Beaten Up Over A Beat-Down

[Toulinwoek]

It was just a rumor. I said it was just a rumor. I reported it as a rumor. I had heard a few months ago that a rumor had surfaced about the pricing for Windows Vista. I had heard that the Home Premiun version (the version I would most likely buy, if I was going to buy Vista at all) was going to cost over $500, which I found ludicrous, and of course I still find it ludicrous.

I was discussing this with someone, and up pops the idea that the price was not out of line. A person actually tried to do the smash 'n' twist with some numbers and make me (who actually has a good, usable portion of the brain I was born with left, such as it is) believe that Microsoft's costs were something like $450 per copy of Vista. This included paying the developers, marketing, packaging, distribution, advertising, profit for the distributors, the electric bill for the lights in the coders' offices, coffee cups, floor wax and apparently everything else except cash register receipt paper and a box of Kleenex! Now I don't know everything (though it might at times seem like I think I do), but I am not so gullible as to believe something like that, especially when the price of an upgrade (which can't cost any less to produce) would cost far less than that $500. But you now how some people just have to disagree with you because they just don't like you or something? Yeah. I pretty much got beat-down hard over my insistence that there's just no way it costs that much per copy.

Well, anyway, something a bit closer to "official" has surfaced about Vista pricing, which indicates that the Home Premium edition will cost $299 ($199 for the upgrade). This is still a bit pricey, but I can sort of see that price as something less than totally unreasonable. In fact, the "Tip-Top" edition (Vista Ultimate) is only going to cost $499. Now of course, this assumes these prices are actually correct, but wow, I wonder if Microsoft (and their shareholders) know that there are those among us who believe they're going to be losing between $150 and $250 per copy of Vista? That's just laughable.

I still don't know if it's going to really be worth it to move to Vista, but now it's no longer about the price, it's more about whether the new features are worth the money. Of course, with a new computer it's not much of a question, but I am seriously thinking of building a new compuer soon, and the question of whether to put Vista on it will be relevant. I still don't know if I am personally convinced that it's a good value or not, but at least the prices are closer to reasonable. With discounts (again, assuming accuracy of this information), one might get Vista Home Premium into folks' hands for as little as the $250 range. So much for Microsoft's "costs".

[jwenting]

While a cost per copy sold of $450 is a bit much, it does prove the point quite well.
Most people sorely underestimate the cost of building and maintaining software, let alone supporting it for years after it is sold.

They think that because they can buy blank CDs for $1 each (or less, but let's take high quality ones), software sold on CDs doesn't cost much more to make.
So they believe that if a store sells XP for $300 Microsoft must be making $299 profit on that.

They don't know anything about the distribution network, the margin for wholesalers and retailers, the cost of maintaining support websites and creating and releasing product updates.
They have no idea of the cost of creating the product in the first place, the cost of running a successful software development team (and recovering the monetary losses incurred from failed projects and research divisions).
They especially have no idea whatsoever that for every title that makes a profit a dozen either make a loss after release or never make it to release and thus never make a cent in income.

But you can calculate back from that $300 and get some insight.
The store has to pay (here) some 20% salestax, of $60.
The store takes maybe another $20 for itself to pay staff, shelfspace, etc. and a small profit.
Leaves a price they buy it at from their wholeseller of $220.
The wholeseller takes another $20 for itself and $40 more for marketing and transport, leaving $160 for the importer (the local Microsoft branch in most but not all countries).
They take $40 for local support and marketing efforts, and $40 to pay for storage, localisation and manufacturing/transport cost (production is regional, for example European versions are produced in Ireland).
Leaves just $80 for Microsoft world in Redmond to cover the cost of development and maintaining the global support websites and maintenance teams, plus pay for failed products, taxes, and some money towards investment and profits.

[Dark_Omen]

Well I don't think I'll be buying Vista anytime when it comes out, at least for awhile, as I see XP Pro is sufficient. And I actually don't think that people are going to be running out and buying it because of the prices. If I am gonna get it, hopefully it'll be on MSDNAA (does anyone know if it will?) which is free through the university I go to :), if they are offering it.

[Toulinwoek]

I'm kind of leaning against buying it too. I just don't see the advantage (yet). I'm pretty excited about the Aero interface, but that's not worth two hundred bucks to me. The biggest thing I was looking forward to was WinFS, and with that gone, I'll probably do just like I did with (WinXP) SP2; upgrade when/if I have to.

[Dark_Omen]

A lot of stuff developed for linux (graphics) looks like it can rival the new stuff in Vista. Like XGL, which really impressed me when I first saw it. Just another thought though.

[mikeandike22]

What im gonna do if I get a computer that comes with Vista is downgrade it to XP pro and dual boot with linux until vista is ready.

[The Geeky Kid]

do we get free upgrades if we buy vista now, like when it's totally ready?

[Toulinwoek]

Well, it seems Microsoft has finally weighed in with some "official" pricing. It really doesn't look as bad as I would have thought. Not that it will make it any more likely that I'll be buying any time soon, but it does make any kind of head planning a bit more accurate. Here's a quote from a Reuter's article:

The software maker set the retail price for Vista at between $100 and $259 for users upgrading from older versions of Windows. The prices range from the basic version of Vista to the top-end "ultimate" edition.
For consumers looking to buy Vista without an upgrade, the products will cost between $199 to $399, Microsoft said.

Considering that upwards of 90% of the World's PC's are already running Windows of some version or flavor, it's likely that the vast majority will be paying upgrade prices, a fact that kind of puts dents and creases in the kind of theoretical conjecture like what I had mentioned in my original post, concerning the guy who tried to prove that it was costing Microsoft up around $450 per copy to bring Windows to market. Mix in the fact that a pretty good chunk of copies are going out the door at OEM prices (preloaded on new PC's), and those figurings are even more clouded.

I'm glad that much of the erudite speculating can now end. (Oh, by the way, these are U. S. prices; depending on where you are, they might be different in your neck of the woods)