Amazon reportedly courts Android smartphone manufacturers: Follow the money

Amazon is reportedly talking to smartphone makers about more deeply integrating its services with their hardware, but economics may hold more sway than code.

The Information reported that Amazon wants to integrate with Android smartphone makers at the factory level. In other words, Amazon may want to power the entire phone or some other form of integration.

While the details surrounding some deeper integration between smartphone makers and Amazon are sketchy, talk of application programming interfaces, code and technology may miss the point. Why? Money matters and Amazon could align economic interests more in hardware makers' favor. Here's why Amazon may just find deeper integration with original equipment manufacturers (OEMs):

There's an entire mobile industry that would like more Android and less Google. Rest assured that Oracle's estimate on what Google makes off of Android ($22 billion in profit on $31 billion in revenue!) peeved many partners of the search giant. Manufacturers of Android devices are plagued by thin margins and would like a slice of that Google windfall.

Google has a big Android rewrite ahead. Today, it's fairly easy to put Amazon in a corner and say that its fork of Android isn't good enough (even though millions of Kindle tablet owners think so). A year from now, there may be a big premium on an Android that's stable. Why? Google is dropping its implementation of standard Java libraries for Oracle's OpenJDK libraries. Oracle and Google have been duking it out in court over Android for years and the latter has been bloodied.

That rewrite means Google has to take total control of Android. Edison analyst Richard Windsor thinks that Google will take even more control of Android so it can avoid fees to Oracle. Windsor said:

Although Android was launched in 2008, Edison thinks that the vast majority of revenues have been generated over the last three years as the volume of Android devices really began to ramp up. Consequently, Google is likely going to have great difficulty in avoiding a hefty royalty payment to Oracle.

This will be expensive in the short-term but it is a blessing in disguise. In order to fix the problems of software distribution and endemic fragmentation, Google will have to take complete control of the software on its devices. The problem is that taking open source software and making it proprietary will not go down well with the developer community or fit well with Google's image.

However, with the viability of the system now clearly under attack from Oracle, then it has the perfect excuse to rewrite the entire run-time and remove the infringing code. The end result will be a complete proprietary operating system and ecosystem just like iOS and Windows 10 over which Google will have complete control. This will allow Google to ensure that its user experience is as good as its competitors and to distribute its software updates in a timely fashion.

Money talks a bit more right now. Ars Technica noted that Amazon's plan to work with smartphone makers at a so-called "factory level" would have some serious challenges. The biggest hurdle would be Google's contract terms. However, let's say Amazon offered a bounty for every new Prime subscriber via a vendor's smartphone. How about a cut of purchases annually? To an Android smartphone maker looking at a struggling Chinese economy and fatigued markets like the U.S. Amazon's offer could look pretty good. In other words, hardware partners would have incentive to work Amazon into the mix.

2016: The best Android smartphones

Factory integration may not be entirely necessary. Amazon already bundles apps with the likes of Samsung. My Galaxy Note 5 had all the Amazon tools I would have downloaded anyway. If Amazon can't get factory level integration it could at least get the economic variety. The Information's report--and subsequent takes on the article--seemed to assume that Amazon would want a replay of the Fire Phone with hardware makers. Amazon has a bevy of hooks into Android that compete with Google, but the Fire Phone approach may not be the ultimate goal. I don't know what a better bundling partnership would look like, but Amazon can probably push the needle farther without annoying customers.

Remember Amazon's main lever with smartphone makers would be to better align economic interests. With Google, these hardware vendors haven't received a cut anywhere near the one Oracle lawyers recently disclosed.