In a sign of just how tough and unpredictable the monetisation market has become, three of the biggest names in the game reported a drop in annual patent-related revenues during 2016.
Ericsson announced its most recent quarterly results late last month. The Swedish telecoms giant reported a steep fall of Skr5.5 billion ($622 million) in year-on-year patent licensing revenues. While that may in part be explained by last year’s results being uncommonly high due to a major settlement and licence agreement with Apple in December 2015, the company’s guidance for the years ahead suggested something more fundamental may be at play. During a conference call, Ericsson Chief Financial Officer Carl Mellander seemed to imply that analysts could expect annual patent licensing revenues of Skr7 billion ($791 million) per year “based on the current contract portfolio”. That is particularly noteworthy considering that Ericsson is one of only a handful of companies to have racked up over $1 billion in a year from licensing out patents.
Two other companies that have reached that milestone are Microsoft and Nokia; and both, like Ericsson, have seen their year-on-year licensing revenues fall.
Last week, the US company released its Q2 numbers. While there were positive developments in revenues relating to its cloud computing business, Microsoft’s sideline in patent monetisation saw a 25% decline in income. The shortfall was attributed to drops in licensed units and licence revenue per unit; this chimes with similar reports from recent quarters, where slowing smartphone sales, decreasing prices and the growing market share of new and potentially unlicensed entrants, particularly from China and India.
Meanwhile, Nokia’s Technologies unit – which handles its R&D, patenting and IP monetisation activities – reported a 25% year-on-year net sales decrease and 49% operating profit decrease in the fourth quarter of 2016. Similarly to Ericsson, the previous year’s figures may have been particularly high due to a headline award in arbitration with Samsung Electronics. However, the current period’s declines were partially offset by an enhanced licence agreement with the Korean company, patent divestitures, and the addition of IP assets as part of Nokia’s acquisition of health-focused consumer electronics start-up Withings.
Times are clearly tough in the patent monetisation market, when even the likes of these three giants have reported falling revenues. Nevertheless, it is far from being the case that the overall trend is a negative one. Each company has continued to license and sell IP during the period. Major one-off deals have been notably less frequent over the past year; while the prevailing conditions in the US market and a gradual pivot towards Asia are requiring the development of new monetisation strategies. That process is clearly going to take some time.