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Microsoft Wants 5% Cut of Each New Windows PC

By - Source: Tom's Hardware US | B 37 comments

It's the Microsoft tax.

Microsoft has historically been rather hush hush when it comes to it's share in the sale of a new PC that includes an OEM copy of Windows, but one general manager of Corporate Strategy at Microsoft revealed some interesting figures.

While none of this information is official, and we're sure that Windows licensing costs vary from one OEM to the next depending on negotiate deals, it seems that Microsoft takes about $50 per PC that costs around $1000.

"If you think of the $1,000 PC, which has kind of been the benchmark for the last decade or so, then we've always charged about $50 for the copy of Windows for that PC," Songhurst revealed at the Jefferies Annual Technology Conference, as reported by Ars Technica.

"So that's five percent. So if you think about charging $100, $200 or if you think about a super high-end PC, you know the Sony Vaios or anything that's there for around the $1000 mark, or the Alienware PCs that are even higher, if we can get that constant percentage then we should be indifferent to the number five points in the market," Songhurst continued.

Clearly, taking a $50 cut from a $300 netbook is something that most OEMs would probably find to be disadvantageous, which would make one think that alternative operating systems such as Ubuntu would have the upper hand. But Microsoft seems to think that it would be happy if it could score five percent from every new PC sale, particularly with the increased range of PC prices with the advent of netbooks and $300 laptops at Wal-Mart.

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  • 12 Hide
    cadder , September 17, 2009 4:55 PM
    5% seems like it would be in the consumer's favor. And why do they charge so much for the retail versions of the OS? I figure the average home PC is probably closer to $500 than $1000, so if they receive $25 for the license for the OS on that machine, why do they charge $100 or more at retail for the same thing?

    I'm sure they have figured this out better than we have, but it seems like they would prefer a sliding scale with higher than 5% for the low end computers and less than 5% for the upper end computers.

    How many computers are sold to business users for significantly higher than $1000? Maybe there are enough of these sold that they want their 5% of the higher prices.
  • 10 Hide
    ethanolson , September 17, 2009 5:02 PM
    I work for HP and the price is different based on the version. His 5% number sounds like it's 90% home editions... leading me to believe he commented with retail stats.

    I know that MS gets about $15-25 per XP Home on a netbook... which is a little more than 5%, but they get more for their business/pro editions.
  • 10 Hide
    Pei-chen , September 17, 2009 5:21 PM
    cadder5% seems like it would be in the consumer's favor. And why do they charge so much for the retail versions of the OS? I figure the average home PC is probably closer to $500 than $1000, so if they receive $25 for the license for the OS on that machine, why do they charge $100 or more at retail for the same thing?

    Two words; customer support.

    If you buy retail and has a problem, it is MS' job to assist you. If you have a Dell, it is Dell's job to assist you. If you bought an OEM disc from newegg, it is your job to provide customer support.
Other Comments
  • 12 Hide
    cadder , September 17, 2009 4:55 PM
    5% seems like it would be in the consumer's favor. And why do they charge so much for the retail versions of the OS? I figure the average home PC is probably closer to $500 than $1000, so if they receive $25 for the license for the OS on that machine, why do they charge $100 or more at retail for the same thing?

    I'm sure they have figured this out better than we have, but it seems like they would prefer a sliding scale with higher than 5% for the low end computers and less than 5% for the upper end computers.

    How many computers are sold to business users for significantly higher than $1000? Maybe there are enough of these sold that they want their 5% of the higher prices.
  • 1 Hide
    pharge , September 17, 2009 4:55 PM
    hmmm... I am confused... Shouldn't MS charged the OEM based on the version of OS installed not on the price of the computer?

    Since most of the computers (desktop or laptop... except netbooks) have Vista home/enterprice installed... will these percentage still 5%? or this is just the average?
  • -7 Hide
    broketechjunkie , September 17, 2009 4:57 PM
    Oh dear.
  • 3 Hide
    ethanolson , September 17, 2009 4:59 PM
    They're exactly opposite of Apple. The MS OS costs less when bundled with the hardware but more on the shelves. Apple is the other way around where you're paying a ton for the OS because of the controlled hardware for it... but it's cheaper than MS Windows if you buy it on the shelf.
  • -5 Hide
    bustapr , September 17, 2009 5:01 PM
    Since pc manufacturers aren't going to like this, I imagine this would make for a good moment for pc manufacturers to consider linux. It'll be way cheaper and they wouldn't have to worry about warranty issues, since most pcs are sent back due to virus crashes. They'll save a lot of money.
  • 10 Hide
    ethanolson , September 17, 2009 5:02 PM
    I work for HP and the price is different based on the version. His 5% number sounds like it's 90% home editions... leading me to believe he commented with retail stats.

    I know that MS gets about $15-25 per XP Home on a netbook... which is a little more than 5%, but they get more for their business/pro editions.
  • -2 Hide
    Andraxxus , September 17, 2009 5:07 PM
    Well they aren't called M$ for nothing.
  • 1 Hide
    thackstonns , September 17, 2009 5:10 PM
    bustaprSince pc manufacturers aren't going to like this, I imagine this would make for a good moment for pc manufacturers to consider linux. It'll be way cheaper and they wouldn't have to worry about warranty issues, since most pcs are sent back due to virus crashes. They'll save a lot of money.


    except then alot of people would be using Linux and everyone would start writing virus's for it. Of course then Microsoft could claim its secure. I hate it when people go oh well linux is secure, oh well apple is secure. Yep they are cause no one is going to try to steal information 2% of the computer market. They are going to focus on the other 98%.
  • 0 Hide
    jellico , September 17, 2009 5:14 PM
    Well, 5% on the cost of a computer for an OEM computer of the operating system seems pretty reasonable. It costs me a lot more when I buy an OEM copy from Newegg when I put together a new system. Unfortunately, I doubt small-scale retail system builders can get an OEM distribution license.
  • 2 Hide
    domenic , September 17, 2009 5:20 PM
    bustaprSince pc manufacturers aren't going to like this,....


    Why are pc manufacturers not going to like this? Do you think they expect to get windows for free? 5% sounds very reasonable to me.
  • 10 Hide
    Pei-chen , September 17, 2009 5:21 PM
    cadder5% seems like it would be in the consumer's favor. And why do they charge so much for the retail versions of the OS? I figure the average home PC is probably closer to $500 than $1000, so if they receive $25 for the license for the OS on that machine, why do they charge $100 or more at retail for the same thing?

    Two words; customer support.

    If you buy retail and has a problem, it is MS' job to assist you. If you have a Dell, it is Dell's job to assist you. If you bought an OEM disc from newegg, it is your job to provide customer support.
  • 2 Hide
    amnotanoobie , September 17, 2009 5:22 PM
    cadderAnd why do they charge so much for the retail versions of the OS?


    A manufacturer could state to Microsoft how much they'd be needing in the next month or so, which would mean a stable income for Microsoft. (Plus manufacturers buy thousands of copies at a time) With retail however there is no guarantee how much you'd be able to sell at a given point in time.


    The fact also that Microsoft is the sole provider of Windows might have also something to do with the retail price.
  • 0 Hide
    ssddx , September 17, 2009 5:22 PM
    A sliding scale with 5% as an average isn't all that bad. Microsoft can get away with the low price since it most assuredly gains quantity. The reason retail is so pricey is to make pure profit, which also explains why MS is happy with a 5% figure.

    PC OEMs will continue to use MS no matter what deal they are cut. The general populous works and plays with windows; this means that if they cut out windows and start with linux they will lose a vast majority of sales. Then keep in mind the compatability issues to be had with a non-windows OS.
  • 0 Hide
    ssddx , September 17, 2009 5:23 PM
    amnotanoobie.. beat me too it..

    +1
  • 3 Hide
    jarnail24 , September 17, 2009 5:34 PM
    Hold up this article is so misleading. Microsoft doesn't want to raise it to 5% microsoft already gets 5%. This was with an interview with a microsoft employee about how much they charge for a license to oems. This article is making it sound like microsoft is raising their prices which they're not, they're just letting the consumer know how much they charge for the first time.
  • -2 Hide
    redgarl , September 17, 2009 5:49 PM
    I hate Microsoft... what else can I say after actually purchasing Windows Millenium...
  • 0 Hide
    Anonymous , September 17, 2009 5:52 PM
    Microsoft are still cunts that charge way too much for many things, but to call Windows on a retail PC "the MS tax" is just retarded. The various/server enterprise products are priced ridiculously high. In contrast, OSX costs about the same as the base hardware, heaven forbid you want a RAM upgrade.

    In all fairness though, it's my understanding that Rabbi Jobs does personally bless each stick of RAM that goes in a Mac, which somewhat justifies the price. /sarcasm
  • -2 Hide
    cabose369 , September 17, 2009 5:58 PM
    If Microsoft forces Manufacturers of computers to pay another $50 per Windows License all that is going to mean for consumers is that every computer is now going to go up in price at least $50.

    LAME!!!
  • 4 Hide
    manjyomethunder , September 17, 2009 6:07 PM
    "It's the Microsoft tax."

    I didn't realize that when I bought something, I was paying all tax and not like, a price. I had no idea that things didn't like, have value. How dare Microsoft charge for it's products.
  • 2 Hide
    manjyomethunder , September 17, 2009 6:08 PM
    cabose369If Microsoft forces Manufacturers of computers to pay another $50 per Windows License all that is going to mean for consumers is that every computer is now going to go up in price at least $50.LAME!!!


    Learn to read the article, 5% is the cost of the actual license for the copy of Windows. Not an additional cost over the license.
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