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Microsoft keeps customers in the dark over Windows 8 prices

Delay in pricing new OS due to desktop vs. tablet conundrum, analysts argue

With just two months to go before the retail launch of Windows 8, Microsoft has yet to price the new OS. See also: Amazon selling Windows 8 Pro upgrade for £49.

Analysts today blamed Microsoft's attempt to accommodate both desktops and tablets with Windows 8 for the lack of information.

"The delay in releasing pricing is all about uncertainty around the PC market and competition from Apple," argued Patrick Moorhead, principal analyst with Moor Insights & Strategy. "Microsoft needs to price Windows in a way that looks smart versus Apple's OS X, doesn't leave money on the table with commercial PC customers, and enables OEMs to compete better with the iPad."

The delay in pricing Windows 8 is real: During the Windows Vista and Windows 7 cycles, Microsoft unveiled retail prices weeks before each OS made the RTM, or "release to manufacturing," milestone, and four or more months before retail sales started.

Microsoft disclosed Vista prices 58 days before that edition's RTM, and 148 days before retail availability. Windows 7's prices were made public 28 days before RTM and 120 days before its on-sale date.

Windows 8 reached RTM Aug. 1, and will go on sale Oct. 26, or 61 days from today.

It shouldn't come as a surprise that Microsoft's not followed past practice in setting prices for Windows 8, said Al Gillen, an analyst with IDC. "With Steven Sinofsky at the helm, you can forget any responsibility to repeating precedents. All through the cycle this product has not been business as usual," Gillen said in an email reply to questions.

Stephen Sinofsky is the head of Microsoft's Windows division. A 23-year veteran of the company, Sinofsky is known for shipping products on time and in keeping tight control over how and when information is parceled out.

The only price that Microsoft has revealed so far is the $39.99 it will charge Windows XP, Vista and Windows 7 users to upgrade their PCs to Windows 8 Pro. That price, however, is valid only through Jan. 31, 2013, or for about three months after the operating system's debut.

Still unknown are what Microsoft will charge for upgrades to Windows 8, upgrades to Windows 8 Pro after Jan. 31, 2013, and what it calls "System Builder," the edition aimed at small-scale or homebrew PC makers, and users who want to run the OS in a virtual machine or in a dual-boot configuration.

Microsoft has simplified its pricing decisions with Windows 8. Unlike Vista and Windows 7, the new OS will not be sold in "full" versions, or licenses able to be installed on machines, physical or virtual, not already running an older version of Windows. Instead, Microsoft will sell Windows 8 in just two flavors at retail: upgrades and System Builder.

Al Hilwa, a colleague of Gillen at IDC, echoed Moorhead's take on the pricing lag.

"Most vendors follow a motto of not ever making a decision ahead of when they actually have to," Hilwa said in an email. "Things may well be in flux right up to the last minute. Having to straddle the tablet and PC worlds, Windows 8 may be under unique pricing challenges given that tablet OSes have historically been free." Moorhead also cited tablets as a likely reason why Microsoft hasn't announced prices. "[Microsoft has] a lot to incorporate [in pricing], and maybe they don't like what they see when they run their pricing scenarios," Moorhead said. "What has them most challenged is how to help tablets."

Implicit in both Moorhead's and Hilwa's speculation is a tug between wanting to set higher prices for desktop copies of Windows 8, and the need to go lower for OEMs building Windows 8-powered tablets so that they can sell devices competitive with Apple's iPad. Also unspoken is the connection between Windows retail and Windows OEM pricing; the former must fit into the price spectrum.

Pricing desktop upgrades and System Builder at a low price could alienate tablet OEMs unless their traditionally-less-expensive licenses were also greatly reduced. Using existing pricing models, like Windows 7's, would mean retaining revenue from desktop OEMs, yet make it difficult for tablet OEMs.

Apple, being both the developer of iOS and the iPad's OEM, does not have to pay anyone (except possibly itself via behind-the-scenes accounting) for a software license.

"I expect Windows 8 to be priced the same as Windows 7 but [that Microsoft will] provide some special discounts to OEMs for tablet and convertible devices," said Moorhead, referring to the hybrid hardware that combines features from notebooks and tablets.

If Moorhead's right, that would mean a Windows 8 upgrade will cost $120, the current price of Windows 7 Home Premium. Under his model, Windows 8 Pro would run $200, the same as Windows 7 Professional.

Other long-time Microsoft watchers are counting on lower prices. Last week, for instance, ZDNet blogger Ed Bott said, "There is strong evidence to suggest that Windows 8 will cost less than corresponding versions of Windows 7."

But there is another explanation for the pricing announcement delay, said Moorhead.

"Microsoft has significantly changed their communications strategy, deciding to keep most of their customers, developers, press and analysts in the dark until the very end of an execution cycle," Moorhead said. "This is the Apple approach, but the difference is, unlike Apple, Microsoft has a huge ecosystem of PC makers, hardware partners, and retail partners."

Gillen of IDC had similar thoughts, that for whatever reason, Microsoft simply doesn't want to discuss retail prices at this point.

"There is surely downward price pressure from every direction [but] I would expect that OEM pricing was established a long time ago," said Gillen, countering the idea that Microsoft hasn't released retail pricing because it's still wrestling with OEM pricing. "How do you get partners to invest millions of dollars or hundreds of millions in developing a product if they don't know what their cost of materials will add up to?"

Microsoft has been sluggish in revealing other aspects of Windows 8. It didn't unveil the versions it would sell until mid-April, about two-and-a-half months later in the development cycle than in Windows 7's case. It's also declined to specify prices for the Surface line, its first foray into PC and tablet manufacturing.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.

Read more about windows in Computerworld's Windows Topic Center.


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