Microsoft reportedly cutting Windows 8.1 licensing fee by 70% for cheaper devices

Microsoft recently has been on the offense against perceived competitors in the form of the Apple iPad and Chromebooks powered by Google's Chrome OS , and now they're taking the fight straight to their Windows licensees by slashing the cost they'll be required to pay by 70%. The reported cuts bring the cost per device for Windows 8.1 down to $15 for devices that will retail for less than $250. The standard licensing cost is $50, though it can be brought down closer to $30 when marketing incentive funds are factored in. Bloomberg's "people familiar with the program" said:

Microsoft is seeking to speed up development and introduction of new devices. It won’t require products that use the cheaper licensing to complete logo certification, a process that verifies hardware compatibility, one of the people said. Devices aren’t required to be touch-screen compatible, sources said.

Adoption of Windows 8 has steadily grown, though unlike with previous releases there was little difference in sell-through rates when the new OS was released. As of earlier this month, Microsoft reported that they had sold more than 200 million licenses for Windows 8.

Microsoft tried a similar strategy back in 2008, slashing the licensing cost for Windows XP for netbooks (opens in new tab). That move may have backfired, for the proliferation of lower-priced netbooks ended up taking a $465 million bite out of Microsoft's revenue, forced them to lay off 5,000 employees, and saddled a generation of computer users with sub-par hardware.

But maybe it will work out better this time around. Certainly, the lower cost hardware of today is far more capable of running something like streamlined Windows RT 8.1 than the anemic netbooks of six years ago could handle an XP so bloated it had to be stripped down for their benefit. Right?

Source: Bloomberg

Derek Kessler is Special Projects Manager for Mobile Nations. He's been writing about tech since 2009, has far more phones than is considered humane, still carries a torch for Palm, and got a Tesla because it was the biggest gadget he could find. You can follow him on Twitter at @derekakessler.

  • Thanks Microsoft for making the most worthless decision in tour life...
  • Ironic that that comment came from you.
  • For the last two years, you two have made me crack up so many many times...kudos.
  • He's Daniels pool boy!!❕❕❕ He has to keep a positive attitude.. I love him dearly...
  • Wow...
  • Microsoft has always been successful with undercut-and-bundle tactics. We just aren't seeing what they're bundling yet; the media is going to be too comfortable with price drop headlines to dig deeper for a while. Microsoft has a lot of things they can offer in bundle. Google only has low price.
  • There are the old sayings "You get what you pay for" and "You don't get something for nothing". Unfortunatly this is the case no matter if it's Microsoft or Google. Android and ChromeOS come with taxes in the form of either the Google Mobile Services (GMS) and/or Google Services monitizing using Search/Tracking/Profiling etc. Just sayin ... thats this is the way it is now and they are all in it for a buck!  
  • Well said.
  • Yeah, don't you just hate it when you have to pay less.
  • I'm sure you're marketing expertise will skyrocket your company to success
  • The article missed one key fact about putting XP on netbooks--it pretty much killed the Linux netbook.  So, mission accomplished.  Before Microsoft lowered the price of XP so OEMs would put it on netbooks, the Linux netbook was gaining traction.  XP on netbooks ended that within months.
  • This is what I read on Engadget, so I'm surprised it was seen as a negative move by WP Central. Sure they had to take a hit, but it worked out better for them in the long run.
  • I just hope with all of these price cuts in every aspect of Windows that the company overall remains profitable. I don't want to see OS development taking a hit in the long run.
  • dude. its budget sevices. not the high end devices
  • Reread the second-to-last paragraph. Cutting licensing cost to spur budget device development and sales cost Microsoft big time back in 2009.
  • There is no direct link between the cutting of the licensing fees and the layoffs.  At that time MS had cash reserves in excess of $20bil.  This was in the depths of the recession when panic set in and all companies were taking a hard look at cost cutting.  Cutting staff is very often the quickest way to achieve this.  
  • The strategy is volume (proliferation) and ecosystem.
  • Nah this is the cut that being taken off from all the profit they will make from Bing ads on app and in windows like even weather and not only that the apps store they aren't stupid! Unlike Sony....
  • Microsoft is trying to get an OS in peoples hands that has a place where they can get 30% from other peoples work. Entirely different scenario than cutting the price of XP for netbooks, in my opinion.
  • I agree, this is a bone of contention for me in that I see MS trying to add revenue from multiple sources (License, Consumer app fees, Enterprise app license packs etc) and not drop the price of the basic OS license. They have no choice but to drop the license price if they also want to use the Marketplace revenue model.
  • The marketplace is actually barely profitable for Apple...
  • That's cause they're mostly one and done products. They need subscription and/or core services. Google Apps and Office 365 type services.
  • Bingo.   A very insightful comment. MSFT is creating a lot of resentment among the OEMs, with good reason.    They're paying a license fee to bundle software which is designed to give MSFT a 30% cut of all marketplace sales.   It doesn't make any sense if you're an OEM, and it's one reason why they're turning to chromeOS on the low end. If anyone had *any* brains at MSFT (which sadly, hasn't been the case for a decade or so) they'd cut the license fee entirely for client software, and give the OEM a (small) cut of marketplace sales.   Ideally one that would scale slightly over the life of the client install (maybe from .5% to 2.5% of sales over a 3 year period).   That gives the OEM an incentive to design a product that they'll update (to keep consumers using the product longer). But no, MSFT treats OEMs like serfs.  Meanwhile, Google seems to be bending over backwards to accomodate them....      
  • I think this is more about OEMs complaining about how Windows costs so much money compared to ChromeOS and Android and how they can't get great specs for sub $250 like they can with Chromebooks.
  • Yeah I think it's a good move. They have other sources of revenue, if they can get devices in more people's hands, that will offset the Windows OS license fees.
  • Yup, agreed. Most of their money comes from Enterprise, so it won't be too much of an impact. This will really help Microsoft compete with Android tablets which dominate the value category.
  • This is actually really good for people who want to put windows on a mac or build a PC! I'm glad they lowered the price!
  • I don't think this applies to someone who buys a license. This is only to OEMs for their sub-$250 hardware.
  • My model was a system where MS gives consumers who upgrade from old versions a free copy of the latest OS and charge a small annual fee from OEMs irrespective of what sales numbers say.
  • Good decisions by MSFT
  • Ballmer said long before he announced his retirement that Microsoft would cut prices, work with partners for better designs, etc to take on Google, apple, unbuntu. His vision of one Microsoft continues
  • Mmm...230-50+att liquidation discount= One bad mama j for $90.00. Unlocked & cheap. Keep it up Nokia killer!
  • Lol this is for Windows, not Windows Phone
  • This is a huge win for Microsoft! Now they should make updates free like to version 9 (Windows 9) cause they will make money from app store!
  • App stores are not very profitable for the parent company after hosting the apps... At least compared to selling Windows.
  • Only apple make billions from the app store☺
  • They need to do this with WP❕
  • They will once sales grow more for WP.
  • I think they should offer the Modern version, like RT, for free. Essentially like an RT device running on x86 processors.
  • Erm, it doesn't really work like that...
  • I would like to see a version of RT for my toaster, also made free
  • But yeah its good they shouldn't drop it any lower cause if they don't gain revenue from other things the masses don't care once its stapled it stapled they wont buy if its higher prices
  • Cut the fees for Windows Phone...
  • It's rumored that Microsoft is offering Windows Phone for free for certain OEMs.
  • End piracy.
  • And Corruption.. And Slavery.. And Bieber
  • Overall I think this is a bad idea. I understand wanting to build out the user base, but turning Windows into an effectively free product just cheapens Windows. Because of Google, people have come to expect software for "free", as if it writes itself. I don't think that segment of the market should be catered to, because if they aren't willing to pay for the OS, they aren't likely going to pay for any other services.
  • Good point.    
  • I imagine that there will be big layoffs by the end of the fiscal year. The Windows market is blue screening and they're taking on 30K more Nokia employees. Something's gotta give... MSFT will be a significantly smaller company in five years.
  • Smart move! Profits will come later. Right now Microsoft needs to concentrate on MARKET SHARE ONLY!!!
  • Most excellent.  This could mean some epic hardware for a low cost.  I've been wanting to get myself a Win8 tablet as a media device. 
  • This is pretty much needed to fight against the low cost android tablets. A 200€ tablet would surely be welcomed by the masses. P.S. Bought myself a Surface RT, unlike the Android tablets I've had on loan before, this I actually want to use for stuff (mainly surfing & reading). Only downside was the hours of updating initially. P.P.S. This decision only eats into their profits if people will buy cheaper devices instead of more expensive ones, and if those losses are greater than the amount of income from new customers. Judging from the popularity of cheap Android devices, and Microsofts total lack of presence in the sub $250 market, I'd vager they will be increasing revenue.
  • It won’t require products that use the cheaper licensing to complete logo certification, a process that verifies hardware compatibility
    So in other words we can anticipate the return of BSoDs thanks to not-so-perfect cheap hardware / driver configurations ?
  • My thought too. This part of the plan is asking for trouble. Also, wouldn't surprise me to see OEMs who won't bother to certify will also not bother to provide much post sale support. "Want to upgrade to the new version of Windows? Sorry, no drivers for you, even if the ones we have would work."
  • That is just asking for trouble... Also OEMs rarely update laptop drivers which so freaking annoying.
  • 15$ for Windows 8.1 for 250$ sub-par machines, great. Now they should give Windows RT to compete more against Chromebooks.
  • Non-Touch, uncertified hardware running Windows 8.1? My tech dreams just came true, except for the warranty, which could also be omitted, for prices sake.
  • How in the world did you link the layoff in 2008 to the netbook licensing?  You may recall the whole economy blew up in 2008.  Comments like that detract from the credibilty of every comment made in the article.  
  • Anyone know what happened to my talking Tom? Since today's update it disappear on every Lumia 620. Did they take it out of low budget phones? Well I won't say I wasn't expecting this
  • Oo, glad i didn't update that app one of my nieces, Sara loves it. Everytime I baby sit she always asks for it lol. I'm being to think she is addicted cos she wont let anyone else babysit, she goes all grumpy haha.
  • The only part of this I don't get.....IF the story is true (it came from Bloomberg after all) why Microsoft would not require touchscreens on small devices. Touch is great on all devices in my opinion, including the 27 incher I'm using right now, but it is particularly good on smaller devices. Perhaps Microsoft isn't requiring touch because they expect OEMs will include it even without the requirement....but given the track record of companies like HP, I won't be surprised to see a cheap 8 inch tablet with Win 8.1 and no touch.
  • I wish they'd make the windows 8 disc cheaper. I want to upgrade my desktop
  • How to stop piracy
  • The best tactics
  • I will go further and say MS should make Windows client for free at least for the OEM. They may have thwarted Linux but that didn't have such a huge install base as Android.