Just 5 or 10 years ago, the Windows business model was pretty simple.
You could just buy a license for it and
you could use it for as long as you wanted to.
But I think older trends seem to suggest that
a free version of Windows is on the horizon.
I'm X from TechAltar, you're watching the 21st episode
of the Story Behind series,
and let me explain how that would work.
Just a few years ago, paying for a Operating System was
common practice. To get Windows XP
or any other version of Windows, somebody always had
to make an explicit transaction.
When the user wanted to get a copy of Windows, they paid Microsoft a fee.
When they upgraded from one version of Windows to another one
they had to buy a new license.
When they bought a new computer, the manufacturer paid Microsoft for the license.
Most of us thought that paying for an Operating System was normal.
And then this happened...
Steve Jobs: "This is one device." (Cheers)
And we are calling it...
iPhone.
One of the many things smart phones changed is
the way people experienced Operating Systems.
With Android and iOS, there were no clear payments.
You couldn't buy iOS, it came with your iPhone
and you just got updates as long as Apple decided to support your device.
Android is famously free to use for Smartphone makers
who might or might not update your phone, but will definitely not charge you for it.
These Operating Systems suddenly appeared
and seemed to cost nothing.
Now, of course Apple and Google both develop their systems to ultimately make money from them
but they did so in much less straight forward ways.
And once users and smartphone makers got used to the seemingly free Operating System
getting them to pay for one became harder and harder.
Which is exactly what Microsoft tried and failed to do.
Remember, smartphone makers originally had to pay Licensing Fees to Microsoft
if they wanted to build on their phones.
Being a paid OS while Android was a free alternative was in my opinion a major reason why it didn't take off
It took Microsoft until 2014 to accept this reality
when it finally made Windows free on Phones and devices with screens smaller than nine inches.
The Company was essentially forced to accept the new reality that consumers
and companies
just wanted the OS for free.
And this new reality has slowly dawned on the PC market as well.
Sure, if you want to get Windows 10 on PCs today, you still have to pay for it.
But the explicit payments are slowly disappearing here as well.
Around 300 million users upgraded from Windows 7 and Windows 8 to Windows 10, for free.
That's more than half of all current Windows 10 users
and upgrades to users that are already on Windows 10
like the Anniversary update, the Creator's Update, the Fall Creator's Update
and whatever else they will be called in the future,
should all be, you guessed it, free.
And that initial fee for joining Windows 10?
I fully expect that to be dropped in the future as well.
So, hurray! Free Operating Systems.
But wait...
We all know they can't actually be free, right?
Developing an OS is incredibly expensive
so it's no wonder that both Apple and Google make money out of their systems
Apple of course sells you an iPhone, an iPad, or even a Mac for a ton of money
So the price of the OS and future updates is simply included in the price of the device itself.
Apple and Google famously also take in up to 30 percent cut
of transactions made through their respective app stores.
Built-in first party services
like cloud storage, music subscription services,
ebook stores, and a lot more that these companies
can promote using their Operating Systems
is also a really good way to make money.
And of course all of these platforms, and especially Google's Android,
also collect a bunch of user data that they can then use
to generate better, targeted, advertisements.
Location Data, App Usage, Contact Lists, Geo-tagged Photos, you name it.
So with all of these things in mind,
Apple and Google have created two distinct
business models that avoid charging the users directly for the OS.
Apple leans more heavily on the side of making money from hardware and the App Store
While Google relies more on understanding the user
and serving them more targeted ads.
And increasingly, Microsoft does both
Making money from expensive, first-party hardware? Check.
Pushing people towards an app store so that they
can take a cut of the transactions? Check.
First party services being sold through the OS? Check.
Collecting user data to sell ads? Big, fat check.
Microsoft is all in on finding alternative revenue sources for Windows
and while it was a bit slow to adapt
it did learn it's lessons from both Google and Apple it seems.
So, does this mean free Windows for all?
Well, here are my predictions.
I think the consumer and business versions of Windows
are going to move further and further away from each other
and Microsoft will, at least for the foreseeable future
keep charging businesses up front for an OS
that will focus less on user tracking
and more on offering a clean and managable OS.
On the consumer side, I expect a free and a paid version of Windows to appear.
Advanced users will continue to buy full Windows, as they do now, at least for a while still...
While the masses will soon be offered Windows 10 S for free, as the default choice.
Windows 10 S, if you didn't know it yet, is a version of Windows that
only allows users to install apps from the Windows Store
and limits users to using Microsoft's own browser
and search engine as default.
In other words, it's the iOS and Android edition of Windows
that should be pretty good at helping Microsoft make money from store sales,
first party services, and user data collection.
And that's why as soon as these alternatives start making enough money
and as soon as the store becomes advanced enough
I fully expect the initial charges to be dropped.
By the way, if you want to see my thoughts on Windows 10 S in more detail,
then check out the dedicated video I made about it
right here.
So those are my predictions for Windows on the revenue side
but there is also another very good reason
to make an OS free. Leverage.
The strongest platform with the most amount of users
and developers give a company the best possible leverage to go after the next big thing.
Google and Apple use this tactic to leverage Android and iOS to reach TVs, cars, and smart watches
to build Voice Assistants and much more
and if Microsoft wants to leverage Windows to go after it's own "next-big-thing"
it will need a ton of users and a ton of developers, all playing according to it's rule book.
Which it can best achieve by making Windows as good as it can be
and give it away for free.
So, what is the "next-big-thing" Microsoft is going after?
Well, a ton of things at once, but I would like to highlight one area as an example.
The company calls it 'Windows Mixed Reality'
All the big tech companies have made it very clear that they think AR and VR will be
a hugely important part of the future.
Google has Daydream, Facebook has Oculus, Samsung has GearVR
Apple has just introduced things like AR Kit
and Microsoft has HoloLens as well as Mixed Reality
AR and VR is clearly super promising.
The main problem all of these platforms have though
is that all of our apps and games are designed for 2D interfaces
and so they either don't work in 3D environments at all
or if they do, they don't feel right.
Now look at this problem and think about how Microsoft could leverage
it's free desktop OS to solve it.
If I was Microsoft, I would make Windows 10 S free
and then use it as bait to get consumers used to the Windows Store.
Once they did, it would also encourage developers
to not only bring their existing desktop apps to the store
but also to develop programs for it from the ground up.
Through the power of the Universal Windows Platform
these new apps that were written for the desktop
will also work magically on Windows Mixed Reality headsets.
So the leverage works to create apps.
but, what about getting them to fit in the 3D environment?
Well, just take a look at Microsoft's newest design language called Fluent Design
Introduced earlier this year apps with Fluent Design
look radically different from traditional Windows programs.
The system works with translucent frosted glass panels, big shadows, light effects and so on.
I already quite like the way it looks on PCs
but it really starts making sense when you put these apps into a 3D environment.
The lights, the depth, the shadows, and the feeling of real materials
are all designed to make these apps
feel like they have physical properties
They look like they were designed for 3D.
So if Microsoft succeeds
it can leverage it's PC user-base
to create an app catelog for it's Mixed Reality headsets, too.
So, to sum it up
I would be really surprised if Windows 10 S
wouldn't become the free, default, OS for users.
Most users have clearly signaled with Android
that they would rather have their data analyzed than pay for an OS.
So Microsoft won't really have much of a choice anyway.
But, more importantly, the company should have also
found enough alternative ways to make money out of
the OS anyway
and getting people to use the Windows Store
will be incredibly important for the future efforts, too.
And now I am interested to hear what you have to say about the future of Windows.
Let me know in the comment section below or tweet it at me @TechAltar
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Thank you very much for watching and I'll see you in the next one.