Why does Microsoft’s Windows 7ista cost so much?

“Why does Windows cost so much?” Bob Cringely writes for I, Cringely. “I know why.”

Cringely writes, “For a stark contrast, compare Windows 7 with OS X 10.6 Snow Leopard, its would-be competitor. I won’t get into the argument over which OS sees the other as competition, maybe they both do. In the marketplace, however, the upgrade version of Snow Leopard costs $49.95 ($99.95 for a five-machine family pack) while there are twenty different versions of Windows 7 to choose from with the most popular (Windows 7 Home Premium) priced at $119.95.”

MacDailyNews Note: Mac OS X Snow Leopard actually costs just US$29 for a single user upgrade and $49 for a 5-user family pack.

Cringely writes, “Is Windows 7 really worth $70 more than Snow Leopard?”

MacDailyNews Note: Make that $90.95 more, Bob.

Cringely continues, “The better question to ask is why Microsoft decided to set the price point where they did? And the answer to that one is quite simple: Microsoft doesn’t actually want you to upgrade to Windows 7 at all. Microsoft wants you to buy a new Windows 7 PC instead.”

Read the full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

41 Comments

  1. That article misses out one good point: Microsoft have just been beaten in price for arguably the most significant (obviously not the greatest) amount ever, so all who think they’re cheaper have got nowhere to go now, and thus they’ll lose customers, proving they have no plans to expand their user base, meaning that it’s just going to be Ballmer and Loonies from now on, and there you go, that’s my point (and longest sentence ever). In other words, they’re going even more down the drain.

  2. Well, gosh I thought Mac OS X was so cheap because it’s an “upgrade” to Mac hardware (refering to all of the Psystar story comments). Microsoft relies on 3rd party hardware so naturally they need to charge more.

    Mac OS X is a loss leader.

  3. If that is true I would say they just made a big mistake. Time to pick-up more AAPL now that it is back under $200. Apparently “up-grading” to Windows 7 can get pretty hairy, is that part of the plan to get new PC purchases. Microsoft sure under estimates the public’s ability to get it.

  4. It was clear years ago that Windows is now the most expensive OS out there. That wasn’t always the case.

    Earlier Microsoft OSes like DOS cost $50 or so (Digital Research cost more), the first Windows $100 or so. But in those days, Interactive UNIX and Xenix cost close to $1,000. The early versions of Solaris X86 in the ’90s cost a few hundred.

    But as each version of Windows has gotten ever more expensive (and diverse), the alternatives have gone DOWN in price. Packaged versions of Solaris and Linux are less than $50, while downloadable images are often free.

    Consider also that in the early days of the personal computer – which typically cost thousands of dollars – the Microsoft component was among its least significant cost drivers. Today it’s one of the most significant.

  5. “And the answer to that one is quite simple: Microsoft doesn’t actually want you to upgrade to Windows 7 at all,” Cringely writes. “Microsoft wants you to buy a new Windows 7 PC instead.”

    Microsoft sells each OEM copy of Windows for about $40. That $40 is pure revenue.

    When they sell a physical disk to people for a higher price, they have manufacturing costs, distribution costs, and profit to be distributed to various middle-men. And you have the hassles of the upgrading process not working for many, with the attendant angry customers. Never mind.

    Microsoft has always seen their customers as being large corporations, not individuals.

  6. Cringely writes, “For a stark contrast, compare Windows 7 with OS X 10.6 Snow Leopard, its would-be competitor.” followed by “I won’t get into … which OS sees the other as competition”. Say, WHAT?
    There are, at the moment, three competitors for use as an OS on your PC. Windows is way ahead, OSX follows, and Linux trails the field. Just what is this “would-be” cruft? And, if MSFT didn’t see OSX as “competition”, why do they spend so much time and energy playing catch-up to Apple’s technology?
    He DID get it right when he said: “Microsoft doesn’t actually want you to upgrade to Windows 7 at all,” Cringely writes. “Microsoft wants you to buy a new Windows 7 PC instead.”. But he may have misunderstood the reasoning. MSFT wants people to buy bigger/better PCs that will actually run the new OS without stumbling and generally “behaving badly”.

  7. Windows costs more because Microsoft is a software-only company. Snow Leopard costs less because it is not a separate product so much as it is a feature of another product with a higher margin than software.

  8. MIcrosoft wants people to buy a new PC because that will just further lock them into their platform. Not many people are going to buy a Windows PC and then switch to a Mac after realizing what a dud Windows 7 continues to be. If they simply did an upgrade, then there’d be less of an investment to get thrown away.

  9. “Windows costs more because Microsoft is a software-only company. Snow Leopard costs less because it is not a separate product so much as it is a feature of another product with a higher margin than software.”

    What the heck are you talking about? There is no product with a higher margin than software, as there are virtually no incremental costs of production for each unit sold.

    All you have to do is look at the gross margins of Apple and MS. Apple’s margins are about 36% (including software sales, which push up the average), while microsoft’s are 78%.

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