Making sense of Windows' irrational pricing and licensing
A few weeks ago, Microsoft announced it was cutting the price of retail, shrink-wrapped copies of Windows Vista. The new suggested price for an upgrade edition of Windows Vista Ultimate is $219, down from $299. The cost of an upgrade edition of Vista Home Premium drops to $129 from $159. Those price cuts were effective with the release of Vista Service Pack 1 in mid-March, and the actual prices that people pay (the so-called street price) will invariably be lower: Amazon, for example, is offering discounts on the upgrade editions of Vista Ultimate and Home Premium for $195 and $95, respectively. The full versions are $300 and $216.
Those prices are, frankly, higher than what any sane person would pay. You can get a better deal direct from Microsoft, just by installing an unlicensed copy of Windows and not activating it within the first 30 days. As I noted back in December, Microsoft will sell you a fully legal Vista Ultimate license for $199, no questions asked, as part of its “get legal” program. In fact, Microsoft’s direct prices are significantly better than the suggested retail prices and practically identical to the discounted prices available from partners like Amazon.
But the customers who really get the short end of the deal are those who consider upgrading after they buy a new computer with Vista preinstalled. A customer who buys a new Dell XPS 420, for example, can choose Vista Home Premium preinstalled or can upgrade to Vista Ultimate at the time of purchase for $150. If they wait, however, the price goes up to $159 (and the hassle increases as well).
Trying to find the best price for Microsoft software is a frustrating game, with a constantly shifting set of rules that leave most people feeling like losers. Trying to understand whether you're staying within those rules is stressful. I don't know a single person who thinks the retail price of Windows is fair and that the terms of use are understandable. In fact, the entire licensing structure for Windows feels Byzantine and outmoded. It needs an overhaul, and next year's launch of Windows 7 offers a perfect opportunity for Microsoft to give its consumer and small business customers a fresh start. If I were in charge of the retail launch, I'd make five changes:
- Clean up the version confusion. Offer Home and Business versions (equivalent to the current Home Premium and Business editions) and an Ultimate edition that combines both.
- Cut the price. Make the Home edition $49, and sell the Business edition for $99. The cost of Ultimate? Add the other two prices together to get $148.
- No more upgrade SKUs. A license is a license, whether it's new or an upgrade. You shouldn't have to sort out "qualifying upgrade products" or kludgey install workarounds that confuse even so-called experts.
- Sell a family upgrade pack. Copy Apple, and sell a pack of five licenses (Home only) for $199. And just like Apple, don't offer that discount to businesses.
- Offer a deactivation option. Product activation is a necessary evil, but other companies do a better job of it. Adobe, for instance, allows Acrobat users to deactivate a license so they can uninstall are reinstall the software, on the same PC or a different one. Windows should do the same.
I'm sure some Microsoft execs are recoiling in horror at the thought of slashing prices and redoing licensing procedures. But I'll bet the company's bottom line would actually improve with this model, customer satisfaction would skyrocket, and it would kill the misperception that Windows is overpriced compared to the Mac OS.
Of course, there's still the little matter of actually delivering a product people want to buy and then marketing it intelligently. But that's a topic for another day and another post.