Goldberg says company executives told him that Microsoft, along with its carrier and manufacturing partners, would likely spend "billions" of dollars in the first year for marketing and development. Another source familiar with Microsoft's manufacturer and carrier agreements says the company will spend US$ 1 billion on the launch, half on marketing and half on other development costs.
Greg Sullivan, Senior Product Manager Windows Phone 7, who I met last month in Munich said to Goldberg, who visited Microsoft's headquarter earlier this month: "We have a long-term view and Microsoft has been in this position before in other businesses where we've had to take a long-term view. The mobile phone market is growing by leaps and bounds, but it's still in the early stages."
That's definitely an interesting approach! No question - doesn't matter how good or bad Windows Phone 7 might be, Microsoft has to buy some kind of market share back, since it lost a lot of ground during the past - at least - two years. Windows Mobile and Windows Phone wasn't competitive enough anymore and carriers - still the main distribution channels for mobile phones - had to look for smartphone alternatives. While devices like the HTC HD2 are still selling like sliced bred, it's less the Windows Phone attractiveness by itself but more HTC's work it put into the HTC Sense UI which made the HD2 a best-seller.
However, the Windows Phone 7 OS by itself is again state-of-the-art and can easily compete with Apple's iOS or Google's Android OS but that's not enough - not anymore. Microsoft had to convince carriers and manufactures to develop and sell Windows Phone 7 smartphones. However, even if Microsoft has convinced its most important partners, at the end of the day everything comes to sold units and this is where the customer comes into the game. The mobile phone market is a multi-billion dollar market today and most of the revenue comes from consumer customers today. While in the past, Windows Mobile and Windows Phone pretty much tried to attract business customers only, Windows Phone 7 is totally the opposite - attracting consumers by not giving up business customer assets (like Office or Exchange integration). But Microsoft has to put some serious money into its Windows Phone 7 marketing to help on one hand carriers to sell the devices but on the other hand attracting its potential new customers for the new platform. From a technology point of view, Microsoft might have everything in place: Zune (with music and videos) is supported, Xbox 360 (for games) as well but soon Microsoft has to start to talk about it - as it did 15 years ago with the launch of Windows 95 where Microsoft sold a fresh new way of using PCs - to consumers which just experienced the Internet.
The same, Microsoft has to do with Windows Phone 7 now - it has to generate an interest, it can't rely on its carrier partners only since they have to sell SIM cards and mobile phone contracts first and at the end of the day, it's less important in which device the SIM card is used - as long as their mobile phone contracts sell well.
If Microsoft is giving carriers a helping hand now - in form of a check and addressing the end user directly - to create a buzz, everything could turn out well for Microsoft, Windows Phone 7, the carriers and the manufactures as well as the third party developers, which are also needed to make Windows Phone 7 an interesting product.
Sure - some might say Microsoft is putting all its weight (aka dollars) into the game to buy success but hey - that's what marketing is about! Not the best systems will win all the time (see Betamax vs. VHS or Blu-ray vs HD DVD) but often it's just the technology with the most attracting marketing. The iPhone definitely showed the world how to create a buzz and hype for a - technology-wise at time of launch - pretty much outdate mobile phone.
Cheers ~ Arne