Nokia's Windows Phone royalties to exceed $1bn per year in future

Nokia's Windows Phone royalties to exceed $1bn per year in future

Summary: After enjoying Microsoft's financial support through the transition to Windows Phone, it's time for Nokia to pay.

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Microsoft's $250m quarterly "platform support payments" to Nokia for using Windows Phone has always exceeded Nokia's own royalty payments to Microsoft for the software, but from now on the scales could be tipping the other way. 

The arrangement has been in place since 2011, when Nokia began using Windows Phone as its primary smartphone platform, and is expected to see the pair exchange billions of dollars over its lifetime.  Traditionally, Microsoft has paid more to Nokia than vice versa under the deal, but Nokia has revealed the tables could be turning in its financial results published yesterday.

Historically, Nokia said, it has received more than it pays in "minimum software royalty commitment payments", but it expect for the rest of the lifetime of the deal to no longer be the net beneficiary in the quarterly exchange the pair make. 

"To date the amount of platform support payments received by Nokia has exceeded the amount of minimum royalty commitment payments to Microsoft. 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," Nokia states in its Q4 earnings results (pdf). 

Nokia's payments are based on a software royalty structure that includes "minimum annual software royalty commitments", which are paid on a quarterly basis. 

That would suggest that Nokia expects to increase volumes of its Lumia devices, which run Windows Phone, beyond well beyond the 4.4 million Windows Phone Lumias it sold last quarter. Sales of the handsets are already on an upward trajectory - Nokia sold one million Lumias in 2011 (the devices were released in October of that year), and over 14 million in 2012.

   

Topics: Nokia, Microsoft, Windows Phone

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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  • Nokia's Windows Phone royalties to exceed $1bn per year in future

    If you ever used a Nokia Lumia phone running Microsoft Windows Phone 8 you can easily see why the sales are on an upward trend. They are solid built phones that stand out from the rest. Nice to see Nokia and Microsoft getting some share of the mobile market.
    Loverock-Davidson
    • Agreed, Have an Samsung Galaxy S3 and miss my Nokia Lumina 900

      I decided to jump into the andriod space after it have over 50%+ of the market share to the ~3% of Windows Phones. I do like that the andriod has a vast marketplace of apps, but most of them just plain suck. I'll miss a couple andriod apps, but when my contract is up, I'm going back to my windows phone.

      The simplicity of the phone and the feel is what I like the most. I don't like the layout of iOS or Andriod, and I'd recommend windows phone to any user that just wants to make calls and check email. It has all the major apps, but if you like the tinker apps, look to apple or andriod.
      Chris Titus
  • Good turn for MS and Nokia

    Eans that the plan is finally working. Now, MS has other girlfriends to woo.
    flyguy29
  • Windows Phone Isn't Worth Paying For

    As soon as Nokia shows any signs of success with Windows Phone, Microsoft's greed kills it.
    ldo17