No price cuts for Windows 8 upgrades, says analyst

Microsoft has no compelling reason for 'cheap pricing trick' this time around

Microsoft will not reduce the price of Windows 8 upgrades, as it did three years ago before the roll-out of Windows 7, a retail sales analyst said today.

"I would expect upgrade pricing to consumers to be on par with Windows 7," said Stephen Baker of the NPD Group. "They had a compelling reason to get consumers off of Vista and priced [it] to make that happen [in 2009]. But the reason to get consumers onto a more modern platform with a software upgrade is a lot less now than in 2009."

Three years ago, Microsoft dropped the price of the primary Windows 7 upgrade edition -- Home Premium -- by $10, or about 8%, from what it had charged customers for the comparable upgrade to Vista two years earlier. It also cut the price of the full version of Windows 7 Home Premium by $30, or 17%.

Other editions, however, including the business-oriented Windows 7 Professional, were priced the same as their Vista ancestors.

At the time, Microsoft did not openly tout the Windows 7 price cuts as a way to move people off Vista, but the newer OS has put Vista in the rear-view mirror: The latest statistics from Web metrics company Net Applications showed Vista with a 7% share of all operating systems, down from its peak of 19% in October 2009, the month Windows 7 launched.

Three yeas after its launch, Windows 7 holds a 39% global share, second only to the nearly-11-year-old Windows XP.

Although Microsoft is probably weeks away from announcing Windows 8 pricing -- in 2009 it waited until late June to reveal Windows 7's -- Baker made a case for why the company will keep to its current chart.

"They believe in the value of Windows and they will want to charge against that value," said Baker. "I think they see a world where the consumers' trust in Windows will be rewarded and they can derive revenue from that."

Under that theory, Microsoft would be hesitant to cut prices, believing that doing so would cheapen the value of the new OS in the eyes of customers. And Microsoft has been adamant about Windows 8's value, casting the new OS as a revolutionary departure that justifies the repeated use of the tag phrase "Windows 8 reimagines Windows."

That's why Baker saw price cuts as sending the wrong message.

"I think Microsoft will be, and correctly in my view, very wary about devaluing Windows in the customer's eye by some sort of cheap pricing trick," he said. "They believe the product has value and will grow rapidly regardless of the price of the upgrade and that is incentive enough, in my mind, to not reduce the price."

Some, however, have speculated that Microsoft will drop the price of Windows 8 to encourage users to adopt the new OS. The reason: The more people running Windows 8, the more revenue Microsoft can earn from the new Windows Store.

Windows Store is Microsoft's app market for Metro-style software, and will be accessible only to Windows 8 and Windows RT users. Microsoft will take a 30% cut of the first $25,000 each app earns, then 20% of all additional revenue.

Baker dismissed that idea as well.

"I am sure they would look at the value of Windows 8 on its own, not subsidized by something else," Baker argued. "It would not be in their best interest to use those [Windows Store] revenues to subsidize Windows 8 pricing."

While Baker believes that Microsoft will hope for a quick adoption of Windows 8, he doesn't think the company needs to reduce the price of upgrades to accomplish that.

Windows 8 price possibilities
If Microsoft did cut Windows 8 prices, here are some possible outcomes based on 5% and 10% cuts from current Windows 7 list prices.
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