Secret to Android's success: Free Droid phones?November 19, 2010: 11:47 AM ET
Arguably the best Android phone available has gone to free with a two year contract. Why?
If you head over to Amazon from now until Nov. 22, you can pick up a Droid X phone for free if you sign up for a two year contract. In fact all of Verizon's (VZ) Droids, including the just announced Droid Pro are free. The fact that arguably the best Android phones in the U.S. are now free with a plan seems to indicate that paying up front for an Android phone should be a thing of the past.
There are a lot of reasons that Android has been so successful. But I think the combination of the carrier and hardware manufacturer competition that the free OS has created could possibly be the most significant.
The Android landscape is in flux. New devices come out every month on every carrier. First HTC and Motorola (MOT) were building the hot Android products. Now Samsung is at the head of the pack, while Dell (DELL), LG, Asus and Sony (SNE) are building new and interesting lines. All of these manufacturers are competing for space in each carrier's lineup. The carriers can play the manufactures off each other to get their prices down.
But the carriers are also competing against one another. If T-Mobile is selling its Vibrant for free, then AT&T (T) is going to have a hard time convincing people that the Captivate should cost $100 (both phones are very similar Galaxy S phones from Samsung).
That competition is how consumers come to find free phones on Amazon. Obviously, everyone makes their money back eventually on the monthly payments, but that initial cost to consumers is subsidized by competition ...and the free OS.
Single-source platforms like Nokia, RIM and Apple are at a disadvantage in this respect. While hardware and software integration sometimes makes for a better overall experience, offloading much of the software R&D to Google (GOOG) often can save a few dollars. That money comes back to the consumers and it is a big reason Android has been so successful.