I’m starting to believe that the fight for the netbook operating system simply won’t go the full 10 rounds. In case you haven’t yet managed to score a ringside seat, let me offer you a blow-by-blow recap.
- Round One – ASUS offers a custom Xandros Linux distro with the original Eee PC 701 in October 2007.
- Round Two – Enterprising enthusiasts (including yours truly) shoehorn Microsoft Windows XP on the meager 4 GB SSD storage in the Eee PC before the 2007 holiday season.
- Round Three – Fast-forward to January of 2009, when Google’s Android begins to appear on netbook prototypes running with ARM processors, while Acer publicly commits to the sale of an Android netbook in the second half of the year, although it will dual-boot with Windows.
- Round Four – The market speaks and what was once a promising oasis for Linux becomes a desert. Microsoft claims that in the 12-month period ending February 2009 its share of the netbook operating system market has moved to over 80 percent from under 10 percent.
So here we are at the beginning of the next round, which would get us halfway to the full 10. There’s only one problem, and it has to do with how Microsoft plans to position Windows 7 for netbooks. The company has already stumbled once, when it limited the Starter Edition to three concurrent apps, only to backtrack on such a constraint later on. The version had other limitations as well, such as minimal personalization and a lack of Aero support and DVD-playback, but the knockout blow may actually come in the pricing.
Although Microsoft isn’t expected to confirm Windows 7 pricing until later this month, word on the street is that OEMs will pay between $45 and $55 for a Windows 7 license on a netbook. Bear in mind that some netbooks cost as little as $279 in today’s market where it’s believed that a Windows XP license is no more than $15 of the overall device price. As Mary Jo Foley astutely points out:
“In order to thwart Linux, Microsoft has chopped the per-copy price it charges for Windows XP for netbooks to an estimated $15 per copy, according to various sources.”
If true, and I suspect it is, why abandon the successful strategy halfway through the fight? Did the manager step away from the corner?
Complicating the situation even more is that the pricing challenge that has everyone’s attention just might be a wind-up of the left while the real hook is coming from the right. According to Microsoft’s initial introduction of the various Windows 7 editions, it’s the price of Windows 7 Home Premium that might bring a TKO:
“All SKUs of Windows 7 will work on many of these devices, with Windows 7 Home Premium as the recommend SKU on small notebook PCs with sufficient hardware.”
The netbook market is, first and foremost, a low-cost market — price has been key to it success. I believe that if a netbook is offered in both a Linux and a Windows version, most consumers will choose the Windows version if the price premium is within 10-15 percent over the Linux model. If Microsoft wants to make it to round six, they need to keep this in mind during round five. That’s when I expect Google’s Android to make an appearance, and I don’t mean as the ring-girl.