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Is packaged Windows going to go the way of the dinosaur with Microsoft's new direct download Windows? Not quite yet, but Microsoft is clearly aiming to transition to primarily online sales.

The Microsoft Store launched today and offers MS Windows, MS Office, MS hardware (such as mice and other peripherals), and more.  (Source: Microsoft)
Microsoft appears to be following in the footprint of Valve and others and transitioning its sales online

Many software developers have found great success moving their products online.  One shining success store is Valve's Steam engine, which has cranked up the company's profits and has been so successful that it now distributes games from other companies, like Take Two, for a fee.  Another example of the success of online software has been Apple's App Store, which game developers are flocking to

The bottom line is that online software distribution saves in packaging and disk production costs, as well as cutting out publisher and retailer cuts.

Now in what some are perhaps sensationally calling the beginning of the end for brick and mortar (B&M) software sales, Microsoft is becoming the latest company to move to offering its software online.

Microsoft quietly launched its Microsoft Store today, which offers directly digital copies of Microsoft Windows Vista, Microsoft Office, and more.  It also sells assorted Microsoft gadgets and accessories, which while significant, are overshadowed by the fact that Windows is directly available for sale and download for the first time.

The approach, with Microsoft and some others refer to as Electronic Software Distribution (ESD) has its perks too.  Microsoft mentions the faster reception over mail orders.  It describes, "The big difference is that after your payment is confirmed, you can immediately download the product to your computer and install it right away. There is no longer any need to pay for shipping costs and waiting for the big brown truck to drive across the country. You’ll be able to enjoy your software almost immediately – all it takes is the download time of the product, which will vary depending on the size of the digital download."

However, even more useful is a benefit hidden in the text of the announcement.  Until mainstream support for the product ends, you can redownload it to your computer whenever you need it.  Not having to search around for validation keys on the backs of CD cases or in product manuals certainly seems to make the online version of Windows a superior choice.

Some are already accusing Microsoft of shooting resellers and retailers in the back with the decision.  In alarmist fashion, they are saying that Microsoft's decision signals the death of packaged software.  These critics continue with gloom and doom predictions about the fate of OEMs and their ilk.

In reality, this probably isn't the case.  While Microsoft surely wants to slowly transition towards the more profitable purely online sales model, it will still continue to sell packaged versions of Windows for a long time.  While this transition will likely hurt retailers and resellers significantly, it won't be a fatal blow, and they will have time to seek other business strategies.  And in the meantime, the continued availability of packaged Windows at brick and mortar stores will help Microsoft reach some that do not have adequate internet connections to make such installations feasible.

Why did it take Microsoft, who usually set the software industry curve, so long to adopt direct online sales?  One likely explanation is the firestorm of criticism from retailers and the media that they knew would follow.  However, with more and more users headed online (currently 80 percent of Americans use the internet regularly); the choice was simply too tempting and financially rewarding for Microsoft to pass up.  And for the user it's a win-win situation, as it provides more options and some very handy benefits.

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Better prices at newegg
RE: Better prices at newegg
By HrilL on 11/14/2008 1:19:05 PM , Rating: 2
Because people are dumb and will buy it without looking elsewhere. Also I believe the one on the Microsoft site is only a one computer license. So you get ripped off pretty damn hard. The only benefit is being able to download it again if you have to reformat. In my opinion though why not just buy it from newegg for the key that you can save somewhere else and if you lose your CD/DVD you can just download it elsewhere. I don’t really see the true advantage to their store.

RE: Better prices at newegg
By excelsium on 11/14/2008 1:36:22 PM , Rating: 3
The advantage is their own, no one else's.

RE: Better prices at newegg
By bhieb on 11/14/2008 1:47:18 PM , Rating: 2
They are only interested in MSRP sales, there will always be others that will take a hit to margin to squeeze out a few more sales.

RE: Better prices at newegg
By bhieb on 11/14/2008 1:50:07 PM , Rating: 3
Also if they go to an online only type distribution. It further answers the "why bother question". It costs them less and they have no competitors to undercut MSRP. No need to sell NewEgg all those copies for less than MSRP if you cannot get it any other way. In fact it is no longer Manufacture's Recommended Price, just Manufacture's Price.

RE: Better prices at newegg
By TomZ on 11/14/2008 5:04:10 PM , Rating: 2
They are only interested in MSRP sales, there will always be others that will take a hit to margin to squeeze out a few more sales.

Put another way, they don't want to compete with their resellers. By pricing at MSRP they allow resellers to continue to have most of their existing business since most resellers price slightly below MSRP.

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