Windows 8 Beats Windows 7, Sets New Sales Record
November 28, 2012 12:29 PM
comment(s) - last by
Windows 8 is the next Windows ME? The sales numbers suggest that accusation is malarkey
Windows 8 was an incredibly bold redesign on the part on Microsoft Corp. (
). The move to a more
operating system certainly seemed to mirror the general direction of the device market, but that did not shield Microsoft from loads of criticism. Many wondered whether it
went too far with the graphical gloss
, whether it was
with its shift to a walled-garden "Windows Store" app distribution model, and whether it was
forsaking traditional desktop power users
I. Windows 8 Upgrade Sales: Very Strong
But the proof is in the sales, and Microsoft announced today that for all the haters, Windows 8 appears to be doing great.
first month of sales
Windows 8 has moved 40 million licenses, according to Microsoft. The company announced the news in
a blog post
and at a conference presentation. It also points out that buoyed by
reduced upgrade fees
, the Windows 8 upgrade rate is outpacing that of Windows 7, the
previous sales record-holder
our own polling
shows that the majority of users are upgrading to Windows 8, although there are certainly many holdouts bitter about the changes.
While some upgrades have been via disc, the new OS has largely been digitially distributed.
[Image Source: The Verge]
Windows 8 is the first Microsoft OS to transition to a
primarily online distribution
. That shift has not seemed to adversely impact sales. It appears Microsoft timed its transition to disc-less media correctly.
II. The Road Ahead
Microsoft's Brandon LeBlanc also brags that
its Windows Store
is thriving, writing:
There were more apps in the Windows Store at launch than any other app store at their launch and since then, the number of apps in the Windows Store has doubled. A number of apps in the Windows Store have crossed the $25,000 revenue mark and the developer keeps 80% of the revenue they make off downloads for the life of their app. A lot of great new apps have been added to the Windows Store since launch such as CBS, ABC News, ABC Family, Engadget, Flixster, OWN (Oprah Winfrey Network), Vimeo and my (current) personal favorite - Top Gear.
A strong app market is good news for Microsoft. While it offers a more favorable revenue split than other players like Apple, Inc. (
) or Google Inc. (
) (with developers keeping 80 percent of the revenue), Microsoft still is closing the loop to include itself in Windows software sales profits.
In the past, Windows Certification processes offered up small cuts to Microsoft, but software publishers largely pocketed these profits. Now Microsoft has cut out the middle man by playing super-publisher with Windows 8, the same move Google and Apple have made with their mobile and personal computer platforms (although Google does allow unofficial third party channels).
Microsoft needed a bold reinvention in the mobile direction to keep up with market trends.
[Image Source: Bloomberg]
Looking ahead, Microsoft has a lot of unanswered questions -- most notably on the leadership front. Windows 8 was
departed Windows President Steven Sinofsky
. His shoes are currently being filled by former CFO and CMO Tami Reller on the business/marketing front and by Internet Explorer, Office and Windows interface veteran Julie Larson-Green on the software/hardware development front.
And the deep divisions between those who love Windows 8 and those who hate it, could hint that sales may dip to a slower pace than Windows 7 after the fans have completed their upgrades.
But, given the already modest success, and given the life-or-death need for Microsoft to have a cohesive, touch-friendly mobile platform, it appears overall Microsoft made the right choice. Windows 8 isn't perfect, certainly and as they say, haters are going to hate. And that is certainly true of Windows 8. But it's better to be hated for innovation than panned for lack thereof.
This article is over a month old, voting and posting comments is disabled
11/28/2012 6:28:07 PM
Microsoft still will make their money on software sales. But their new model will rely more heavily on long-term sales of first- and third-party software through the MS Store. It's sort of like turning the Windows business strategy into the Xbox business strategy - make most of your money off software to run on the platform.
11/28/2012 7:03:06 PM
Selling software and media is not a profit center, at least not the way that Apple/Microsoft/Amazon are doing it. It certainly doesn't make money in the same way that high margin items like Windows and Office do.
A 25%-30% cut, minus the cost of running the service, bandwidth, etc, results in something with about 10% net profit. iTunes is by far the least profitable part of Apple's business, and Microsoft's profit centers of Windows and Office carry much higher profit margins than anything that Apple sells (Apple makes it up in much higher total revenue by selling so many units).
Diverting profit from Office and Windows to the app store would result in a massive reduction of profit for Microsoft, something like a quarter of what it is now.
BTW, I do need to note exceptions to the rule. Valve's Steam service gets a much bigger cut for Valve since their piece ranges anywhere from 30% to 70%
This is because they are competing directly with brick and mortar retailers, and that carries a much different profit distribution than the flat 30/70 split model for digital that Apple pioneered with the App Store. Microsoft is doing one better for developers with a 25/75 split on their own app store, but that's even less profit than other download services, which again makes it even less reasonable for them to switch profit centers from Windows to their app store.
11/28/2012 7:10:01 PM
By the way, using the XBox model for profit doesn't make sense for the rest of the company. After ten years the MS entertainment division is
in the red. The XBox has been a huge money sink for the company. Granted, XBox software sales had to offset the sale of loss leader hardware (loss leader hardware that was the most defective of any piece of consumer electronics ever), but Microsoft's cut from console games sold is also much higher than it is through their app store on Windows.
Windows and Office pays for the whole thing. More importantly, the bulk of their profit isn't from consumers, it is from OEMs and enterprise. So long as they aren't "giving it away" to OEMs (and they won't), then the rest doesn't really matter. Cheap copies of Windows 8 to a miniscule DIY market, money that they wouldn't get otherwise since they'd otherwise just stick with Windows 7, is a way to get a little more cash that they wouldn't otherwise.
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