It seems the Android / tech community at large have recently become obsessed with the idea of the “cheap, good phone.” Every time a new carrier announces unlocked Moto X pricing, it’s news.
Google did a cheap, good phone with the Nexus 4, so why can’t someone else? And Motorola [Mobility] is now a Google company, so shouldn’t they follow along with Google’s revolutionary business model?
The thing is, Google’s pricing of the Nexus 4 isn’t a business model for a phone, it’s a business model for a platform. Just like carriers get you to sign up for 2 years of service in exchange for a low price on your phone, Google is giving you a low price on its phone to get you hooked on Google services and the Android platform at large. How well the Nexus program is accomplishing that in the grand scheme is a bit harder to tell, but the point is this: Google doesn’t make money selling you a phone. Google makes money on what you do with it. A carrier does not make money selling you a phone. A carrier makes money selling you the service that phone requires. Neither Google nor carriers are in the business of selling phones. They’re in the business of selling (I use that term loosely with Google) attached services and products.
This model cannot work for Motorola. Motorola does not sell a platform. Motorola sells hardware, and it derives profit from selling that hardware to consumers, or more accurately, carriers and retailers. If you want to be a successful OEM in the US, you have to play ball with the carrier / OEM relationship. Even Apple does this. It’s how you make money.
You cannot maintain a multi-billion dollar business on razor-thin (har har) margins in a highly competitive, volatile, and ever-evolving market. If I am Joe Consumer, how interested am I in the proposition of – in my mind – walking into a store and paying more for something that isn’t as good (a $300 phone) as something that would cost less and is better (a $200 subsidized phone)?
The idea would undoubtedly resonate with some consumers. But not enough. Not enough to make a multi-billion dollar business of it. Not enough to spend tens of millions of dollars on product R&D.
But what about those $150 Chinese quad-core 1080p phones? Clearly it’s possible. Well, yes, in China it’s possible. Where you aren’t paying hefty import and shipping costs or taxes, where there really is no support structure, few if any OTA updates, and quality control / component sourcing can be most optimistically described as “questionable.”
Maybe one day a $300 unlocked phone really will be something Motorola can pursue profitably. Maybe. Right now, it isn’t going to happen. Not in the US. But what about the Moto X that’s going to be offered outside the US? Why not bring that here? Well, again, because business model. A lower-end phone wouldn’t be as competitive in the US, and it would be less profitable. A cheaper, less powerful Moto X only makes sense outside the US because that is what Motorola is competing with outside the US – other cheap, not very good phones. There’s a low-end phone market in the US, for sure, but the bulk of the profit – and attention – is at the high end of the price spectrum for the time being.
While I wouldn’t buy a Moto X, I applaud Motorola’s current direction. They really seem to have put a great deal of focus into restructuring their business and products in a way that focuses on the company’s strengths; namely, R&D and branding.
Think of it this way – if it were your business, what would you do? I look at Motorola’s trajectory and see a risky, but highly logical, attempt to reinvigorate a company that was falling by the wayside. It may work, it may not. They cut all the crappy smartphones, they kept the highly valuable and successful DROID VZW partnership (killing it would have been monumentally stupid – it’s a moneymaker), and they made one really good phone platform without betting the house on anything too radical (like crazy pricing).
Baby steps. Today, Motorola is focusing on building an image, regaining consumer confidence with quality products, and cementing a position with carriers as a reliable OEM partner that can bring in customers. Let the company get on its feet before you declare it dead.