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Buy a new Windows Phone, get $25 worth of apps

Pssst!  Pass it on: Through the end of the year, we're giving a prepaid $25 app card to anybody who buys one of the great new Windows Phones now on sale.  The prepaid card makes it easy to jump start a new app or game collection.

The Windows Blog Michael Stroh

Context & Ripple Effects

This promotion extends a strategy Microsoft has run since launch: when more than half a billion dollars went to jump-start Windows Phone 7 in August 2010, the money bought developer attention; the $25 prepaid card now buys consumer attention at retail. Both moves attack the same weakness — an app catalog too thin to sell phones on its own — from opposite ends of the marketplace.

The timing puts the card directly into the holiday shopping window, making the subsidy a point-of-sale incentive rather than a marketing gesture: every buyer who activates one becomes a paying customer for apps and games they might otherwise never browse.

First-order effects

  • Holiday-season Windows Phone buyers get $25 of Marketplace credit bundled with the handset, lowering the effective price of the phone-and-apps package against iOS and Android rivals whose catalogs need no subsidy.
  • App and game developers on the young Windows Phone Marketplace see purchase demand concentrated onto their listings during the promotion window, since card holders must spend the credit there.

Second-order effects

  • Carriers and retailers gain a merchandising hook — a tangible gift-with-purchase — that lets them position Windows Phone handsets against iPhone and Android devices without cutting hardware prices.
  • If the card lifts paid downloads measurably, expect Microsoft to keep subsidizing demand-side spend alongside supply-side incentives, deepening the per-user cost of closing the catalog gap.

Third-order effects

  • A pattern of repeated cash subsidies — developers paid to build, consumers paid to buy — points toward mobile platform competition becoming a balance-sheet contest, where the third ecosystem survives only as long as its backer keeps funding the gap.

The trend: Mobile platform building is shifting from product differentiation to direct financial subsidy, with Microsoft paying both sides of its marketplace to manufacture an app economy.