Windows Vista Family Discount Is No Ultimate Bargain
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Maybe only Microsoft could take something as obviously simple as a family pack and make it unnecessarily complicated and costly. |
As part of a six-month promotion, people buying the full-version Windows Vista Ultimate--for the lovely price of $399--can get up to two extra licenses for about 50 bucks each. I suppose one Ultimate and two copies of Windows Vista Premium looks like a steal at $500. But it's a bum deal and no bargain, ultimately.
"The issue is that it's pretty pricey," said Roger Kay, president of EndPoint Technologies. "Microsoft has cued things up so that people have to spent a lot of money. It's creating a hurdle that's about as high as it could be for people to get over it."
The deal's shortcomings aren't complicated to understand: upfront cost, basic value, potential buyers and realistic state of multi-PC households.
Appeal is Limited
Who's going to buy the full Vista Ultimate, anyway? Anyone with a Windows XP PC would be eligible for the Ultimate upgrade, which Amazon sells for $250. People upgrading from another Windows version would need the more costly full version, assuming their vintage PCs could even run Ultimate. As Microsoft's premium operating system, Ultimate carries some hefty system requirements. I wouldn't recommend it for many computers that are more than a year old. Many owners of older PCs would make out just as well with Windows Vista Premium preinstalled on a new computer.
The only reason I could see for a Windows XP user to plunk down $399 ($379 from Amazon) for Ultimate would be to get the extra licenses. But who would want them? Multiple-PC households would seem like pretty good candidates. Microsoft's own internal information puts the number of multiple-PC households at 34 million of 106 million U.S. households.
By Microsoft's reckoning, then, only about one-third of U.S. households have at least two PCs. If Microsoft's CEO is any indication, the average family buys a new PC about every three years. Steve Ballmer's multi-PC household last bought new computers in 2003. I predict that most households that bought PCs before 2006 will find Windows Vista Ultimate to be a taxing upgrade on their aging computers.
"If you're really upgrading three machines, it's a great deal," said Gartner analyst Michael Silver. "But how many families are going to have the horsepower to get the most out of Ultimate and Premium? I don't think it's going to be a big number."
The only realistic candidates for Microsoft's Ultimate discount would be consumers purchasing more than one PC within the last 12 months to 18 months.
However, I know from my recent days working as an analyst that many households buying a second or third PC choose a Mac. For many Americans, that most recent computer wouldn't be eligible for Vista Ultimate because it runs Mac OS X.
Why This Offer?
Way I see it, Windows Vista Family Discount is a great way for Microsoft to push off complaints about family pricing, while offering something that most consumers won't buy. If Microsoft sincerely believes that the Family Discount will drive lots of Vista upgrades, the belief is mistaken.
"The desire to get all the candy out of the candy jar is my metaphor [to describe Microsoft's pricing strategy]," Kay said. "You grab all the candy in your fist and you can't get your hand out of the candy jar. If Microsoft wanted to get more candy more quickly, it would leave some in the jar. You could actually go in the jar and get a second handful."
Maybe Microsoft's discount is victim of two extenuating circumstances.
- Microsoft can't really risk undercutting PC manufacturers. OEMs are already cranky about Windows Vista missing Christmas 2006. If Microsoft gives away too much, it could take away sales from PC manufacturers. Vista Ultimate is a costly product for everybody, including OEMs, and PCs running the operating system will sell for a premium price. As such, Microsoft expects the bulk of consumers will buy new PCs with Vista Premium. OEMs may still gripe, but they've got a whole lot less to complain about than, say, a discount on Ultimate.
- Microsoft doesn't like to give up anything when it comes to licensing costs. In the more than 10 years since Windows 95, Microsoft operating system pricing has stayed steady or, with Ultimate, gone up. In a competitive market, such pricing could never be the case. Monopoly insulates pricing. Microsoft doesn't have to give up anything when it comes to Windows pricing. Entrenched corporate cultural attitudes and habits are tough to break.
But JupiterResearch research director Michael Gartenberg disagreed about the monopoly pricing effects. "Given that the cost of producing software has gone up over the last 10 years, it's impressive that Microsoft is able to keep prices as low as they are," he said. "While the OS might seem disproportionate to the rest of the PC, the hardware components leverage economies of scale that don't make it into software development."
Microsoft's Family Discount contrasts with Apple, which offers a Mac OS X Tiger Family Pack for $199. It's a good deal; five additional licenses for another $70. Plenty of folks (me among them) have criticized Microsoft for not offering a Windows family discount. Now, I'm in the unusual position of criticizing Microsoft for making discounted licenses available. The choice of nothing would be better than Windows Vista Family Discount.
"There won't be many takers for this thing," Kay said. "It's an appealing offer that, when you parse it, it isn't going to get many buyers."
Looking for a Better Deal
I see two discounts that would make sense, and both are based in part on the understanding that most consumers do not upgrade the operating system on existing PCs when buying new computers. JupiterResearch consumer surveys show that since 2001, the majority of households buying Windows XP kept the older Windows computer in use with the older operating system. I expect to see a similar pattern for Windows Vista, with Windows XP hand-me-down computers used with the existing operating system.
If households aren't going to upgrade anyway, no new PC sale would be lost if Microsoft offered a free or discounted Vista upgrade.
A Windows Ultimate family pack with two or three licenses would be a good deal at $399 and might encourage some consumers to upgrade existing hardware, which would drive business to Microsoft partners.
A more sensible option would have been to offer Windows Vista Home Basic at low cost or even free with some Premium or Ultimate SKUs for households with two or more PCs. Many of those vintage PCs would be capable of running Windows Basic.
"Premium and two additional Premiums or Premium and two additional Basic licenses would make more sense," Silver said. "There's more that Microsoft could do here."
Microsoft would benefit in a several ways:
- Assuming people wouldn't upgrade those XP machines anyway, Microsoft would gain a license sale it otherwise wouldn't get.
- Windows Basic would extend the operating system experience and benefits to other users in the home and create excitement for more Vista, possibly another software upgrade or PC purchase.
- Vista comes with newfangled security features that Microsoft should want to get to as many consumers as possible. Better that multiple-PC households run all Vista, rather than Vista and XP, at least from a security perspective.
- Consumers running Windows Vista can be influencers. If the kids get the hand-me-down PC, wouldn't Microsoft like them talking up Vista at school? What's to talk about Windows XP?
Microsoft's Windows Vista Family Discount is no deal, for customers, the company or its partners. So, I say. Commenters, what do you think?
Note: Updated with analyst comments.
Comments (31)
I have to be honest and say that I'm not sure that you're article isn't more confusing than the Family Discount plan. It's also very flawed.
According to the press release, one need only purchase the upgrade (not full version) to be eligible. Secondly, the Family discount only applies to additional licenses of Home Premium, not Ultimate. If you purchase an Ultimate upgrade, you can get two Home Premium licenses for $50 each. So, if I have two or three computers in my house (let's say one is a year old and the others two years old), I can buy 1 Ultimate upgrade and then one or two Home Premiums, for a total of $300 or $350. While not quite the same, getting two licenses for the not-exactly-a-huge-update OSX Tiger is only $100 cheaper.
Lastly, Vista Ultimate and Vista Home Premium require the same system components. Ultimate asks for no better hardware than Home Premium. In addition, getting Home Premium for $50 is a better deal than buying Home Basic for $100.
Posted by Jordan | January 18, 2007 2:49 AM
As you say Jordan, a very confusing article that doesn't agree with what the press release states. I am also disappointed (as a European consumer) that it is only available in North America
Posted by Jon | January 18, 2007 4:33 AM
this article is factually incorrect and it seems that lately all this site does is bash MS - don't get me wrong I'm no "fanboy" (I think thats the term) but they are actually doing alot of good work atm - however since MaryJo left every single article seems to be ignoring any positive and focusing soley on the negative areas.
whats the point of reading a site that only reports half the story - and even then gets it wrong I find myself asking myself. If I wanted to do that I would still read the Register.
I wouldn't be suprised to see your readerbase dwindle in the coming weeks/months. be warned.
Posted by Joe | January 18, 2007 5:59 AM
Joe: "I wouldn't be suprised to see your readerbase dwindle in the coming weeks/months. be warned."
You are in error - I believe the correct terminology would be "I wouldn't be surprised to see your readerbase *continue to* dwindle in the coming weeks/months."
MS bashing is so last year; Google is the developing evil empire.
Posted by Sam Spade | January 18, 2007 6:17 AM
I agree also that this site has gone down hill. If I wanted 1/2 truths I would listen to the news. Now back on topic, at least MSFT is doing something. This is their first try with a family pack, they need to test the waters and see how it will be accepted, if at all.
Posted by JoeM | January 18, 2007 10:33 AM
Joe, I don't know who's right or wrong here.
What I do know is that your articles are usually spot on and very appealing to me. Why? Because they are NOT of the usual Microsoft butt kissing genre.
You, more than most, tell it like it probably is. No, you won't get many MSFT invites to Redmond but, you'll get my undying readership; as long as you keep it interesting and truthful.
Thanks
P.S. The above posts have a hint of shill in them. Tsk!
Posted by Ray Myers | January 18, 2007 11:11 AM
Like most people, I will get Vista when it comes preinstalled on my next computer. I don't really care about the boxed prices of Vista.
Posted by JohnJ | January 18, 2007 11:52 AM
I would be much more interested in the Family Pack deal if the additional licenses purchased for $50 were for Vista Ultimate.
As it stands are the additional licenses for Home Premium Full Install or Upgrade?
Posted by Akbar_The_Great | January 18, 2007 12:41 PM
The idea is to put an artificial reason to buy new computers, instead of loading a new OS on to old hardware.
By putting up a high price point, MS supports the OEM partners.
Posted by drave | January 18, 2007 12:58 PM
... which is the reason I went with a new iMac... if I'm going to get new hardware, I decided to go with something sweet!
Posted by drave | January 18, 2007 1:12 PM
The best deal is Linux. $0 for the operating system and $0 for the family pack. In fact, the Entire World License Pak costs $0.
Posted by Tony | January 18, 2007 2:13 PM
I don't understand why reviews keep saying things like this, "assuming their vintage PCs could even run Ultimate." I beta tested Vista and I'm currently running Vista Ultimate on my desktop system. Is this a brand new system or one purchased in the last 12 to 18 months? No, it's one I built almost 4 years ago. Does it have any problems with Vista? I wouldn't be running Vista as my OS if it did. Any well built system, even one that's nearly 4 years old, can run Vista without any pain.
For those considering an upgrade and wondering how well their old system will do, here are my key system components:
3.06GHz P4
2GB Dual-channel DDR2 RAM
2 ATA-100 hard drives and 1 SATA1 hard drive
ATI All-in-Wonder 9700Pro w/128MB RAM
Posted by lblake | January 18, 2007 7:11 PM
I was very happy to find this article because I has been wondering why Microsoft wasn't offering a family upgrade deal. Apparently I had just not read about it anywhere else. I was aware that Apple had made family upgrade packages available in the past for about $150.
Perhaps the best deal going forward for families is to buy them from an educational discounter. I've seen Home Premium for about $80. You need to have a student or teacher in the house to qualify, but that was the way I was leaning. 3 copies of Home Premium then totals $240, I don't see anything in Ultimate that I need that's not in Home Premium.
Posted by Jon | January 19, 2007 10:57 AM
I do agree that Microsoft Watch is very dissapointing of late. We relied on Mary Jo to keep us informed on what MS was doing without the negative opinion. Just report the facts and leave the opinions to those that actually use this stuff (and not Apples).
Adding some discounting for families is a good idea. It will get much better in a year with the release of Microsoft Home Server. Since MS already offers students a free SQL database, development software (.NET, VS), graphics tools, and academic copies of Office, they can't be faulted too much.
In the mean time, if you want a splendid discount, consider registering as a Microsoft Partner (Member level) and purchasing the venerable Action Pack. You get more software than a family could ever use for about $300 a year. I doubt Apple or Google can even get close to matching this. Of course, they may announce iActionPack any day now ;)
Posted by Bill | January 19, 2007 2:43 PM
I agree the MS family plan is dumb. But as you say, MS must protect the OEMs and new PC purchases, which is where they make their real money.
At this point, the only way I'd get Vista anything is by buying a new computer when the time comes.
Posted by mark | January 19, 2007 11:49 PM
Paying $300 to "get more software than a family could ever use" doesn't sound too bright. I'd hope that the part that you do use is worth $300.
Anyway, Joe, hang in there! Unlike some who are just steeped only in MS lore and can't appreciate anything outside of the MS view of the world, keep your broad perspective, and keep telling it like it is. After all, that's why this site is called microsoft "watch".
Posted by JohnJ | January 20, 2007 12:10 AM
I think everyone here has posted some really good opnions and thanks to those who also pointed out the facts vs flaws I personally enjoyed "Tony Linux" point on costs; I found that humurous. MSFT has always been about licensing that is where the bulk of the OS revenue comes from and its really the corporate licensing programs, as the end user market only makes up a fraction of this revenue albeit in the end its all about money. Vista; regardless of versioning limitations,is the response to apple gaining popularity with the general consumer and since apple decided to make its new osx more of a windows feel to attract the pc user, which they have done a great job at by the way, vista was msft's answer to that or was it the cost of supporting the many security flaws in the existing os... I am not one to flavour with either OS since I use them both, and to each has their own set of limitations it would be nice to put all the great things of both OS's into one package maybe we can call it a "mapple" and we will all be happy, ah if only... basically, when it comes down to it, regardless of vista versions,license packs, family packs or whatever you want to call it, it will still cost you money in the long run. I have been using vista since the first beta and am now using the enterprise version with the new office/07 both non beta's. I have this installed on a vista premium PC. the only thing that I have found more useful with the 07 product line was office which I installed on my xp machine. Vista has too many software contraints for me, but thats me. My advise for new vista people, go with a new machine, test your existing software first.
-emmy
Posted by Emilie | January 20, 2007 1:13 AM
Interesting perspective, drave. The next question is, why does Microsoft feel more obligated to prop up PC manufacturers and gouge the individual consumer rather than give the individual consumer with an older PC a break?
Posted by meatofmoose | January 20, 2007 4:47 PM
Wow, the people supporting this article, after it's been revealed that it's faulty from the very first sentence, are disturbing. If that's the level of journalism you're seeking, you'd be better served by a Linux or Mac fan site. On the others hand, maybe not...the fact that this article hasn't been corrected speaks volumes.
Posted by Vern | January 21, 2007 5:17 PM
i just thought I'd drop by and tell Wilcox to stop attacking Microsoft with his uneducated rubbishy oppinons. If I wanted to read lies I'd read Apple blogs.
Posted by Brody | January 22, 2007 8:00 AM
Joe,
Try reading the entire press release before writing about it. Here's the web page with the information you are writing about:
http://www.microsoft.com/presspass/press/2007/jan07/01-17ConsumerOptionsPR.mspx
"one valid full or upgrade Windows Vista Ultimate".
As you can see, the upgrade package IS included, contrary to your article. As for the value of this offer, I doubt that I'll get it anyway.
Posted by Chris | January 22, 2007 8:45 AM
Joe,
I guess you can not please all the people, all the time. Seems you can not be pleased at all. You should get your information correct before you write an article. Microsoft has worked very hard to try to please the masses. Not just you! Besides from the comments above, you do not have a large fan base anyways. How we all miss Mary Jo, as for your comment:
"Plenty of folks (me among them) have criticized Microsoft for not offering a Windows family discount. Now, I'm in the unusual position of criticizing Microsoft for making discounted licenses available. The choice of nothing would be better than Windows Vista Family Discount."
What the Hell does that mean? Maybe you should write for MAC-Watch, or better yet just use your MAC and leave Microsoft-Watch and get a new job for Steve Jobs.
Posted by Michael McCrea | January 22, 2007 1:08 PM
Hi folks,
I was reading my eWeek email newsletter and after clicking a few links, ended up here. I am a long-time Mac user (so take my comments with a grain), but also a cross-platform game developer (I use the Mac to develop graphics and my partner uses Windows to program then we test on both platforms... we've had a detente situation going for years). I have been following the system requirements of Vista for a while now... just thought I would compare a bit for everyone's edification.
I have been purchasing each upgrade to Mac OS X since OS X 10.1 came out (never buy the first rev!) and I've been taking advantage of the family pack since OS X 10.2 to upgrade 5 computers each time ($40 each), which has been approximately every year (each upgrade was not huge, but each had useful new features I wanted). The nice thing about this situation is that *all* my Macs can utilize Mac OS X just fine.
I have one 400 and one 466 MHz desktop (these cannot use the amazing iChat video due to their slow speed, but I even run Photoshop CS on them no problem... each has 1 GB), a 700 MHz iMac (this one does work with iChat video, but does not handle multiple programs well with only 384 MB), a 1.2 GHz laptop (only 256 MB, but *does* handle multiple programs fine), and a 1.8 GHz desktop (1.5 GB with SATA RAID... this one handles multiple 1/2 GB Photoshop files pretty well).
I was stunned when Iblake posted that his 4 year old config was 3 GHz processor and 2 GB RAM. This is way beyond what most people have purchased just yesterday! So of course it will run Vista... I'm just glad I have a system nearly identical to Vista that will run on all my old Macs without buying new hardware. Don't believe Vista is a copy of OS X? Watch this video (yes I know there are some differences... but this video is just for fun... don't drive angry!):
http://www.youtube.com/watch?v=QT6YO30GhmQ
Ken Totten
Posted by Ken Totten | January 22, 2007 4:06 PM
Ken,
In the same time that you upgraded Macs, I got fairly major upgrades to both my Media Center and my Tablet PC OS. How much did I pay for these upgrades? $0. Therein lies the difference...
Posted by Vern | January 22, 2007 5:18 PM
vey misleading article. not factually correct and biased against msft. please post the facts and don't try and mislead anyone.
regards
Posted by mj | January 23, 2007 1:30 PM
I ordered two keys from ms right after I installed my ultimate retail. The next morning when I went to install home premium on my other two machines I was greeted by the invalid key problem. I phoned ms and spoke to two reps as well as emailed them about the problem. As of this time I have not received anything new from ms and the keys still do not work. Needless to say I am not happy as I wrecked two activated xp pro installations for this upgrade.
Posted by Greg | February 1, 2007 8:37 AM
I am neither MSFT hatter nor lover. But, what you are saying in the article is not right. Why is MSFT doing bad in letting me buy 2 additional licenses (of vista premium) for $50 each.
I have already bought 2 keys (though not working as others have said..i am sure fix is in the making) and I appreciate M$ for making this deal available for home users like me.
I do not need ultimate options of bitlocker and remote desktop on my kids computers. Again it is a great option for household like me (I know many of friends are in the same boat).
Posted by mssfrommn | February 2, 2007 12:19 PM
When I first found out about the Family Pack Deal I thought that it was the first deal of Microsoft's I would actually buy relating to Vista right out the gate. This is the Only Pricing setup that I could justify Ultimate to myself at and I had previously considered Ultimate to be overpriced and under-featured
I am the closest thing to a administrator in my family, and right I do my father's desktop and my desktop. My father also wants a laptop, I advised him to wait, first for the Core 2 Duo, and then because of Vista. this would add up to 3 computers, and Ultimate seems kind of choice to me for myself and also for that laptop.
"It's targeted at what we term the 'super-engaged customers,'" said Bill Mannion, a director in the Windows marketing group. - (source)
Posted by Laurel | February 5, 2007 5:02 AM
Jordan:
For my application the buy one complete and get two more for a discout is an outstanding offer.
Eventually I will actually need a couple more Vista operating systems because I am going to build an ultimate based TV system and make it a server/atcs-ntsc receiver/recorder for off the air TV which I intend to distribute with eathernet to two other locations in the house and display (almost always) prerecorded (NTSC til 2/17/09) DTV and HDTV. This will take 3 computers running Media Center Systems which I do not now have and I still have my work desktop and laptop, which currently are running XP SP2 home, which I will eventially upgrade. I also intend to add some of the satellite programs to the feed from my PVR/HD receiver.
I realy appreciate this offer because it is a super deal for me and will probable be so for lots of other folks under similar circumstances.
What is now needed is some better easier to use control software.
Joe
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