David DeJean

Are Vista prices low enough yet? Not compared to Apple's OS X

By David DeJean
March 04, 2008 12:31 PM EST
Microsoft's price cuts on Windows Vista last Thursday seem to be designed to make the most difference where it's the least important – to give the software giant bragging rights down the road without hurting – or improving – its bottom line.

In the United States, Microsoft will make price cuts that are largely symbolic gestures. It will cut the price of the full retail version of Vista Ultimate from $399 to $319, and the retail upgrade from $259 to $219. It also reduced the Vista Home Premium upgrade from $159 to $129. The cuts will be effective with the release of Vista SP1, apparently, or when Amazon.com posts a promotional sale, whichever comes first.

(Around the world, price cuts were more substantive, but whether they'll result in more copies of Windows being paid for and fewer pirated is an open question.)

What are the chances the cuts will set off a stampede of PC users who've just been waiting for Vista prices to hit the magic number? Slim to none, actually. Nobody's been waiting.

Very few users update their PCs, and Vista's hardware demands are so heavy compared to previous versions of Windows that it's practically upgrade-proof. The result is that Vista's sales have come almost entirely through PC makers' sales of new computers, and retail has been a minor piece of its business. Microsoft isn't saying how small, but it's probably less than 10 percent of the total, maybe as little as 5 percent. If Microsoft had cut its OEM pricing – what it charges a PC maker to install a copy of Vista on a new machine – now, that would have been big news.

The cuts, if they have any effect at all, solidify the position of the Vista Home Premium upgrade as the most cost-effective version of the operating system – at $129, it's just $30 more than the Home Basic upgrade, and what you don't get in Home Premium that you do get in Vista Ultimate is stuff you'll never miss anyway.

What makes Microsoft's changes most puzzling is that they don't do anything to change Vista's competitive price/performance relationship with other available operating systems. Vista prices are still higher than Windows XP, which will be on sale for another three months or so and – if reports of XP SP3 are to be believed – still represents a better price/performance decision.

Obviously Vista loses to Linux, which is generally priced at zero. But I'm not about to argue that Linux is worth more than Vista. Regardless of what you think of Vista, Linux is still not as convenient to use or maintain, nor as widely compatible with hardware and software – a side-effect, however unfortunate, of the fact that the consumer marketplace for Linux is roughly the same order of magnitude as the marketplace for Vista upgrades.

Value pricing is a much easier argument to make with Apple's OS X. Today I can buy the ?family pack? retail upgrade of Leopard from Amazon.com for $171.49 and install it on up to five computers. That's $34.30 a copy.

That's a tremendous bargain, even when you compare it to the single-install version of Leopard, which Amazon lists for $109.49, which is just $10 more than the Vista Basic upgrade, which is essentially XP without XP's performance. Vista Ultimate is six times that per machine than the Leopard family pack, and the most realistic comparison, the Vista Home Premium upgrade, is still more than 3 1/2 times as expensive. Apple makes it possible for you and a Mac-head friend to split the cost of family pack and upgrade your MacBooks and desktop machines very cheaply.

There are all kinds of arguments you can make here (and I expect the comments on this blog will be full of them, at very high volume) but most of them work in Apple's favor. For instance, the PC side will say, $34.30 for Tiger-to-Leopard doesn't buy you nearly as much of an upgrade as XP-to-Vista represents – in fact, given that it was six years between XP and Vista, and Apple went through how many major upgrades of its OS in those years, the total cost of keeping a Mac upgraded has probably been much closer to the cost of the Vista upgrade. But then, the Apple side will say, you weren't waiting for six years for better security, either.

But then, the PC side will say, you don't have pay Apple's prices for hardware to run Vista. But then, the Apple side will say, a Mac that can run Leopard can look cheap compared to a PC beefy enough to run Vista.

And so it goes. Let the games begin.

But I'm still puzzled. Why did Microsoft even open up this can of worms if it wasn't going to make a serious competitive move?