On Tuesday, Mary Jo broke the news about the Windows Vista Family Discount. Today, Microsoft made the formal announcement, and Joe Wilcox immediately lambasted it as a bad idea (no surprise there). The problem is that Joe based his analysis on incomplete information. Fortunately for you, dear readers, I have all the facts (for reasons I discuss in my next post).
Before I delve into how the plan works, here's how the existing upgrade pricing works for a family of 3:
- Upgrading 3 computers to Vista Home Basic will cost you $99 for the first copy, and $89 for each additional copy, for a grand total of $279. If your computer is more than 2 years old, this is the way to go.
- Upgrading 3 computers to Home Premium would cost $159 for the first copy, and $143 each additional copy, for a grand total of $445. This is where it starts to get hairy. Most families would rather buy one new computer than spend this kind of money upgrading all three.
- Upgrading 3 computers to Vista Ultimate would cost $259 for the first version, and $233 for each additional copy, for a grand total of $725. While it may be relatively unlikely that a family has 3 computers that should be running Ultimate, the price makes it even less likely that they would.
It should be noted that most people aren't really going to know about the additional license packs, so most people would end up just buying 3 boxed copies.
So the target position is really the 3 upgrades to Vista Home Premium. Now, Microsoft has a few additional problems to combat in positioning this program. One is that they don't want the system to be abused by people who would buy a crapload of Home Premium upgrade boxes, and then use the Anytime Upgrade system to get discounted keys that they can turn around and sell for full price. They know it's going to happen, but they need to minimize the damage.
The second is that they need to consider the scenarios where this will actually make sense. They want as many people as possible to move to Vista, because it's far more secure than XP. So the scenario that they miss in their pricing is the family that purchased a computer in late 2006-early 2006, and has a couple older computers in the house. The new computer is still relatively fast, but the older ones are slowing down and constantly infested with spyware. Since even the upgrade editions of Vista wipe the system clean, these machines will perform better than on XP, even if they might not be able to support Windows Aero.
So here's how the Windows Vista Family Discount works. NOTE: All prices are Microsoft's MSRP. Amazon.com is offering most copies at a $10-20 discount.
- Purchase a Retail Box Copy of Windows Vista Ultimate. Since we're talking about upgrades, most people will get the $259 Upgrade version (and not the $399 Full version that Joe used in his analysis).
- You'll have the option to acquire two additional product keys for Windows Vista Home Premium at $49 per key.
- Grand Total (Upgrade): $357
- Total Savings: $220 (if you buy the same SKUs)
- Total Savings (vs 3 Home Premium): $120 (if 3 upgrade copies are purchased) or $88 (with additional license packs)
Under this plan, the new computer would get Ultimate, and the older but still capable systems would get Home Premium. By using Ultimate as the "barrier to entry", Microsoft can blunt some of the effects of people abusing the system, while at the same time introducing more people to the Ultimate experience.
Joe's wrong about OEMs being the ones that hurt in this equation. It's actually the Retail channel that will have the most issue with it, because the $49 in pure profit goes directly to Microsoft. CompUSA, Circuit City, Best Buy, etc don't want this to work, because they want people to grab boxes off shelves. Whuch is why I doubt you'll see signs touting the plan in any retail store come February.
So while people like Joe Wilcox will berate the decision, and say that "The choice of nothing would be better than the Family Discount", I completely disagree. This is an experiment to see how the market will respond. If it responds well, you may see better multi-computer bundles in the future, that may be less complicated than the current incarnation. And instead of criticizing Microsoft, Joe should be praising Microsoft for FINALLY listening to the needs of the market, and doing something that he himself has argued for in the past. It may not be perfect, but at least they're taking a risk and trying something different. And that can only be a very good thing.