How much will Microsoft charge for Windows 7 on netbooks?
A lot of discussion has bounced around since Microsoft showed Windows 7 running on a netbook at the PDC recently. This was an obvious attempt to show us all that Windows 7 is less resource hungry than Vista and could easily power netbooks. This is great news and some folks much smarter than I are analyzing what the bursting netbook market could do to Microsoft’s bottom line if Windows 7 becomes the de facto standard OS for the little notebooks.
This should be a genuine concern to Microsoft because the netbook market is getting bigger all the time and that growth is expected to continue. The impact on the bottom line in Redmond will be traced back to how much they will charge OEMs for netbook licenses. Mary Jo Foley has some interesting thoughts on this subject and she is correct in her statement that OEMs will not be happy if the Windows 7 license fee is a large percentage of the cost of a netbook. MS can get away with charging a high fee for Vista to OEMs but not for netbooks that typically cost $400 or less. Part of the growth of XP-based netbooks is no doubt due to the low licensing fee that MS is charging OEMs. While no one knows exactly how much (or little) that fee is I have my own guess that it’s only $20.
How did I reach the $20 figure? For the recently announced Mini 1000 netbook by HP they quote $379 for the model running Linux and $399 for the WinXP version. The OS is the only difference between the two models so I’m guessing that HP is simply passing the license fee on to the consumer. That would fit into the overall scheme of things as it would put the OS at around 5% of the retail price of most netbooks which sounds about right to me. Do you think MS will only charge OEMs $20 for their brand new Windows 7 when it ships? They can’t, not without hammering their projections and bottom line. So it’s going to get pretty interesting next year when Windows 7 hits. Perhaps Linux will end up being the OS of choice on netbooks if the Win 7 fee is too high. One thing is almost certain, MS will not allow WinXP to be sold on netbooks once Win 7 goes live. They can’t.
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I’m curious as to how this will impact business sales, since the XP downgrade option is set to end in Jan 09. I can understand MS will kill XP when Win 7 is released, but the real issue to most netbook users I think regardless of price is performance. The question is not how much MS will charge for licensing, but can Win 7 perform on a netbook as well as XP does today? At least that’s my burning concern, not a $20, $40 or even $60 extra for the OS.
Finally, take into account many users will still have copies of XP on them when Win 7 is released. MS may stop sales of XP altogether, but it’s doubtful they will shut down their activation servers for people wanting to install (or reinstall) the OS on their system. I can assume the number of PC’s running XP even after Win 7 is released will be substantial.
Your $20 license fee presupposes that Linux is free on these netbooks. This is unlikely considering the work that HP, ASUS, etc. will have put into tailoring a distro for their netbooks. Also, if Linux on Dell PCs is anything to go by, the price charged for Linux is not that different to the cost of Windows and can sometimes be more.
I agree with Jake. I was pretty surprised to see the cost of some Linux distro’s when it came to support. When I talk to the IT manager at work he laughs when I talked about the thought of switching to Linux. The idea of having to retrain 5,000 people to use Linux even for 1 day blows any supposed savings out of the water. I enjoy Linux and I use it daily, but when I have to type a document or work on a spread sheet I don’t use Open Office even though I think its a very good product.
Something I’m curious about is whether ordinary peoople will be able to buy a version of W7 suitable for netbooks, or whether only manufacturers will be able to buy it.
If I could buy a cheap version of W7 suitable for my netbook, and if it did everything I need, why bother with the full version of W7 on desktops and notebooks?
The current OEM licensing fee for a netbook version of Windows XP is $26.
For me – and, I suspect, many others – the purchase of a netbook will NOT be as a notebook replacement, but as an additional device. In such cases, Microsoft enjoys more revenue, not less.
Given that most sales of low-cost netbooks in developing countries will be to first-time purchasers, hense Microsoft will enjoy more revenue, not less.
I strongly suspect that its only a matter of time when all netbooks will be outfitted with WWAN radios and wireless telcos will begin offering them at greatly subsidized prices (perhaps even for free) with a two-year data plan commitment. Once again, that’s more revenue for Microsoft, not less.