This Is How Microsoft Can Monetize Windows 10
“Free” is a word we hear with increasing frequency. In this context, we are referring to the “free” upgrade to Windows 10 .
Many millions of users will indeed have a free Windows 10 upgrade. Others, holding onto their now aging Windows XP and Vista machines, won’t. But just what is this free Windows we are expecting? And how are we going to pay for Windows 10 down the line?
What Is Microsoft Saying?
Microsoft has a number of options to play around with. They have us like a ball in the palm of their enormous hands, waiting to be tossed, or shoved deeper into their pocket.
During a presentation at the Credit Suisse technology investment conference in Phoenix, Arizona, Microsoft Chief Operating Officer Kevin Turner said:
“The thing about it is, though, we’ve got to monetize it differently.”
The clearest indicator so far toward a new monetization model for Microsoft products. He’s right. A multinational technology company cannot survive drastically altering their core business model–selling software to people–without having a couple of aces in the deck. In the same presentation COO Kevin Turner hinted much more would be revealed in the summer. The very same summer we are expecting Windows 10 to drop .
You can also read the entire Kevin Turner presentation transcript here.
What Are the Options?
We see a few options, actually. Microsoft has built Windows 10 in a pretty organized manner, allowing them flexibility in their monetization choices. Personally, I think we will see a big app store push, along with some nice app subscription models, as we have seen with Office 365. But let’s look a little further.
Similar to other application stores, the Windows Store features a number of paid and unpaid selections. We won’t dwell too long here, as most of us by now understand the ins and outs of an app store. Apps for Windows, as already established with Windows 8, will feature numerous apps.
If Windows is switching to a subscription model , then it is easy to see many apps following suit and offering their users a tiered subscription model, which isn’t uncommon in existing markets. Along with this, I’d expect some in-app purchases to come our way as part of these tiered service packages.
The difference this time around comes in software we have traditionally considered pay-to-license i.e. you buy it, you use it as much as you want, and Microsoft leaves you alone. With Office 2016 coming in the fall, we may well see an overall shift to an app subscription model along the lines of Office 365 which has been by almost all accounts a pretty successful venture.
However, the monetization will only work with new products. Retroactively monetizing globalized free-to-use products such as Skype (I know it is already monetized, I’m talking about the removing the free service) would cause a severe backlash. Microsoft will focus on what they can offer subscriptions for and the services they can bundle together, but it might take a little time to figure out the best subscription combinations.
Remember it is isn’t entirely necessary to sign up to Office 365 and the plethora of other Microsoft services coming our way. Office Online is free and has outstanding functionality, and the same goes for many of the most popular Microsoft services. While Microsoft will undoubtedly monetize where possible, you can still choose from a range of free Office suites .
Bonus: For those readers living in Seattle, you can be one of the first to try Microsoft Wi-Fi, a new, paid service available at a number of city locations. This service arrives with Windows 10 Insider Preview Build 10166, and can be purchased through the Microsoft Wi-Fi app.
Currently only available in Seattle, it will soon be available throughout the US, Canada, and most of Europe. It appears the service will be device specific, and will run from the moment of purchase, regardless of whether you’re connected to Microsoft Wi-Fi. It sounds like an generalized extension of Skype Wi-Fi, with a wider appeal, but we’ll have to wait to test it!
Don’t forget that Windows 10 is only free to those upgrading from Windows 7, 8, 8.1, and potentially Windows RT. Any users making the jump from Windows XP or Vista, or anywhere else will pay for their Windows 10 license. How much? We don’t know for sure, but Windows 7 Home Premium was around $119.99 at release, and Windows 8 was very similar. Perhaps $119.99 is the Microsoft magic number?
We have already seen leaked numbers indicating Windows 10 Home retailing for $109.99, and Windows 10 Pro for $149.99. The leak, discovered by ZDNet’s Ed Bott, certainly fits well with the opening day purchase price for the past two Windows iterations, so this could be a solid answer to those purchasing a license. The site in question, Newegg, jumped the gun on Windows 8, lending further “credibility” to the leak.
Of course, it isn’t too late to update. Here are some cheap license options , if you so choose.
N.B: since the initial Newegg leak prices on the site have been updated and now include prices for 64-bit operating systems, along with two different release dates: 07/29/15, and 08/31/15. The later dates are marked “full version,” so it’ll be interesting to see what that means.
The new Windows Update model has been designed for two reasons: Firstly, to keep a vast proportion of consumers on the same version of Windows, preserving our security. Secondly, directly related to the first, is to gradually reduce the cost of maintaining an extensive update program with seemingly no end in sight.
Windows Update will roll out more frequently , updating our systems with the newest and shiniest from Redmond when ready, and Microsoft hope this will be the downward pressure required to slowly make Windows 10 a profitable enterprise.
Microsoft has already reduced costs in other areas, but not as part of the Windows 10 rollout. This month saw Microsoft cull around 7,800 jobs in a move most likely designed to counteract their calamitous purchase of Nokia’s mobile division. Different cutbacks, but cutbacks nonetheless.
Pay for Updates
Microsoft very, very quietly slipped some vital information out into the world at the end of June. I almost missed it myself. It ties in directly to the continually stipulated “Windows 10 and its updates will be free for the length of the device cycle” bit. A vague statement, at best, but we understand. As with Windows XP, Vista, 7, and now 8, each product has a life cycle.
In a slide contained within the Windows 10 Revenue Recognition PowerPoint presentation, the small print reads “which can range from two to four years.” It goes on to say device life is determined by customer type, and that deferral periods may vary.
It isn’t definitive, of course, but if the update cycle becomes monetized after two to four years, Microsoft will have captured a generation of new Windows users without fully explaining exactly what’ll happen at the end of time.
It raises the very serious and extremely valid question of what happens afterwards?
Part of reducing costs might entail entertaining other income streams for Windows 10. Microsoft didn’t hesitate pushing a somewhat ill-advised adware-style update into your system , and despite the flack this author received when we first discussed the matter several months previous, a great many individuals became very concerned when the update actually hit their system, with a number of those scrambling for removal guides . Would Microsoft consider using the Windows 10 platform to deliver choice adverts to your desktop?
To be honest, I cannot see this one happening. I think a serious contingent of Windows users would jump ship to a free service, be that Linux, their mobiles, or even an older, ad free version of Windows. It could be worth holding onto those Windows 7 installation discs and product codes after all!
We’ve been told Windows 10 will appear on novel devices such as the HoloLens , or the Surface Hub. Will Microsoft apply a subscription model to modified versions of Windows 10 designed to run specifically on those devices, or any future devices?
The operating system might come free to these devices, but the apps won’t. The HoloLens is going to bring expert opinion into our homes to help with day-to-day tasks, and end-users will certainly need to fund aspects of this program. As the HoloLens becomes established, we might see some downward market pressure as expert individuals, businesses, and organizations jump aboard the new platform. But this could similarly be stifled by as-yet unknown operating costs. Microsoft will run the HoloLens platform; how profitable it will be in conjunction with Windows 10 is completely up in the air.
Microsoft may well go completely bonkers and work on a referral system: convince three of your friends to buy a Windows 10 license, and you get use of Office 365 for a year. Or use Skype to make five Windows 10 marketing calls, and grab Skype WiFi for a month.
What else? Microsoft may encourage Windows 10 users to develop a Minecraft addiction and then force users to fight to the blocky death in an assortment of arena battles. Or not.
@briguy943 "Windows as a service" just means that we'll continuously keep it up to date. There is no ongoing fee.
— Gabriel Aul (@GabeAul) May 12, 2015
Given the Microsoft purchase of Minecraft, and the upcoming Fable Legends (whose DLC delivery system is akin to Windows 10), could Microsoft be making serious waves back into the gaming market? Windows 10 exclusive games would work well alongside the Xbox angle-but could potentially alienate users with painful memories of the failed Games for Windows system, as well as those used to housing everything under their Steam account. Still, Directx 12 looks jolly nice and could represent a coup for Microsoft and Windows 10.
Windows 10 Will Make Money Somehow
Whatever happens, Microsoft is not going to simply give their flagship operating system away completely free. The free upgrade solidifies their hold on incoming Microsoft users and the expansive plans for cross-platform apps broadens the appeal to users used to using a plethora of devices, wherever they are.
If we consider the Microsoft expansion into consumer hardware, you begin to fully understand their change in approach; no longer bound by software, Microsoft is taking a distinctly Apple-esq route into the future-and we are all going with them.
How much are you willing to pay for Windows 10 and its features?