Microsoft chops Windows 8 price for low-end device makers: Report

Microsoft chops Windows 8 price for low-end device makers: Report

Summary: Microsoft is cutting the price it charges PC makers for each copy of Windows 8 they sell from $50 to $15, but only on low-end devices, according to a new report.

SHARE:
44

There has been talk that Microsoft was considering chopping the price it charges OEMs for Windows, and now, according to a February 21 Bloomberg News report, Microsoft is making that move -- at least for low-end devices.

asuslaptop249

Bloomberg, citing unnamed sources, said Microsoft is dropping the price it is charging OEMs for Windows 8 from $50 a copy to $15 a copy. The price cut seemingly only applies to machines that are priced at $250 or less at retail. It's not clear from the report when this pricing change will take effect.

There aren't a whole lot of Windows 8 PCs or tablets that cost $250 or less right now -- at least here in the U.S. Perusing the online Microsoft Store, I only found one: The ASUS X102BA-BH41T Touchscreen Laptop, which has been discounted to $249 from its original price of $399. On Amazon.com, the 8-inch Dell Venue 8 Pro 32 GB tablet is listed at $249, also discounted from its original $299. That said, the low end of the consumer market is where Microsoft is most vulnerable to competition from Android and Chrome OS-based devices.

Microsoft is expected to overhaul its Windows SKUs by the spring of 2015, which is its target release date for the next major version of Windows, codenamed "Threshold" (and likely to be labeled Windows 9 at launch). According to my sources, Microsoft is planning to make three primary Windows Threshold SKUs available: A low end "modern" consumer SKU for Windows Phones, ARM-based Windows tablets/PCs, phablets and other kinds of tablets; a more traditional consumer SKU that would likely run legacy Win32 apps; and a traditional enterprise SKU for business users that would support legacy Win32 apps and be updated less frequently than the other two.

I'd think it would be devices in "modern" SKU territory that would be Microsoft's target for a cheaper OEM version of Windows. The Verge previously reported that Microsoft might go so far as to make this SKU free to PC/tablet/phone OEMs.

Microsoft has been criticized by PC makers for decades for its OEM Windows pricing. In the past, Microsoft has charged OEMs more than $100 a piece for Windows, but provided PC makers ways to reduce that cost via marketing agreement concessions. OEMs who agreed to preload Windows on at least half of their PCs each month; to display the Windows logo prominently; and/or to promote Windows in their press releases got discounts. Volume also mattered (and to a large extent, still does), with PC makers moving the largest number of Windows machines granted a tier-one rate. Many of these practices got Microsoft in legal hot water -- see U.S. DOJ vs. Microsoft -- and resulted in Microsoft leveling the OEM playing field around pricing to a large extent.

I wouldn't be surprised if Microsoft plans to and/or has already started cutting Windows OEM pricing for low-end devices, as Microsoft's OEM revenues from Windows on cheaper consumer PCs and tablets has been on the decline. (Its share on more expensive business PCs has held up better, as company officials have noted during recent earnings call reports.)

The part of this equation in which I'm most interested is how the Softies plan to make up for reduced operating system licensing revenues.

Patent-licensing is one place where Microsoft is counting on increased, sustainable revenues. Microsoft is believed to be earning in excess of $1 billion a year from its growing number of patent agreements with companies making Android and Chrome OS devices. I'd think Microsoft also will be looking to service-subscription sales from users for Office on iPhones, Macs, Android phones and -- if my sources are right -- the iPad, as another offsetting revenue source.

Anyone else see other places Microsoft might try to exact more money from OEMs and/or consumers to take up the OS licensing slack?

Topics: Windows 8, Microsoft, Tablets, PCs

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

44 comments
Log in or register to join the discussion
  • 285

    "There aren't a whole lot of Windows 8 PCs or tablets that cost $250 or less right now"

    Actually, they only need to cost less than $285. Then, with the $35 license discount, the price can easily be slashed to $250
    Sacr
  • Unified Platform

    "Anyone else see other places Microsoft might try to exact more money from OEMs and/or consumers to take up the OS licensing slack?"

    A well running app store across all Windows devices certainly would be a billion dollar business.
    Sacr
  • Not good enough

    It will still be $15 more than the equivalent Android or Chrome device while performing not as well. Microsoft has to put its money where the mouth is and if it wants to be a devices and services company give away windows client for free, make money off the services.
    Xenon8
    • Patents

      Android seems to be about a 10$ license for patents. And the "not performing as well" part depends a lot on the definition of performance, and on the specific Windows/Android device in question.
      Sacr
    • Please no more...

      Not every piece of software needs to be free, paid for by tracking users usage, locations and serving ads.
      MarknWill
  • Microsoft Basically Had No Choice...

    Because Windows 8 is atrocious as a mobile OS.

    Don't even get me started on RT.

    Underneath all that Metro Bloat is AARP eligible Windows NT.

    Even for horror movie fans, that should be pretty scary.

    Fact of the matter is, Microsoft is plain lazy.

    Instead of writing a new mobile OS, they doggy-piled Metro on top of NT.

    Why did MS do this?

    Oh, that's right, Microsoft NEVER wrote an OS in its history.

    They always bought, borrowed, copied, or outright stole!
    orandy
    • I see the fear has already set in with you

      I guess this is your worst nightmare come to life, eh orandy?

      Imagine a full Windows 8.1 tablet, at the exact same price as a less expensive Android tablet.

      Isn't competition great. :)
      William.Farrel
      • comprehension?

        exact same price... less expensive...

        Your math needs to be reviewed. Less expensive is always LESS. It cannot be "exact same"

        The advantage is to the vendor. it would still be $15 less profitable to make the Windows tablet...
        jessepollard
        • Yep, even with Android

          it is not free. They have to pay $ to Microsoft for patents. So there ends your LESS dialogue.
          Ram U
          • Not all pay

            Only the idiots pay. (idiot - someone who acts in a self-defeating or significantly counterproductive way)
            frank0-3f91e
          • So the majority of companies are idiots

            Interesting.
            Michael Alan Goff
        • Why do you think the OEM gets the extra $15?

          you seem to believe that there are huge profit margins for android tablet makers and they can just pocket the imaginary $15 price difference you think exists.

          Androids race to the bottom pricing has been frighteningly fast. There isn't much room to pocket any savings, especially against tablets being sold at or below cost... unless your company name is Samsung.

          As for comprehension, william was suggesting that you imagine windows tablets that were previously more expensive than an android tablet, but were now on equal pricing levels due to trimmed costs. Understand now? That isn't exactly going to help struggling android tablet makers.
          Emacho
      • Agreed

        Except you should have put "same price or less than an android tablet or laptop" and the ABM crowd wouldn't have anything to complain about. Since they can't say anything that's truly bad about Windows 8 without lying they jump on your word choice instead. Pathetic way to try to make a point, isn't it? But if that's the best they can do...
        xplorer1959
  • Isn't some competition great!

    All you windows fanboys who can't stand to see android, chrome and iOS devices doing well and insist they either su*ck or deny thier success.
    For some reason, you want to go back to the days when all we had was windows PCs with 95% share. Thanks to these competitors, MS now has to be on the ball and prices are getting lower. While they botched windows 8, maybe they'll become better at developing software going forward.
    drwong
    • DrWong: "MS now has to be on the ball and prices are getting lower"

      This is nothing new. Microsoft faced a similar dilemma when Linux-based netbooks were introduced a few years ago. With Windows XP Home (Windows Vista was far too bloated for netbooks) sold at or near cost and a little help from Intel, Microsoft nipped netbooks in the bud.

      Today, I believe that Google's branding power with Android and Chrome OS, including its various services, will have greater success fending off Microsoft's low prices for Windows than did the relatively unknown Linux distros that were pre-loaded on netbooks.

      Android-based tablets, Chromebooks and Chromeboxes not only provide low-cost alternatives to Windows, they also offer simplicity (and, in the case of Chrome OS, security) which in and of itself is attractive to many consumers.
      Rabid Howler Monkey
    • I see. The "fanboys".

      Seriously, I don't think anyone with a normal, or average life worries too much about whether a handful of multi-national, billion dollar companies structure their profit margins, as long as it doesn't impact them negatively.

      I don't think many people spend any sleepless nights worrying about who has what in terms of some market share. I do think they, like me, look at this as a good way to get me a companion device like a tablet, at a price they're willing to pay for a tablet. $499 is too much, in my opinion for a secondary device.

      I believe the terms "Fanboy" is a word used by those that do not like to have someone post something that favors something from a company they didn't buy from. If someone say a Windows Pro tablets fits their needs, their lifestyle better then an Android tablet, how does that make them a Fanboy? Because that person have an opinion that doesn't align with theirs?
      How does it make someone a Fanboy simply stating facts that someone else doesn't want to hear, or have others discover?

      Those same people tend to call anyone who questions, or corrects an inaccurate or false statement as "shills" and "trolls", as they believe only their opinion is the right one, and are angered when they're caught making stuff up.

      Wouldn't someone who consistently and relentlessly, spins, twists, or fabricate facts negatively to favor their wants be considered a "fanboy"?

      It's just they're not a fanboy of the company they're speaking out against, correct?

      Me, I'd like to see what kind of devices this ushers in, and at what price point. I think Windows 8 on a tablet is very nice. If I could get it on a good $250 10" tablet, that would be even better.
      William.Farrel
      • William.Farrel: "as long as it doesn't impact them negatively"

        An example, ultimately resulting in less choice in the market. Time will tell, but I don't think that Microsoft will wipe the floor this time around.

        And, yes, I *do* believe that competition is great.
        Rabid Howler Monkey
        • I agree.

          Will they "wipe the floor"? Probably not. Will they get more devices out there? Yes they will.

          For many like me, a tablet is secondary, and as nice as the Surface is, I can't see paying that price for something used on occasions. The Dell Venue 8 is really nice, and a great price, but I'm not looking for an 8" tablet.

          If lowering the cost of the License can help OEMs put out a decent (not underpowered) tablet at a good price point, like me, many will jump at that chance.
          William.Farrel
    • Marketshare...

      It seems to me that 92-93% is still pretty impressive... you make a silly comment dredged from a silly mind...
      xplorer1959
  • Microsoft chops Windows 8 price for low-end device makers: Report

    Hard to trust this report when its from Bloomberg and unnamed sources. But lets say Microsoft does drop the price. That would be excellent for me because I could purchase a whole lot more licenses for cheap. I might even resell a few and make a profit. And I'm not alone on that, OEMs will be selling a whole lot more as well. Good things are coming out of this either way.
    Loverock.Davidson