About six weeks ago, Microsoft surprised us all:
Microsoft announced that it was buying [Skype] for $8.56 billion in cash. Last year, Skype had revenue of $860 million on which it posted an operating profit of $264 million. However, overall it made a small loss of $7 million, and had long-term debt of $686 million. This is the second time Skype has been bought out; after being started in 2003, it was purchased by eBay in 2005 for $3.1 billion. EBay then sold the majority of its stake in 2009 to a private investment group for $1.2 billion less than it paid.
Bright goes on:
Perhaps more adventurous, integrating Skype-like functionality into Windows Phone would be something of a game-changer. Integrated multinational VoIP support would potentially be enormously disruptive to the cellphone market. However, as good as this might be to end-users, it would probably serve only to kill Windows Phone stone dead for carriers.
I wonder why this idea hasn’t be bandied about more. Is it because the focus has been on the ridiculous sale price or what? The iPhone is the king right now. People can hype up Android all they want, but the only people I know who have Android phones have them because their carrier doesn’t/didn’t have the iPhone. The number of people I know who have an Android phone based purely on choice probably make up less than 10%.
Everyone talks about what it will take to overthrow Apple. The way I see it, there are two ways:
- Create a vastly superior product (possible but not likely in the short term)
- Create a comparable product at a vastly lower price
To focus on the latter, you have to reduce the service cost. The subsidized version of the iPhone costs $200, which would be tough to top, but with a minimum service fee of at least $60/month1 the phone costs more than $1500 every two years. We now know that an unsubsidized iPhone costs $649, but even that requires a service plan somewhere in order to use. But what percentage of people could get by without a voice plan?
Consider me one of them. I pay $40 per month for the cheapest voice plan AT&T offers. I don’t come very close to using my minutes, and in reality there are approximately 10 people I ever talk to, and only a couple I talk to on a regular basis. If I could save even $30/month for a stripped down solution, I would probably do it. I have considered going with an iPod Touch and a MiFi as an alternative, but there are flaws in this system2. First off, the MiFi plans cost $60 per month, so the base plan savings are minimal. Second you need a reliable way to send and receive calls when needed.
I spend 65% of my time (that’s my estimate) in my house or at work, both places I have landlines and don’t have plans to get rid of anytime soon. So in both cases I can be reached via some phone. The other times, I am in the car or out somewhere.
So what if Microsoft released a phone with Skype integrated and a $40 data plan? Skype Out allows you to call out for unlimited minutes for just $3 per month. There are alternatives to text messaging that you could make work. That just leaves incoming phone calls. Supposedly Skype In, which allows people to dial a number and reach you, cost just $18 per 3 months3. So that adds up to $49 per month. My voice, data and texting cost like $85 per month now. Meaning this would save me $25 per month or $300 per year.
Will this happen? I highly doubt it. Would it appeal to a mass audience? Probably not. But this would be something that no one else could offer and could appear to geeks who don’t like paying for calls they don’t make.