How Microsoft could – but shouldn’t – sell Surface Windows RT tablets for $199

“An anonymous source has told Engadget that Microsoft’s ARM tablet, the Surface RT, will cost just $199 when it goes on sale on October 26th,” Peter Bright writes for Ars Technica. “Microsoft would be making a loss on every unit sold. Still, Microsoft could afford to sell Surface RT for $199. There are reasons why it might want to do so, and there are even realistic ways in which it could make up for that loss. But the negative effects of such a price plan would be enormous.”

Bright writes, “The downsides are numerous. Microsoft’s relationships with OEMs are already strained as a result of Surface. Acer, in particular, has been vocal in its complaints about Microsoft muscling in on the hardware market. A $199 system would give the company’s hardware partners no room to manoeuvre, forcing them out of the Windows RT market as soon as [make that “before” – MDN Editor] they’ve entered it… With no means to effectively compete with Microsoft, other tablet manufacturers would likely switch to, or stick with, Android.”

“Bad blood in tablets could have a knock-on effect on the desktop and laptop market, too,” Bright writes. “Windows 8 is already a contentious release thanks to its numerous user interface changes. It’s not likely that the OEMs are going to switch to Linux any time soon for their conventional PCs—but they could respond to doubts about the new operating system, especially among enterprise customers, by continuing to push Windows 7 even once Windows 8 has been released, and fueling the perception that Windows 8 just isn’t cut out for conventional computers.”

MacDailyNews Take: Imagine if Apple then executed a controlled licensing program (Apple approval required) of OS X to interested parties. OS X is now just a fraction of Apple’s revenue stream, yet it is the only serious alternative to Windows. Apple no longer needs OS X exclusivity to survive. By licensing OS X correctly and at this crucial time, Apple cause extensive damage to Microsoft and Windows.

Bright writes, “Perhaps the most significant reason of all not to price Surface RT at $199 is that once that decision is made, there’s no going back. The price of a 10″ Windows RT tablet will be two hundred bucks—or less—forever… The results [of a $199 10″ tablet] for Microsoft and the PC OEMs alike would be nothing short of a disaster.”

Read more in the full article here.

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23 Comments

  1. While I agree with MDN’s suggestion, my first thought when I read it was, wow, how times have changed. Five years ago, if anyone on this site suggested licensing OS X, as several did, they were considered trolls and it would be pointed out by others that Apple was a software company and OS X was the “company”, so to speak, and to license OS X would be a form of corporate suicide.

    Again, how times have changed.

    1. Only because Apple now has a new hardware platform for which they won’t license the OS for, which makes them far more money.

      Before the iPhone and iPad iOS, Apple was still a desktop/laptop company that happened to make the popular iPod, which could not run apps. Computers that ran OSX were its largest revenue stream, so It *would* have been suicide to license OSX to other hardware vendors.

      Times have indeed changed, they’re now a company that makes apps-capable mobile products, and happen to also/still make desktop/laptops.

      Licensing the OS has its risks though; for one, they no longer control the whole experience, and frankly system stability isn’t as good as it should be considering they *don’t* have to deal with 3rd party assemblers right now.

  2. MDN,
    This OS X licensing this is never going to happen. It’s not a matter of Apple waiting for the right time to do it. They simply don’t care about “damaging Microsoft” and Windows. That’s not their goal. Their goal is to make the best products in the world, and they just can’t do that unless they control the hardware.

    1. There’s apple macbook series vs dell inspiron (or other windows machines) series and there’s Ms Windows vs OSX.
      I think there could be Apple Macbook series vs Dell OSX series if that make sense. There should be no problem with that as there is Dell whatever series vs HP whatever series both with Win 7.

    2. The argument about selling Mac OS to other hardware makers died the death. TechTard journalists ranted about it for a decade. Apple tried it. Oops it FAILed and ate a chunk of Apple’s future and reputation. So much for Apple listening to TechTard journalists. They’re never going to make that blunder again.

      The marriage of Apple hardware and software will survive eternity, or so we hope. Hacked together stuff has its place, but not in a professional environment. And yes, I am pointing fingers. ☞☞☞

  3. I think the story is flawed on several fronts.

    Firstly, the Surface tablet will only be available for distribution in Microsoft stores. That effectively means a limited distribution channel in the United States (7 stores in total) and none to limited channels overseas. In effect the Surface tablet is limited to sales in the United States to a very, very small number of stores. Contrast this with the iPad where it is available for sale in multiple channels, from Apple’s own brick and mortar stores, to its online store, to accredited partner stores, to department stores, to Best Buy, and practically unlimited worldwide distribution channels.

    Secondly, I don’t believe for a second that Microsoft will extend the $199 price for any length of time, beyond an initial launch phase. Unlike the Xbox price model, Microsoft can’t make up the losses from sales of game software and online access to games. I don’t think the MS App Store will make up the difference. If it did, Apple’s App Store vastly outstrips MS’ App Store in revenues, yet Apple has not seen fit to subsidise the iPad via App Store sales. In any event the cut to MS from App Store sales will only be 30%.

    Thirdly, given the relatively low adoption rate of Android tablets, the other tablet manufacturers may have no choice but to adopt Windows 8 RT as a viable alternative in the tablet market particularly if there’s significant uptake in the corporate space due to integration with Office. This is based on a lot of ifs – not least of which is the beachhead the iPad has achieved in corporate boardrooms and corporate environments so MS will have an uphill struggle no matter what to drive adoption in corporations.

  4. Licensing OSX to OEM’s would surely bring competition that not only undercuts Apples own prices and thereby the viability of the Apple Stores worldwide, but may have a destructive element regarding reliability and longevity that Apple have nurtured for many years.

    There might be one exception to the rule though: The Mac Pro.

  5. Correct me if I’m wrong, but who said the $199 Surface tablet would be 10″? Couldn’t they release a 7″ for that price at the same time as the 10″? Just a thought…

    1. As we know from Amazon’s 7″ fiasco: $199 is equal to buying market share, a very old Microsoft trick.

      The ‘Surface’ OtherPad which Microsoft showed off in their bungled demo was a 10″. Therefore, the assumption of course is that this is what MS intend to sell.

  6. “Apple no longer needs OS X exclusivity to survive.”

    I feel that Apple no longer needs high profit margins on their hardware to survive. I would be interested in seeing them begin dropping prices – not to ridiculous levels – but competing with Windows machines more on price, adding market share even faster than they currently are. They would continue to control the whole widget, but begin balancing the price vs. volume equation more in the direction of volume.

    1. They already are competing on price, and have been for years. PC makers can’t even make anything close to the air on price/specs. Yes, apple is making a great profit, but they’re able to control their costs to such an extent that they can give you better quality at an equal or less cost than a similar PC. Even the mac pro (as tired and old as it is) is still a pretty good value (and I can’t wait to see what they’re doing with it next). Apple is just not competing with the low end crap, it gives the impression that their prices are too high.

  7. Slow and steady wins the race… Every single one of these ideas goes against the entire value system of Apple.. The day they start licensing OSX is the day they may as well pack it in..

    Slow and steady wins the race. Apple is gaining share in consumer (nearly 20% in the US) and enterprise.. You don’t win for the long term for a quick buck. You let it happen organically by staying true to your ideals and continuing to create incredible products..

    It will never happen.. Not will price drops matter.. People pay a premium for quality products, and the prices are attainable by most people nowadays.. A $999 mb pro 14″ and a $1299 15″ would crush the competition though.

  8. The mention of Linux in the article got me thinking again abot the sheer laziness and short-term thinking of Windows manufacturers.
    Microsoft has a crappy OS based on Apple, and Apple has OSX based on Next and Unix. And thats it.
    Not ONE other company has tried to build a desktop OS of its own (No I dont count Android).
    Why doesnt Samsung , for example, build a desktop OS from a Linux base and then build some software around it?
    We are stuck with software; nothing really new happens anymore. The only real innovation is iOS.

    Even Apple needs to build a seriously great version of Pages and make it into a real competitor for the appalling but ubiquitous Word.
    One good sign is that many places now ask for invoicing and estimates in PDF format, which can be made with almost any word processor.

  9. Well another attempt for Microsoft to make something MACROHARD, but I am sure the likelyhood of it making a good door stop.

    Too bad they discontinued the Zune, I hear that they are being used in the exclusive executive bathrooms at Sammyson as soap holders, it’s been saving the company a fortune on water usage.

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