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OS upgrades: Cheap is better than pricey, free is better than cheap

Gregg Keizer | March 5, 2014
Apple's shown the way with free OS X upgrades, but will Microsoft follow? The numbers say that would be smart if Redmond is after service revenue.

Over the last six months, the no-cost Windows 8.1's share of the combined user share of it and Windows 8 was 7 to 20 times higher than that of Windows 8's share of it and Windows 7 at the same point in Windows 8's post-launch timeline.

On average over those six months, Windows 8.1's share of it and its precursor was 11.7 times higher than Windows 8's share of it and its ancestor.

( Microsoft charged $39.99 for a from-Windows-7-to-Windows 8 upgrade for several months; Windows 8.1 was free to anyone running Windows 8.)

Again, the power of free.

The same advantage held for lower-priced upgrades over those that cost more, although the edge to the former was not as dramatic.

OS upgrade uptake
Free operating system upgrades outperformed paid on both Windows and OS X in adoption rates, and less-expensive upgrades, like the $20 Mountain Lion, got a larger percentage of customers to move up than did pricier offerings like Windows 8. (Data: Net Applications.)

Mountain Lion's share of it and its two precursors — Lion and Snow Leopard — was 5 to 9 times that of Windows 8's share of it and its immediate predecessor, Windows 7. Over a six-month period, the lower-priced Mountain Lion's share was 5.5 times that of Windows 8's.

Apple priced Mountain Lion at $19.99, while Microsoft, as already mentioned, charged $39.99 for a Windows 8 Pro upgrade from October 2012 through the end of January 2013, at which point the price jumped as much as five-fold.

(Perhaps coincidentally, the increase in Windows 8's share of it and Windows 7 was lowest in February 2013, the month when the former's upgrade price spiked.)

While the numbers point to a definite uptake advantage for free or cheap OS upgrades over their low- or higher-priced rivals, the question is what Microsoft would do with the information.

Even if Microsoft followed Apple's lead and made Windows always free, including the rumored Windows 9 of 2015, it would seem at first glance that the move would be unlikely to pay off. First and foremost, Microsoft would be leaving an incredible amount of money on the table. Although it might swallow the relatively small losses from giving consumers free upgrades — one-off upgrades bring little to the bottom line — it could hardly afford to chuck the billions earned each quarter from the sale of Windows upgrade rights to enterprises via Software Assurance and other volume licensing agreements.

But there have been several hints of late that Microsoft will experiment with a free, consumer-grade version of Windows. According to a report last week by The Verge and others, Microsoft may be building something called "Windows 8.1 with Bing," which, if it becomes reality, would be offered free of charge to Windows 7 customers as an upgrade carrot.


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