Each and every version of Windows 7 will be capable of running on low cost, low power netbooks. But the cheapest version of Windows 7 that netbook makers will be able to license is Windows 7 Starter Edition, which will have several restrictions. For instance, users will only be able to run up to three programs at a time (applications like antivirus software that can be minimized to the system tray don’t count). Companies will be able to license Windows 7 Starter for a minimal cost, but Microsoft won’t be making much money on those licenses and instead will encourage computer makers to preload Windows 7 Home Premium.
Customers who buy netbooks with Windows 7 Starter will also be able to pay for upgrades to Windows 7 Home Premium. The upgrades will probably be cheaper than buying a boxed copy of the operating system, but they could easily add to the cost of the netbook. Final pricing hasn’t been announced yet, but my guess is it’ll be cheaper to buy a netbook that comes with Windows 7 Home Premium preinstalled than to pay for an upgrade yourself. Microsoft tends to give computer makers like Asus, Acer, Dell, and HP a better deal on software licenses since those companies are ordering in bulk.
Anyway, this is all old news. But Bloomberg has an article today that poses an interesting question: Will consumers be willing to pay extra for the more capable versions of Windows 7? Or are people who buy bargain priced mini-laptops looking for a deal, not performance? If that’s the case, then netbooks could pose the same kind of risk for Microsoft in 2009 and 2010 as they did in 2008.
Windows Vista’s minimum system requirements were simply too high for the OS to run well on most netbooks. And so Microsoft was forced to extend the life of Windows XP by offering low priced licenses to computer makers selling mini-laptops. And that ate into Microsoft’s profits for the year. Now, you could make the case that if Microsoft hadn’t offered Windows XP, the company would have lost even more money, since computer makers showed they weren’t scared to install Linux instead of Windows (and customers started to show that they were willing to buy Linux computer as well). But either way, Microsoft is making less money than it used to.
On the other hand, maybe Microsoft doesn’t really need to make money on netbooks. Maybe all Microsoft really needs to do is ensure that its software is installed on the bulk of laptops, desktops, and mini-laptops sold over the next few years. Otherwise, there’s the risk that consumers will pick up large numbers of netbooks running Linux and realize that the operating system meets most of their needs — a decision which may influence them the next time they purchase a desktop or larger laptop computer.
Anyway, what do you think? Would you be willing to pay more up front to purchase a computer with Windows 7 Home Premium instead of Starter Edition? How much? Would you pay Microsoft for the ability to upgrade? Or would you just prefer a netbook that comes preloaded with Linux?