Ten years ago, Apple released a major MacOS update (10.9) and said “Ya know what, it’s free from now on. No more charging for OS updates.” And Microsoft quietly and collectively soiled its underthings.
(Of course iOS and Android had already gone there. But MS could pretend that mobile was a separate market. Ditto Linux.)
There’s a twisty but I think clear line between that day and MS announcing a new Clippy keyboard button. They have to believe in AI because they have no other story to tell.
Microsoft knows quite well what makes them money: Office, SaaS, and Azure. They also know that Windows is a platform that enables profits from the other chunks, no longer a major revenue generator by itself.
From their 2023 annual report:
More Personal Computing:
Revenue decreased $5.2 billion or 9%.
• Windows revenue decreased $3.2 billion or 13% driven by a decrease in Windows OEM. Windows OEM
revenue decreased 25% as elevated channel inventory levels continued to drive additional weakness
beyond declining PC demand. Windows Commercial products and cloud services revenue increased 5%
driven by demand for Microsoft 365.
• Devices revenue decreased $1.8 billion or 24% as elevated channel inventory levels continued to drive
additional weakness beyond declining PC demand.
• Gaming revenue decreased $764 million or 5% driven by declines in Xbox hardware and Xbox content and
services. Xbox hardware revenue decreased 11% driven by lower volume and price of consoles sold. Xbox
content and services revenue decreased 3% driven by a decline in first-party content, offset in part by
growth in Xbox Game Pass.
• Search and news advertising revenue increased $617 million or 5%. Search and news advertising revenue
excluding traffic acquisition costs increased 11% driven by higher search volume and the Xandr acquisition.
Windows is already effectively free for non-business users; I expect that in another year or two, MS will drop the pretense that an activation key is required.
Andrew Plotkin
-dsr- (not a dog)