• Paul Fingleton

Windows 10 to be available as Subscription, like Office 365?

Even with seriously reduced PC sales, and some small successes in the mobile sector, Windows is still a huge revenue source for Microsoft.

The market is changing and we are seeing an ever evolving Microsoft trying to keep pace as the ground shifts beneath their feet. Previous CEO, Steve Ballmer, described such an evolution as trying to replace the engine of a race car while it is already travelling 120 miles per hour.

Current Microsoft CEO seems to be ready to give this a go, with the "Mobile first, Cloud First" strategy. He wants people to use Microsoft products regardless of the device on which they are using them - but naturally doesn't want to throw out the baby with the bath water.

Microsoft has cut the price of Windows—making it available for free on phones and small screen tablets (anything under 9 inches), plus there's the Bing edition for everything else (devices under $250). But executives in the Redmond based company are still looking at ways to monetize its platform, and avoid giving it away entirely for free.

Kevin Turner, Chief Operating Officer at Microsoft, moved to assure investors last week that profits are still the goal for the product.

In a report covered by GeekWire, Mr. Turner was asked if the plan was to make Windows a loss leader - give the product away for free and monetize them in other ways such as the incredibly successful Office 365, Microsofts latest billion dollar business. Turner responded that the company had "not had any conversations" about going down that road, adding that "we've got to monetize it differently... There are additional opportunities for us to bring additional services to the product and do it in a creative way... finding new ways to monetize the lifetime of that customer on those [zero cost Windows license] devices."

More is expected to be revealed in the first six months of 2015 as Microsoft look to hold several key events focusing on the Consumer and Developer features of Windows 10.

It would seem that Microsoft may be looking to offset some, or all, of the initial purchase price through other methods to generate continuing revenue from Windows users: Perhaps through subscriptions, as has been rumoured before, which could eventually bring higher revenues per user. Another alternative that his been rumoured is that certain features may be licenced as 'add-ons' such as a Desktop environment for Windows RT toch screen devices, or Blu-Ray and DVD playback, etc.

The growth of the smartphone and the tablet markets have had a significant impact on the way we use computers, and what we expect from our Operating Systems on such devices. Microsoft has sold operating system licenses to both end users and OEMs, and the company delivered paid upgrades for those operating systems every few years for a significant charge.

Nowadays with smartphones costing as little as $40 and sub-$100 a regular occurrence; charging $50 to $200 for a Windows upgrade licence is a non-starter.

Turner commented to investors that new licencing models for Windows has seen the market for "nine-inch and below devices explode"

Microsoft receives some indirect income from these devices — app stores commission (30%), advertising income from Bing and other Web properties. This is still a large amount of money, but pales into insignificance when compared to the revenue behemoth on which the company built it's success.

A subscription service for Windows is nothing new for Business users, Software Assurance has been available for years to ensure that Enterprise customers could upgrade to the latest and greatest versions of Windows at no additional cost (above the Software Assurance fee).

If Microsoft were to release a new no-cost Windows license, it is likely that they will lack certain key business features, to ensure that Software Assurance continues to provide added value to customers and more importantly for Microsoft and it's shareholders this income should continue for many years to come.

This will also provide a potential monetization path for Microsoft - in the BYOD (Bring Your Own Device) market, if you want to pick up a Windows tablet for $150, then that should be OK, but if you want enterprise features for it then you can upgrade for a fee.

Other subscriptions are not new for Microsoft: One of their other major 'cash cows', Office, is undergoing a radical overhaul and according to Microsoft's quarterly financial results, millions of people are using the home-oriented Office 365 subscriptions, and these subscriptions are already providing billions in revenue to Microsoft.

Xbox Live works as a subscription service for consumer devices such as Xbox Live to provide matchmaking and other services for almost 40 million users.

The closest thing to a Subscription for Windows itself is for the additional storage availble in OneDrive, perhaps used to test the waters, but this is strictly optional in Windows.

Further testing of the waters could invovle cross-promotional bundles such as Microsoft's "Work & Play" bundle: $149 bundle that contains one year of Office 365 Home (which includes unlimited OneDrive storage), Skype Unlimited World + Wi-Fi, Xbox Live Gold, and Xbox Music Pass.

If you combine enough additional value then it is an offering for which people will pay.

It will be a fine line for Microsoft to walk, if you price it right and there is great value for money then it will be an easy sell for customers, they will flock to it. If the price is slightly off, or the value for money is questionable then many will balk. If they miss the price point or don't include enough in the package then the product could be dead in the water and Microsoft will quickly need to scramble to bring the customers back.

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