Android = $0, W8 = $85.

With Google they're on more equal footing. Though HP did have webOS...

Android = $X.

Where X is the sum of all the patent royalties they have to pay to Microsoft et al.

Microsoft charges OEM's a significant amount of money to use Windows on their hardware, Google gives Android away for free.

So, the Surface is able to undercut the OEM's on price significantly.

I was under the impression that Google does have licensing agreements with OEMs, for the use of Google apps like GMail, Maps, Navigation, Play Store, etc.

I'm sure it's not $85 per device for the license but the point still remains.

Although in all fairness without announcing any pricing it's not clear they're going to do that.

Ok, so where are the big Android OEM's 7" $199 tablets?

Google, like Amazon is able to sell their tablet at that price at a small loss or no profit because of owning Google Play and selling content through it and the 30% cut of app revenue(Google does no curating of their apps so their costs are less than Apple's).

Not to mention early access to the OS, while all other tablets in the market are using the older version ICS.

How can HTC match that? They couldn't. So they stopped making Android tablets, same with LG.