A report by AdAge has raised eyebrows around the world of modern telephony today, claiming, via an anonymous source, that AT&T alone is preparing to drop a mountain of cash into its coming Lumia 900 promotions:
In the coming months, AT&T will kick in as much as $150 million to help launch Nokia’s Windows Phone Lumia 900, Ad Age has learned, topping its outlay for the ubiquitous Apple device.
Big backing was a no-brainer for Nokia and Microsoft, players that have been pummeled in the extremely competitive, extremely lucrative smartphone market and are teaming up to compete with Apple, Samsung and Google.
By our reading, that states that AT&T is in for $150 million, and Nokia and Microsoft are in for other, separate sums. Let’s lowball and say that Nokia and Microsoft put in $50 million apiece for a total of $100 million. That, along with AT&T’s cash brings us to a total of $250 million for Lumia 900 promotions. That’s 0.25 Instagram to launch a single handset. Impressive.
But, how well will the Lumia 900 sell this year? I’m going to assume that the ad budgets that we are discussing are for 2012, given that they are tilted towards launch. Therefore, we can calculate an estimated per-unit advertising fee. At 5 million units sold this year, the three firms would be spending some $50 per phone. Even at 15 million sold, a number that I am exceptionally dubious of, just under $17 is being plunked down per phone.
Given that the Lumia 900 is already selling far below, in many places, its MSRP of $99.99 with a contract, those numbers loom larger. You can get a Lumia 900 for under $50 in many places, at least for now. Therefore, it’s entirely likely that the average sale price of the Lumia 900 will be below its marketing budget.
Of course, there is a carrier subsidy involved and so forth, but the chunk of money that advertising is going to in theory eat out of the Lumia’s potential profitability is substantial. Still, this is an investing year for AT&T, Nokia, and Microsoft. Can the three of them buy market share and consumer love? I’m not sure, but they are sure giving it the old college try.