Analyst says Windows Phone must cut licensing fees to gain traction

One more report says that Windows Phone has risen to its largets worldwide market share, but with a caveat: The analyst says rough times are ahead for the platform if it doesn't cut licensing fees as a way to lower the price of the devices.

Strategy Analytics says that Windows Phone has a 3.9% worldwide market share, up from 3.6% a year ago. The firm isn't the only one finding the platform making steady headway. Kantar Worldpanel ComTech's most recent survey found that in the three months to June 2013, Windows Phone had an 8.6% market share in the U.K., a 9% market share in France, and a 4% market share in the U.S.

Strategy Analytics says of Windows Phone's growth, "Microsoft is making steady progress in the smartphone market due to strong support from Nokia." However, the firm also warned that the growth is in danger because of the high licensing fees Microsoft charges for the platform. Strategy Analytics' analys Linda Sui says that the "license fee charged to smartphone makers for WP8 must be more competitive to compete with Android in lower price-bands."

That recommendation should not come as a surprise to Microsoft. Kantar Worldpanel ComTech has found that Windows Phone's growth, especially in the U.S., is being driven by the budget-conscious who are buying smartphones for the first time. So shaving dollars off a phone's price tag will help gain new buyers.

However, Strategy Analytics also says that Microsoft needs to focus on the high end as well. Sui says:

"Microsoft must dramatically accelerate its support for advanced technologies, such as octo-core chipsets, because WP8 continues to lag behind Android in the premium smartphone category."

I'm not sure that Sui is on target there. Window Phone's steady growth has come not via so-called top-of-the-line "hero" phones with the highest-resolution cameras, most powerful processors, and largest screens, but instead with more affordable devices. The best example of that is Nokia's lagging sales in the U.S. in the past quarter, even though Nokia has been pushing the high end of its Lumia line.

In addition, people in emerging markets are looking for budget phones, not expensive, high-end ones. And emerging markets is where the growth is.

Cutting licensing fees for Windows Phone would likely get more market share than focusing on high-end phones. Will Microsoft go ahead and do it? My guess is not, because Microsoft traditionally doesn't like to go that route. As a way to gain market share, though, it would be worth a shot.

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