Microsoft offers Windows 10 carrot, threatens with stick

After a year of free Windows 10 upgrades, Microsoft will start charging an unknown amount

Microsoft has extended the carrot. Later it will brandish the stick.

Windows 10 will be a free upgrade for the first year after its release. But once those 12 months are over, users will have to purchase a retail copy of the OS or license it through a volume deal, according to a briefly-available blog post by Microsoft's Australian arm.

For just a few hours this week, a blog post -- first pulled, then restored but without the previous content -- spilled a few details that, while assumed, had not been officially revealed by the Redmond, Wash. developer.

"After the first year, upgrades will be paid via boxed product and VL [volume license] Upgrades," the blog stated.

Microsoft has not spelled out the pricing for a post-one-year upgrade. It will likely reveal the dollar signs closer to Windows 10's launch this summer, if only for SKUs (stock-keeping units) that would allow customers to do a "clean install" on a PC running an ineligible-for-upgrade OS, like Windows Vista or even XP. But the "boxed product" -- which may, in fact, not come in a box per se, but may simply be a small card with a license key inscribed or a key emailed to the customer -- will come with a price tag.

Microsoft has professed a goal of putting Windows 10 on a billion devices within two to three years, and in its developer pitches, talked up the large pool of Windows 10 users who can be targeted for app sales. Microsoft wants to push as many customers as possible, particularly consumers but also small and mid-sized businesses that run a "Pro" version of Windows, onto the new OS as quickly as it can.

The free upgrade offer is thus the carrot designed to speed up migration; the cost-you-money upgrade is the stick for wielding in the future to prompt laggards to get with the program.

Customers now running Windows 7 Home Basic, Windows 7 Home Premium or Windows 8.1 will receive a free upgrade to Windows 10. Those with PCs powered by Windows 7 Professional, Windows 7 Ultimate or Windows 8.1 Pro get Windows 10 Pro. Others, including Windows Enterprise, must use their Software Assurance annuity to upgrade, while users of Windows RT, the now-dead spin-off of Windows 8, are entirely out of the Windows 10 loop.

That policy means that the free upgrades to Windows 10 Pro will be more valuable than consumer upgrades to Windows 10. Historically, Microsoft has charged significantly more for the Pro edition, and there's no reason to think that will change (even if the prices themselves do).

For instance, Microsoft lists Windows 8.1 Pro at $199.99, 67% more than for Windows 8.1. Expect a similar disparity for Windows 10.

There is no data that directly speaks to how a change from free to paid will impact the uptake rate of Windows 10 before and after the one-year span, but Windows 8's progress provides a clue. For several months in late 2012-early 2013, Microsoft delivered cheaper upgrades from Windows XP, Vista and Windows 7 to Windows 8 before raising the price five-fold. (The early adopters' price was $40 to Windows 8 Pro; after the discount expired, prices jumped to $200.)

According to analytics vendor Net Applications, which tracks adoption via user share, Windows 8 grew between 0.63 and 0.77 percentage points each month for the three months when the $40 upgrade was available. Once the reduced price vanished, Windows 8's monthly increase in share dropped to 0.47 percentage points before recovering to the mid-.05 point range.

Those numbers are total uptake, not just upgrades, as they account for new system purchases too, but they imply a quick start to Windows 8's climbing share as the $40 upgrades were shipped to customers, then a declining rate of change for the next several months. Expect the same to happen with Windows 10: A big boost to its share at the beginning of the free upgrade, a slowing of the month-over-month increase as time goes on, and a significant drop once the offer expires.

However, Microsoft will more accurately monitor the progress of Windows 10 adoption -- primarily through product activations -- and so could easily extend the free upgrade offer if it believes the deal has not sufficiently moved the needle toward the 1 billion goal.

Windows 8's adoption

Windows 8's adoption -- upgrades were cheap for several months, then jumped 5X -- hints at how Windows 10 will perform when it goes from free to paid.

Copyright © 2015 IDG Communications, Inc.

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