Ask Paul: December 9 (Premium)

Happy Friday! We’re suddenly barreling into the holidays, but here’s another mammoth edition of Ask Paul to kick off the weekend a bit early.
Ads in Windows
AnOldAmigaUser asks:

Part of the argument for ads in Windows and pushing users to Edge and Bing, whether they want that or not, is that Microsoft is not making money selling upgrades. How much did upgrades actually contribute to Microsoft's bottom line when they did?

I understand where you’re coming from, but that might be the wrong question. There’s no way to know for sure how much upgrades literally contributed in the past. But as a generality, we can say that Windows upgrades were revenue sources in the past but aren’t now, and that in the era in which upgrades were available, most people did not take advantage of them because they were reliability nightmares. The one major exception might be Windows 95, but compared to the user base we see today, even that was still a comparatively small market.

Perhaps a better way to think about this is that we used to replace PCs more often than we do today. There are multiple reasons for this, and while we often talk about how PCs are “more reliable” today and thus “last longer”---I often cart out these phrases myself---that may be somewhat incorrect too. PCs simply aren’t advancing as much year-over-year anymore as they did when PCs were the only major device in personal computing. This is true across the board: real-world performance goes up only marginally over the years now, and while we are seeing advances in things like USB over time, that too is not that dramatic to most people. A several-year-old PC pretty much works well for most users now (not including power users, gamers, developers, etc.).

Whatever the reason(s), people hold onto PC for longer time periods now. And since Microsoft is not charging for upgrades (and can’t), it’s getting less in recurring revenues than it used to. Most of which is tied to Windows license fees associated with new PCs. Which brings us to…

Most businesses were on Software Assurance, and could install whichever supported Windows version they wanted. Most consumers purchased Windows with a new PC, and ran that version until they got a new computer. Both of those trends are still in place as far as I know. I still see many professional offices running older versions because the software they use is not certified to run on the new versions. Travelling in Asia, I think I saw more XP than anything else, and I am pretty sure that was pirated, so there is no revenue there either way.

We think of subscription services as a relatively new thing in technology, but that’s exactly what volume licensing (Software Assurance) is, and that’s something Microsoft has been doing for a long time in the commercial market (business, education, government, etc.). The fear, of course, is that Microsoft will try to do this in the consumer market. The theory is that that would neve...