Robert McLaws: Windows Edition

Blogging about Windows since before Vista became a bad word

The True Cost of Windows, Part 1 - Conclusion(s)

Now that we've accumulated all of the data, it's time to see if my hypothesis passes the litmus test.

Interpretations – Basic Home SKUs

The first thing to point out is the fact that, though prices increased pretty dramatically before 1995, they've leveled out since then, and with XP, they actually went down. You can interpret the graph on your own, but I'll point out some highlights:

  • If you bought Windows 1.0 today, it would be nearly twice as expensive as its original MSRP, and only $16.54 cheaper than the list price for Vista Home Basic. Inflation increased the price by nearly $84, or nearly $4/year.
  • Windows XP Home was actually $10 cheaper than its predecessor.
  • The MSRP for Vista Home Basic is the same as Windows XP Home.
  • Every release since Windows 3.1 is more expensive than Vista Home Basic in today's dollars. In fact, Windows 95 Retail tops out at $74 more expensive than Vista Home Basic, and the Upgrade version is $42 more expensive than Home Basic Upgrade.

Interpretations – Advanced Home SKUs

Based on the data, I can see why Microsoft hasn't tried a midrange SKU in so long. The first one was overpriced. Did anyone actually buy that product? I'd love to see the sales numbers.

According to my research, if you were to buy Windows/386 today, it would cost you a full $100 more than Vista Home Premium. So when asking yourself if Aero Glass is worth it… ask yourself if you consider the banishing of the "Whitewash Drag" a more important advancement to Windows than the 386 processor.

Interpretations – Pro SKUs

Based on the data, I can see why Microsoft hasn't tried a midrange SKU in so long. The first one was overpriced. Did anyone actually buy that product? I'd love to see the sales numbers.

An interesting piece of data I saw here was that there is only a 36 cent difference between the inflation-adjusted price of Windows 2000 Pro, and the average for all the inflation-adjusted Pro SKU prices to date. I don't know if you can draw any conclusions from that, but it is interesting nonetheless.

By far the most surprising thing in this set is the difference between the inflation-adjusted 200 Pro Upgrade price, and today's Ultimate Upgrade price. It's less than a buck, folks. How can you say that Ultimate is too expensive when the difference after inflation is 58 cents???

So Is Vista Really Cheaper?

Based on the evidence presented, I've shown conclusively that Windows Vista is the most inexpensive operating system they've released to date. After almost 10 years of steep price increases, the MSRP of Windows has been flat for more than a decade, with the cost after inflation steadily decreasing since then. One would expect that the cost of Windows would rise with inflation, but I have shown that simply isn't the case. And while newspapers are quick to trump the (so far) subdued public excitement for the Windows Vista launch compared to Windows 95, purchasing that OS in today's dollars is a VERY tall order.

That answer, however, is VASTLY different from the public perception. According to the poll in this CNET article, 76% of respondents think Windows is actually more expensive than it used to be. That alone screams to me that Microsoft has not done enough to convince people of the value of Windows and how it has improved over time. Hopefully, this exercise, along with CNET's poll data, will be a wakeup call for the Windows Marketing team to start looking at how to address this issue, which may be the most significant issue Microsoft has ever faced. And if they don't, they can always hire me and I'll do it :D.

Wrap Up – Part One

Well, I hope you've enjoyed this exercise as much as I have. But I'm not even close to being finished yet. For the next article in this series, I'll gather some new data about each OS release, and break down the explosive growth of the operating system. In Part 3, I'll tie everything together by showing you how Windows gives many economic theories The Finger.

So stay tuned…

(OK, you can start commenting now.)




  • Julian Sweet said:

    How did you adjust for inflation?

    What index did you use?

    Most measures of inflation take a basket of goods and measure the price today versus the price in the past.

    To apply this figure to a computer product is misleading.

    Computers and software prices have fallen. One example the IBM pc launched at $1,565

    Now a PC is alot cheaper than that today!

    On the other hand I suppose it makes sense to justify a lemon by the rise in cost of lemons.

    February 28, 2007 9:38 AM
  • Julian,

    I explained in several places what source I used for my inflation calculations. I even linked to it again six inches above your comment. I'm pretty comfortable with NASA's calculations, since they need to send people into space and all. Second, I said in the beginning that the article had nothing to do with hardware sales, it was retail box software only. Plus, your argument is specious. Performance PC hardware has always been in the $2000-$3000 range. Budget lines may have fallen, but it's still difficult to find a sub-$1000 Vista-capable machine, after taxes and shipping. Finally, your last statement makes no sense, because the price of Windows has fallen, not risen. You didn't even look at the graphs on the second page.

    But thanks for your comments :).

    February 28, 2007 12:56 PM
  • Frank Hudson said:

    I'm not sure how it would impact your conclusions, but I thought it was odd that you didn't include NT Workstation. Certainly every bit a consumer/non OEM product as Windows/386 and probably similar to Windows 2000 in most consumer regards.

    However it would change the conlusions, more data points from inclusion of NT 3.5x and NT 4 would add strength to the study.

    Yes it wasn't a great notebook or game OS, but let's be careful not to judge NT by modern standards, but against other contemporary Windows versions. Any shortcommings in these areas didn't stop some of us from considering it the "pro" version in the days of Windows 3.1 through Windows 98.

    February 28, 2007 2:20 PM
  • dugbug said:

    "it's still difficult to find a sub-$1000 Vista-capable machine"

    Wha?????  vista-capable machines go for < $500 (pre-shipping).

    February 28, 2007 3:34 PM
  • dugbug said:

    "it's still difficult to find a sub-$1000 Vista-capable machine"

    Wha?????  vista-capable machines go for < $500 (pre-shipping).

    February 28, 2007 3:42 PM
  • Thom said:

    Very interesting, but I agree with Frank. I knew something was missing in those charts and it's NT. That would definitely bolster the professional SKU data.

    Actually, I would almost say that it makes the most sense to only deal with home and professional versions and skip the versions that don't play well.

    February 28, 2007 5:10 PM
  • Mike Dimmick said:

    Prior to Windows 95, you also needed a copy of (the appropriate version of) DOS, if starting from a bare machine. Not that this was common at the time - you couldn't buy DOS at retail until DOS 5.0, IIRC. Still, you should include it if you're really comparing like with like. It also goes a long way to explain the jump of $60 in price from Windows 3.1 to Windows 95.

    February 28, 2007 6:10 PM
  • Interesting points. I'll see if I can get the press releases for the NT versions too.

    March 1, 2007 1:49 AM
  • Jack said:

    It would also be interesting to include the prices for Microsoft's version of OS/2 or even Xenix. These were typically much more expensive than Windows -- and in the early days, the relatively low price of Windows was part of its appeal.

    March 1, 2007 5:12 AM
  • Bishop said:

    It may be valid to point out that Windows is a bargain compared to Windows predecessors, but the true indicator of any bargain is when it's compared to its competitors. Look at Vista and how it compares to OS X or Linux flavors that match or exceed even the Ultimate edition in features. Vista IS overpriced when it competes with any other modern OS on the Market.

    March 1, 2007 12:08 PM
  • Brian said:

    Bishop, Windows is far more useful than any other modern OS on the market, and if you pile on the OS X upgrade taxes you end up with the most expensive OS on the market.  With Linux, well, you get what you pay for:  a crummy interface, copycat software, and I'm still waiting for a decent financial program like Quicken or Money (please, don't bother listing Moneydance et al, I've tried them and they SUCK).  To say nothing of games.

    Sorry, ABMers, we're not interested in your B.S.

    March 2, 2007 7:17 AM
  • But Bishop has a point in that this sounds like the RIAA justifying the price of CDs based on inflation. The bottom line is that in a market if you're justifying a price to consumers, something is wrong. It may not be the companies fault, but it may be, if in fact, the price can be dropped with the company still making a profit on sales. Consumers don't want to hear the excuse that Microsoft spent billions on developing Vista either if in fact that was a result of bad management decisions and not real development costs. There are many reasons consumers expect it to cost less. One is because of the fact that Microsoft charges per license or in special license packs. Before activation I really don't doubt that for most families people reused the same copy of Windows for multiple computers. The fact of activation is something thats making people disatisfied with commercial software, yes, if part of the reason, is because before they "pirated" to allow their grandmother and little sister to use it also. People have the option to get family licenses right now, but its not an obvious option to consumers and even if it were, it would confuse the marketing. Also, because more computers are sold now, causing and because of computer prices dropping, it also allows OS developers more avenues for profit from their OS, allowing ways for the price of the OS to drop as well; especially when your OS is included on most shipped PCs. The price of OSs like Linux are also relevant also, that even if consumers decide Windows is worth more to buy, there's dissatisfaction, and there's an expectation for it to act as a functional correction on the price of Windows. Of course Microsoft has to meet profit projections for their investors, and that's the bottom line for them in the short term.

    But aside from all of this, the upgrade model is also important to figure in. First of all, the idea that Home Basic should be taken as a standard basic version of the OS is something a lot of people will find laughable. Computer manufacturers are treating it this way also, to be sure, but I suspect most people who buy a computer shipped with a Basic version will want to upgrade to Home Premium. Most home users wouldn't have really wanted to upgrade to Professional on computers purchased with Home, with XP. The upgrade value between XP and Vista Home Basic is also something seen as reasonable thin for consumers. The value between XP and Vista Home Premium is better, and I think is something justifiable at the upgrade Price they're putting on Home Basic. Some of this, yes, is because they're packaging the editions differently, and Home Premium has most of the things that Professional had. While thats true, the company has to look at it from a perspective of consumer perception; and Professional was always set at too much a premium from Home anyway. The whole Ultimate edition thing also now does nothing but add a bad perception of price value on the market. The Ultimate Extras thing could have been done differently, as a service people could pay for, without there being an Ultmate edition on the market; like a Windows Plus! thing, which consumers could understand better.

    March 2, 2007 12:01 PM
  • By the way I didn't see any academic priced editions in stores? Do they exist? Are they sold in regular stores?

    March 2, 2007 12:31 PM
  • Also I just wanted to say, that I personally would be less disatisfied with the price, if I could buy a new computer and use my copy of Vista (Ultimate) on both this computer and my new computer, legally, without having to buy a second license, to run Ultimate on both.

    March 2, 2007 2:14 PM
  • Brian said:

    I know my parents for one could not care less if they get a computer with Basic or Premium on it.  They can barely manage to use the mouse.  Most people have lives away from computers, and will use whatever flavor of Vista is in front of them as long as it solves their problems.

    I have no problems with product activation.  Let's face it, it was brought about to solve a real problem:  geeks pirated Windows rampantly and flagrantly.  PA slowed that way down and now only the most dedicated tightwads refuse to pay for their software (then go online and *** impotently about WGA).  Don't pretend that buying one copy of Windows and installing it on 40 or 50 computers is legit or excusable.

    So the article establishes that Vista isn't more expensive, it's cheaper.  But the same people who endlessly complained about XP and PA now complain about Vista.  Almost word for word the same complaints--yet they're all running XP now.  Funny, that.

    Why don't you just go download your FREE copy of Ubuntu and then tell everyone how it is way better than Vista Ultimate?  Then you won't have to worry about how much Windows costs because you'll never use it.

    By the way, most other major commercial software is also not any cheaper than before (games seem to actually be getting more expensive).  Why do you expect Windows to be any different?

    March 2, 2007 4:58 PM
  • ikyouCrow said:

    some of the above posters are right. for editions prior to Win95 you would have to include the cost of the DOS they were running on to make an appropriate comparison. back then they were just front ends and can't be left out for this argument.

    good attempt, though.

    March 3, 2007 2:12 PM
  • Hvatum said:

    Brian: OSX "Upgrade Tax," what is this?

    I don't see how it's Apple's fault that you feel compelled to upgrade everytime they release a new version of OSX. If you are spastically obsessive compulsive with regards to having the most up-to-date software available this is your problem, not Apples. The features added in any given upgrade of OSX are less then those which one gets between Vista and XP, but more then a service pack. I really don't understand how you justify asking for them for free, especially when the price of each full version of OSX is half that of even home basic. Ontop of that Apple offers a free upgrade to the latest version of OSX if you recently bought an Apple computer.

    If you feel that one should only upgrade when the differences between two distinct versions of the same OS become as great as those between Vista and XP then you'll need to exhibit some self control. Instead of upgrading to Jaguar because you absolutely MUST have desktop widgets (or something) wait until Apple has added a whole slew of new features and go directly from 10.2 or whatever it is your running to 10.6. And your assesment of Linux is, well, very sad to say the least. Indeed your arguments are so poor that I would venture to say that you are actually a Linux or Apple "fanboy" who is posting inane silly arguments to discredit the Pro-Microsoft camp.

    PS. I don't think Microsoft can do anything to convince people that Windows is "properly" priced, because they are comparing the price of Windows against competing OS's. Consumers don't base their expectations of price upon a scientifically inflation adjusted index, if they did people wouldn't be complaining about gas prices! Whether Microsoft set the price to high is for the marketplace to decide. A bunch of people pontificating on some online forum doesn't make the slightest difference in the reality of the marketplace.

    March 9, 2007 3:27 AM
  • paperino said:

    Little mistake (very trivial) Robert.

    Microsoft usually compares Pro SKUs (win2k & XP) to Vista Business.

    March 23, 2007 8:08 PM