The free Windows 10 upgrade is really a 'promotional activity' for Microsoft's accountants

Microsoft may be offering a free upgrade to Windows 10 for consumers who own a Windows 7 or 8.1 PC. However, for accounting purposes, the company is labeling this generous deal as a "marketing and promotional activity" in order to avoid a situation that would have normally forced Microsoft to defer revenues from the Windows division in their quarterly financial results.

Microsoft filed a detailed report on their 2015 fiscal third quarter results last week to the US Securities and Exchange Commission. The report mentions the free upgrade to Windows 10 for Windows 7 and 8.1 users:

"This offer differs from historical offers preceding the launch of new versions of Windows as it is being made available for free to existing users in addition to new customers after the offer announcement We evaluated the nature and accounting treatment of the Windows 10 offer and determined that it represents a marketing and promotional activity, in part because the offer is being made available for free to existing users."

As noted by Computerworld, the language in that statement is important to Microsoft for accounting and revenue purposes.

"If it said Windows 10 was an upgrade, not part of a marketing campaign, the company would have had to adjust Windows revenue to account for the deferrals -- and set aside money from sales of the OS starting in January when it announced the no-cost upgrade -- reducing Windows' earnings for at least the first half of this year, perhaps longer. That could have painted an even darker picture of Windows revenue, maybe one that would have bothered skittish short-term investors enough to impact the stock."

So in other words, labeling the Windows 10 free upgrade as a "marketing" tool helps Microsoft in the long run financially, and may keep its stock price from going down in the short term.

Source: SEC.gov, Computerworld

54 Comments
  • I don't think it matters what they call it for any purpose it's free!
  • At least for the average person it doesn't.
  • Free is free. Don't care who you are.
  • You can just bet your next paycheck that SOMEONE will find some kind of fault with this. It is the most amazing phenomena I have ever seen.
  • In voice of Jim Moriarty "That's what people do!".
    Ps, I'm unemployed :/
  • Best marketing campaign ever - giving your product away for free.
  • All upgrades should be free by the way they work, that is very slow. My upgrade from Windows 8.0 to Windows 8.1 was a total disaster, system worked very very slow and it kept producing BSODs, after a clean install of Windows 8.1 there were no problems, no BSODs and it works fast and reliable, same problem with upgrade was with Windows 10 technical preview, it took forever to install, same as Windows 8.1 upgrade it took hours to set up, clean install setup was done in about 10 minutes.
  • Riiiiigggghhhhhtttt
  • I smell bullsh!T My upgrade to 8.1 was smooth as a whistle. Only took an hour or so I think.
  • Sounds like someone doing an in place upgrade of a system that was customized by 'turning off all that windows bloat', moving user home folder, using hard links to program files.   All of these things will break the upgrade scenario.
  • Enough to cause BSOD?
  • Yes, it's "free" for a year. Then what happens? Does anyone know what it'll cost us to keep the program?
  • Again with this? Its free forever!, you don't have to paid it again
  • As mentioned countless times before: Once you upgrade, it's yours. No ifs, ands or buts. Only costs money for those who don't already have a valid Windows license and/or miss the boat on upgrading while it's still offered at no cost. Exactly like how the $80 deal worked with Windows 8.
  • $40
  • *$15
  • For those that take advantage of the offer, there is no hidden fee or charge later to keep Windows 10. This is not like a trial period. 
  • This has been answered a many times already.  MS has officially stated... The upgrade is free for consumers, FOREVER, if you upgrade in the first year. The upgrade is not free for consumers that wait to upgrade until after the first year. It's not a free upgrade for enterprise customers (although that is a moot point since most have Software Assurance contracts anyway).  
  • If you upgrade within the 1st year, its free forever for you. However if you decide to upgrade after the 1st year of launch, you have to pay for it
  • Another illustration of malicious rumour never dies. Fortuantely, there's enough people to pound on it when it resurrects.
  • The reason it is free for a year, is to show value to the customer.  Entice people to upgrade rather than wait.  Plus you cannot by law have a promotion go on continuously if you want to charge for it at a later time.  Which I am assuming will happen when you buy a new system, is the OEM will be charged for that license, which is passed on to you.  But do not worry, your free upgrade will not stop working after the one year.
  • Daym man...are you slow or something??
  • Why you gotta b so rude
  • You can upgrade free for the firt year . Period. afther that year if you were to lazy to upgrade you will then have to pay.  
  • MSRP $799.99 from what I've heard. Then an extra $9000 if you want to keep Cortana.
  • Corporate business bullshit as usual.
  • More like stock valuation, tax code, Enron caused fire hoops to jump through.
  • This is pretty standard in accounting.  The accountants had a question, on the books, how do we categorize this?  The two overarching areas are revenue and costs.  Since this is clearly free, there's no revenue, so it's a cost.  One category that makes alot of sense is marketing since it promotes the new services and product. Like giving away free bubble gum samples to entice people to buy more or recommend it to friends. For example, eventually you will want a new computer, and this upgrade makes it more likely that you stick with Windows instead of switch to the competition. It's like having a lemonade stand and giving away free samples.  Would you mark it as a revenue or cost?  If cost, what kind of cost? Marketing!
  • Thanks for that simple analogy, it makes a lot of sense to me than all the explanations out there
  • And I was just waiting for the shares to go down, darn!
  • Exploiting loopholes through flavored English
  • This ^
    The way of the present day world :-)
  • It's like having a lemonade stand and giving away free samples of lemonade juice.  Would you mark it as a revenue or cost? Cost. Now, what kind of cost? Marketing!  It begs the question, how can a marketing campaign be a revenue? Sure, you get revenue as an outcome or marketing, but marketing itself is never a revenue.
  • I hope windows 10 will be good to go upon release. I use my computer for music production and recording so im hoping this upgrade won't be harmful to all my applications..
  • Best create a recovery image and clone your hdd, just incase.
  • who would downvote this? making backups is always excellent advice.
  • Then don't upgrade
  • I may not for a while but its gonna be hard ^_*
  • You have a year to upgrade for free. If I were in your position, I would wait for a few months to make sure major issues are ironed out. If you have multiple systems, only upgrade some of them at release so you can see how/if it affects your workflow. Also, you can install the current preview on another machine now to see how it will eventually run for you.
  • I wouldn't count on it. Pretty much every OS Microsoft released was only stable until the 1st or 2nd Service Pack. I think Windows 7 was the first one that really shone early on. Windows 8 was pretty slick, but didn't get really good until 8.1 came out.
  • Hmm interesting "new customers" does that mean off the shelve customers or a free downloadable iso? Or OEM installs? I guess we will find out more at build.
  • So what does it mean? We can still get free upgrade yes?
  • Read above comments
  • Makes a lot of sense to me.
  • Free for the first year. After that it will be a subscription service like office 365.
  • Nope.
  • "What's there in a name by which you call a rose; a rose by any other name would smell as sweet."
  • yep.
  • At the end of the day do I get it free? that is all I care about. Who cares what the bean counters want to call it.
  • W10 TP will get full W10?? No? :(
  • THIS IS THE QUESTION THAT NEEDS TO BE ANSWERED
  • If you upgraded from a valid (activated) license to the TP, like I did on my SP3, you can in place upgrade to RTM.   If you ISO installed with no key, you will need to re-install and activate a supported OS.  Then you'll be able to upgrade.
  • Thank you MS...just Thank You
  • Windows 10 is free but at a cost of some of your Privacy