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Goodbye cheap Windows 8 tablets: Windows RT costs OEMs $85 a pop (venturebeat.com)
47 points by hinathan on June 12, 2012 | hide | past | web | favorite | 59 comments

Microsoft is afraid to cross the chasm. It must become a hardware manufacturer to compete with iPad.

The iPad has disrupted the steady decades-long growth of PC sales. Microsoft has the choice of competing with Android on the tablet low end, or of competing with Apple on the tablet high end.

But because Microsoft is a software manufacturer, competing with Android on the low end means competing with something that is free - aside from existing mobile patent royalties.

And competing with Apple is difficult because Apple keeps all the device sales profits, whereas Microsoft must split profits with tablet hardware manufacturers - who have the choice of using Android or some other Linux-based tablet OS.

By the summer of 2013, we will begin to see how this is sorting out. Nokia, who has bet their company on Microsoft, may be then only a year away from bankruptcy. Enterprises may be reluctant to upgrade desktops to the Metro UI in Windows 8.

What will be Microsoft's tablet market share a year from now? More than 10%?

> Microsoft is afraid to cross the chasm. It must become a hardware manufacturer to compete with iPad.

Well, Microsoft as a company already crossed that chasm with the XBOX (and Zune, if that matters). But yes, for the Windows section of Microsoft, that is a huge step to make.

Odd how the history played out. Mac OS X began as NeXT's OS (NEXTSTEP). When NeXT failed to get market traction with their high-end proprietary hardware/OS platform, they abandoned hardware and became a software/OS company. Microsoft already owned that space however. When NEXTSTEP the OS failed, they sold to Apple, became Mac OS X and later iOS, and went back to being a high-end proprietary hardware/OS platform. Microsoft however, long successful as a software company, is now facing the prospect of having to compete as a complete hardware/software platform, something they've never done, and something that Mac OS X (as NEXTSTEP) failed at previously.

I guess it just shows that neither strategy is necessarily the "right" one. It's all about providing what the market wants, when it wants it.


Its interesting to consider the choices available to the incumbents given their respective legacies.

Is Microsoft making a mistake by pricing its mobile OS bundle at a high $85? To what extent is that decision forced by their existing Windows franchise?

I think that Microsoft is making a locally optimal decision, and cannot yet fully come to grips with the post-PC era.

It must become a hardware manufacturer to compete with iPad.

Is Apple a hardware manufacturer re: the iPad? Do they have chip foundries, LCD plants, manufacturing plants?

As you know they certainly don't.

Samsung, on the other hand, does. They make their own...everything. How is that working out for them? Are they destroying Apple with their profit advantages.

It is never so simple. It is actually ridiculously complex, and cargo-cult hand picking of attributes of leaders and losers (while ignoring all of the exceptions) is seldom a useful exercise.

Microsoft has the choice of competing with Android on the tablet low end, or of competing with Apple on the tablet high end.

Another rather questionable analysis, sorry. The iPad dominates because it's cheap (options like the Xoom have been, perversely, more expensive). In what universe is the iPad the "high end"? Further as prices do move down, Apple most certainly is just as heartily in that competition, and we know that a 7" iPad is not far off.

Microsoft needs to make a product that people want. It's as simple as that. Android had faltered on tablets because it was, simply, a terrible tablet OS. It is becoming a very credible contender. Is Windows 8? Time will tell, but I see little to competitively sell it over either ICS or iOS but a lot of hot air and futurist speculation about how Microsoft will somehow leverage their other markets to take over the tablet market (a strategy that has failed miserably for them, but here we are again. How many people actually want Office on a tablet again?)

Clearly Apple is a hardware manufacturer according to the common business definition. Samsung is doing very, very well in the mobile device market - second only to Apple. Hardly anyone else makes a profit!

Really it is quite simple to analyse the confounding situation Microsoft finds itself in with regard to pricing its mobile OS bundle. They can either price it high or they can price it low. I consider why they priced it high.

iPad in the current reality is the high end of popular mobile tablet devices. One need only look at tablets for sale at Amazon.

You say that "Microsoft needs to make a product that people want". OK. But Microsoft sells software - and does not have direct control over what actually gets sold to tablet customers. This software approach worked for the commodity PC market for decades - thus the chasm.

I agree with your arguments about Microsoft's bet on Windows 8.

Windows 8 tablets can't sell for $800 or $900. I don't care what the tablets cost the manufacturers to make and license, they simply won't sell any for that price.

It may well be more featured packed and powerful than an iPad - but it will be the premium product. At that price it will be pretty damn close to the price of a Macbook Air or Ultrabook which aren't any more arduous to carry. The only advantage of a tablet of those notebooks is the form factor. So how many people are out there looking for the form factor of a tablet but find the iPad's specs constraining?

I'm no mathematician, but I fail to see how +$85 gets you up to "$800 or $900" or how they're figuring that. For the 64gb models perhaps.

I'd gladly pay +$85 for a tablet where I have file system access so I don't have to use another computer to get a file on the darned thing.

I'd gladly pay +$85 for a tablet where I have file system access so I don't have to use another computer to get a file on the darned thing.

If that is your entire set of requirements you can get Android tablets for $85 (total) that give you file system access.

He probably read TFA to get to those prices:

"Premium Windows 8 tablets will likely run between $800 and $900."

As I recall, "analysts" were predicting much higher prices for the iPad before it was released. Maybe they'll be wrong again.

He is clearly asking how the article gets those prices.

That's the trouble, though - will Windows RT really offer file system access? I haven't seen guarantees that it will.

Yes, you can use Windows Explorer in the desktop.

"the new iPad starts at $500. Premium Windows 8 tablets will likely run between $800 and $900."

Which is why I am more than happy to stick with a much more functional & useful laptop, that's slim and has a long battery life. With the added bonus of a built-in cover for the screen, without having to add a bulky cover for that protection.

>At launch, Win 8 tablets will cost at least between $550 and $800, which is a scary price point to start at when the iPad 2 retails for $400 and the new iPad starts at $500.

This part is worse to me. The way I see it, the only advantage in the PC vs Mac debate is that PCs can compete on price.

What chance do Windows 8 tablets have when they are more expensive than the best (to many) tablet on the market?

>The way I see it, the only advantage in the PC vs Mac debate is that PCs can compete on price.

Enterprise users.

Of course, Microsoft is dropping the ball there with WinRT, too, but that's beside the point.

Enterprise users I know already bring their iPads to work and especially to business travel. Enterprise IT departments already accommodate them.

I have two brand new 16GB iPads sitting on my desk at work right now that are completely useless because we can't accommodate them.

Our line of business applications are just plain too tied to Windows for it to even begin to be an option; and I'm talking about software packages with costs in the five to six figure range.

Yes, but I expect that you have the iPads interfaced to your corporate email and to your web based systems. Those are enough for the execs and attorneys I know.

And I assume you know about virtual desktop app solutions too. You may be using those currently for remote Windows users unless you have chosen a VPN solution to extend your enterprise network directly to remote users.

Because people are being told they 'need' a tablet. But also that an iPad isn't enough by itself- they need a computer too. So the 'choice' for your standard uninformed BestBuy consumer is iPad & Laptop or a single Win8 machine, and the single machine solution is vastly desirable.

I think this argument is bull- and we can poke a ton of holes in it but it's difficult to communicate this to many people. I almost always try to sell them on a Macbook Air instead (a Windows ultraportable would work as well, I just haven't had as good experiences with non-Apple ultraportables).

A little less than Android-based ones. They effectively compete in price with iPads, have software available and some of them can be rooted.

But it is not as easy to use while carrying around. Which one you choose will ultimately depend on your needs. If you need both, there are convertible tablets.

That's why I got myself an inexpensive laptop (Vostro 131, comes with Linux) and a Nook Color (promptly rooted). Good enough. And I barely went over US$ 600...

the 11" macbook air looks like it strikes a nice balance.

Not really, though. I love my Air (a LOT), but the ergonomics are so different from my iPad that I can't even compare the two.

Doctors, teachers, parents, people working outside - there are many reasons that a laptop is cumbersome for various vocations.

I have never seen ANY tablet that works well outside on a sunny day. Need an e-ink tablet for that market, though I'm not aware of any besides the Kindle which isn't really a general purpose device.

In the 1990's I led an electric utility project team that deployed hundreds of Compac brand Windows NT tablets for field work in Florida, USA. No real problem with sunlight - who would stand in the sun there anyway?

I'm surprised at everyone quoting the same line and no one crying, "Foul!":

"the new iPad starts at $500. Premium Windows 8 tablets will likely run between $800 and $900."

Well, what's the "Premium iPad" go for? What do Windows 8 tablets start at? It's like saying "The entry level Mercedes goes for $50,000. The premium Porsche will likely run between $100,000 and $140,000." In that example, both can cost the same - it's all in the options/model chosen.

I don't know what the actual prices of the Windows 8 tablets will be but I'm assuming Microsoft hasn't made their entry-level product 40% more expensive than the iPad.

I'm a little baffled by the pricing here — Microsoft's goal in the desktop world seemed to more or less break even on OS and push the application suite for the real cash.

Does anyone have a sense of whether this makes sense at all? Perhaps the 'preferred volume OEM' terms are hugely discounted.

That $85 price tag is a Windows RT and Office Metro bundle. So, it's not _just_ Windows in question. I think the title should be adjusted to reflect this.

Read this Windows Team blog post to see what I mean: http://windowsteamblog.com/windows/b/bloggingwindows/archive...

They are fooling themselves if they think the Office bundle justifies the price. The rationale for the Office bundle should be to give an initial boost to an unproven platform and overcome the scarcity of Windows RT apps.

If Office Metro is half as good as the current Microsoft Office, it will be worth $85 by itself.

I say this as someone who doesn't own any Windows licenses. (Except a Windows 7 starter OEM license for my netbook.)

While it's true that they're bundled, it would also appear that Windows RT is only being delivered in bundled form(Unless I'm reading this blog post incorrectly).

So if we accept that Windows RT itself is a bundle, the headline isn't particularly misleading.

Are we witnessing something big here?

I love my iPad because it doesn't have office. It's not a laptop, it's a whole new kind of personal computer. Maybe I'm wrong but it's nothing like a laptop and as long as they're trying to make it a laptop in a different form factor I just can't see it

Really? I chose my iPad because it was the only tablet with good office software.

Ah, that makes a lot more sense. Thanks.

With Mountain Lion at $19 the trend in software prices continues to go down year after year, propelled by the open source movement. In ten years I'd prefer to be in Apple's shoes.

Software can be copied, pirated, or built up from scratch with an editor. Hardware can not.

No. Hardware can be commoditized as with the PC market.

Apple has an incentive to sell Mountain Lion at $19 which is to increase the adoption of new OS versions. They also make money predominantly on hardware so a lower software cost isn't such a financial hit. Lowering the price of their newer OS also depresses the value of operating system software in the eyes of consumers. This is important with the upcoming release of Windows 8.

Innovation and market differentiation is essentially what you are looking for. And ultimately you need a good product and resulting sales.

Don't forget that free yearly upgrades are the norm for tablets (well, iOS at least. Android, where art thou upgrades?).

What will Windows RT users be getting a year from now when iOS7 is released?

Microsoft is going to have a very hard time moving to an annual development cycle for Windows, as opposed to the 2-4 years they've been at. I don't know if they can solve that problem.

The Apple website says you have to download Mountain Lion through the App Store, which means you need a Mac (with OS X already installed) to get it. That's an update.

You mean we wont be printing hardware in 10 years?

Yes, at home we will not be printing circuit board and chip hardware in 10 years! Current maker-style single unit manufacturing is very limited as to the allowed input materials - and current trends do not indicate a solution in just seven years.

A typical smart phone or laptop contains an astounding number of nano-sized parts made from otherwise hard-to-manufacture chemical compounds.

After the singularity, I suppose that robotic logistics will make possible local on-demand customized manufacturing from a very efficient supply chain. Think UPS or FedEx but orders of magnitude more automated and efficient - as input to your locally-shared "maker" - which would be a completely automated robotic CNC, machine shop, electronics fab, paint shop, testing rig, etc.

Where manufacturing plants are located, and the degree of customization offered, appear to be functions of the cost of labor and the cost of transporting various inputs and outputs. Post singularity economics may very well favor localized manufacturing when the customized output product is needed tomorrow.

After years I still fail to understand how Microsoft thinks an OS is worth the prices it charges. I see two possibilities:

1. The OS isn't worth this, in which case it's either extortion (if their partners feel they have no choice) or cluelessness (if their partners end up walking away).

2. The OS is worth this, in which case they've over-engineered: they made their particular OS do way more than it's supposed to and are trying to recoup the cost of developing so damned much.

Fundamentally, an OS needs to boot a device and provide resource management. In order to be compelling to developers it needs to include good libraries that make common tasks easy and tricky tasks efficient. ARM tablets don't even need Windows' backward-compatibility, so there should be a heck of a lot they can just drop out of it! It is hard to imagine this OS being a beast; apparently it is.

Technical points aside however, Microsoft is also the underdog, and a rich one. If anybody should be eating the true costs of an OS and charging partners $6 a head to boost adoption (whether or not it's worth $85), it's Microsoft.

Its worth whatever people are willing to pay for it. It's a perception that you need Windows, and that's going to last a while. That's why there's such a huge market in silly things that you don't need(like Winzip for example), the price has nothing to do with how much engineering went into it, or how much it cost.

And also, from TFA the actual source of the article is hearsay at best. Pricing is more likely to be based around individual agreements with suppliers. They have a real incentive to get units out (to drive more App store revenue), But for smaller players they will continue to milk the Windows brand for as much as people are willing to pay for it.

After years I still fail to understand how Microsoft thinks an OS is worth the prices it charges.

Show me an operating system (that comes with support) that is cheaper.

Ubuntu is $104.99/year for the cheapest support offering from Canonical. OS-X is more.

Android is free, but you have to pay to license the Google Apps (exactly how much no one is saying).

Vast majority of Ubuntu and Linux users don't pay for support - that's the difference - they have a choice. With Windows there is no choice, just a huge fee going to Microsoft, who are trying desperately to hang onto the lead in the desktop OS market.

You actually do have a choice. If you buy an OEM copy from, say, Newegg, there is no support included. That's part of the reason it is so much cheaper than the retail version.

Windows doesn't come with support. The manufacturer has to handle it.

Yes and no.

Microsoft doesn't support the consumer directly, but it does support the manufacturer.

Haven't seen anyone ask this, but is this also going to be the OEM price for say Dell, Lenovo etc for desktops and laptops? In a business with as slim margins as those folks have, this could scream for an alternative.

Ubuntu anyone?

The Windows 8 OS bundle price for PCs - that is laptops and desktops - does not need to change much from existing prices for Windows 7 OS bundles. Microsoft already has awesome profit margins on Windows due to their monopolistic-style lock on that market.

If someone wants to sell a laptop for example, for most of the world they must also include MS Windows. When netbooks first came out, the Asus EeePC was Linux, but customer returns forced subsequent models to be a stripped down Windows XP - and a hard disk needed to be on netbooks from that point forwards.

Windows 8 for PC may cost more like $100, but the OEMs can offset that with crapware.

> Ubuntu anyone?

Good one.

I wish the cheap was in brackets, as this spells doom for profit margins completely for OEMs. They don't have the scale of Apple.

OEMs are going to get kickbacks from Microsoft.


That should drive the prices down a bit.

> While this opens a path for more impressive devices, it seems to us that Microsoft and Intel both took the Ultrabook route and charge “an arm and a leg” for the RT-powered tablet.

What? Intel is charging for an Windows RT ARM tablet?

Intel and Microsoft are very jealous of the high profit margins obtained by Apple on gross sales.

The Ultrabook is an Intel marketing scheme to make a commodity category out of the MacBook Air. Otherwise small form factor commodity laptops use less expensive Intel CPUs & low-end versions of MS Windows OS bundles.

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