Blog: Pete Loshin

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Windows Pricing: Economics of Competing Against Free

It's fun to keep track of how much Windows costs these days when Microsoft must compete both with pirates, who sell Windows cheap and send nothing to Redmond, as well as with non-Windows open source software who likewise pay nothing to Redmond.

What does Vista cost? List price on Microsoft Windows Vista Ultimate is $399.95; Amazon.com has it for $339.99.

But it's cheaper if you buy a system with Windows pre-installed. While Dell doesn't make it easy to compare on their website, according to this report on Ars Technica, the "Microsoft tax" for Dell systems--how much more you pay for the same hardware with Vista pre-installed--is about $50. Of course, that's for Home Premium or Business version of Vista, both of which list for about $200 or so if you buy a shrinkwrapped box at retail.

Then, there's Microsoft's own effort to get something from developing nations: Microsoft offers $3 Windows package for poor nations. Three bucks for a stripped-down version of Windows and Office, if you're in the right (or wrong) part of the world.

That's a deal, but it's also the going rate for pirated versions of Windows and Office in places like Lagos, Nigeria. According to this (which you probably can't reach, since a flood of hits shut it down) the Google-cached version is here, Nobody Knows Linux.

What it says, basically, is that OS prices in Lagos depend on how many discs the OS fits on. Since Vista fits on one disc and Linux takes up four discs, Linux costs more than Vista.

So, Microsoft retains its monopoly through the efforts of the pirates: if consumers can't afford to pay the full freight for Windows, Microsoft may not like it that people are buying pirated versions, but they'll take it over the alternative of having people buy open source software instead.

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