Market pressure works. In response to an outcry from customers, HTC has just annnounced that it will return to its policy of shipping handsets with unlocked bootloaders.
This makes me personally happy because I’ve been a fan of HTC handsets since the G-1; I would have had to stop buying and recommending them if they’d stuck to the lockdown. But the larger reason this story is interesting is because of what it signals about ongoing shifts of power in the Android smartphone market – and throughout consumer electronics, as well.
There are four major stakeholders in the Android smartphone market: the cell carriers, the consumers, the handset makers, and Google. The carriers want smartphones to be locked-down carrier-controlled devices through which customers obediently buy services on carrier terms. All the other stakeholders, by contrast, gain from unlocked devices. Consumers win because they’re not limited to what the carriers choose to provide them; handset makers win because an unlocked phone is more valuable to a consumer than a locked one (and a little less expensive to ship, too); Google wins because its long-term strategy requires it to commoditize the carriers into a passive channel between the customers and Google.
Ever since the G-1 shipped in 2008 control of smartphone handsets has been slipping out of the carriers’ hands, a process well-chronicled on this blog. Google has been fighting its corner (and, on this and most other issues, the consumer’s) by taking control of the Android feature list, most notably via the Froyo announcement in May 2010. The carriers have been fighting back by pressuring the handset makers to ship phones with locked bootloaders. (The carriers’ biggest success on this front is undoubtedly the Motorola Droid 2.) But for a couple of years after the G-1 HTC led the way in resisting this pressure.
So, why did it flip? And why has it now flopped?
The reasons for HTC’s original no-lockdown policy aren’t hard to deduce. As a new entrant in the handset market back in 2008, HTC didn’t want to subtract value from its phones by locking them down – especially when many of its sales were to technically savvy early adopters who explicitly valued the openness of the phone. HTC’s carrier partner T-Mobile, as the #4 in the U.S. market, was polishing a valuable reputation as the carrier that doesn’t screw you in hopes of gaining market share.
As HTC gained visibility and began to woo other carriers, the pressure mounted for it to lock its new models. And I think I know what the carriers’ clinching argument was: movies and streaming video. I would bet serious money that the pitch went like this: the MPAA and the content cartel behind it demands DRM the consumers can’t subvert, and if you don’t give us boot-locked phones to build that on you’ll be out in the cold as your competitors sell locked phones that can stream movies. And HTC flipped.
The fact that HTC has flopped back tells us something very interesting: consumers, just by complaining loudly, were able to exert more pressure on HTC than the carriers and the content cartel. It’s also possible that Google exerted some pressure of its own; the point is, the pro-consumer anti-lockdown coalition won and the carrier/content-cartel alliance lost.
Power shifts like this are self-reinforcing. It’ll be that much more difficult, now, for the carriers to keep Motorola and Samsung and LG and Sony-Ericsson on the reservation – not that anyone but Motorola had been showing any real enthusiasm for locked bootloaders to begin with. The carriers have a weak hand, and it’s getting weaker. Which was, of course, Google’s plan all along.
More interesting, perhaps, is that the strong suggestion that the content cartel (the movie studios and record companies, represented by the MPAA and RIAA) may be losing the Svengali-like ability they used to have to make the consumer-electronics industry cripple its own products and screw consumers. There have been other signs of this recently, notably in the ignominious speed with which Netflix grabbed for a deal with Google after Google announced a movie-streaming tie-up with Amazon. I had been saying for months that this was coming, that Google could encourage unlocked phones and pay only the most perfunctory lip service to DRM in the knowledge that time and market share trends are on Android’s side. HTC’s reversal tends to confirm this.
And of course the MPAA/RIAA is quite right to fear unlocked hardware in the hands of Linux hackers. Netflix tried to keep the cartel happy by refusing to ship a client for Linux desktop machines, but it is almost as exposed now by shipping a client for Android. When the screens on Android tablets reach desktop quality, it will be fully as exposed. And its planners have to know that – but Netflix just can’t leave all that money on the table. Circumstances are driving a wedge between the content cartel and the streaming services, who at the end of the day like DRM only because it appeases the cartel. The streaming services make money by shipping bits, not by locking them up.
Indirectly HTC’s flop is also bad news for Apple. One of the principal advantages of the iPhone and other iOS devices was Apple’s special relationship with the content cartel. The exclusivity – and thus the market value – of that relationship has begun to erode. As the MPAA/RIAA axis weakens, so does Apple’s value proposition. Eventually this is going to put pressure on Apple’s prices and margins.
So, celebrate HTC’s decision. It doesn’t just mean that geeks get to heart HTC again; it means that the entire coalition of villains behind locked hardware and DRM is losing its grip. That’s good news for everyone.