On Windows and OS X upgrade pricing

John Moltz notes that in the time that Microsoft has released four versions of its Windows operating system, Apple has released every version of OS X, save 10.0 Cheetah, released 7 months before Windows XP.  Interesting.  Of course, I could mention that in the time that Apple has released five versions of OS X, Ubuntu has released 16 versions of its operating system, but that would be a discriminatory association.

I use a Macbook as my only computer, but I run Windows 7 in Parallels for work.  I don’t know which is the better operating system (I’m pretty sure it’s not Ubuntu, though).  What I do know is that Apple’s OS X pricing ($19.99-$29.99 for the last four releases) makes it very cost-effective from an end-user perspective to upgrade their OS every year. Microsoft, by contrast, has historically charged significantly more for it’s last three Windows releases ($119.99-$259.99), but it has released them every 2-6 years.1

However, when you compare the costs of purchasing all upgrades for both operating systems between 2007 and the versions being released later this year, the license fees are comparable (I am assuming that the “starting” version listed is bundled with the computer):2

  • 2007 Intel-based Mac (10.4.4-10.8): $207.98 3
  • 2007 Windows PC (Vista-8): $159.99-$259.994

If they generate approximately the same revenue per user, why have they adopted such different upgrade approaches? I think the answer is “risk”.

Apple controls the end-to-end hardware/software ecosystem. They can define 99% of their hardware use cases. 5  Apple also isn’t dealing with the bureaucracy of the enterprise as a large percentage of their users, where there is an institutional aversion to change.  A new, low-cost, annual(-ish) OS X upgrade is likely to have a very high adoption rate.

Microsoft is the opposite in every regard.  Infinite variations and deep enterprise adoption lead to higher upgrade support costs for each operating system upgrade Microsoft releases.  So, they release fewer upgrades to keep their fixed costs down.

Can Microsoft sustain their approach to releasing and charging for upgrades?  It seems like something needs to change – Windows revenue is down year over year,6 and the non-Apple PC market continues to shrink.  It probably won’t, though.  Even though Microsoft is charging only $40 to upgrade to Windows 8, this is just a promotional period, and it’s more evidence that Microsoft is betting heavily on Metro than it is evidence of a sea change.

  1. One point worth noting is that it’s not possible to actually apply every OS X upgrade that’s been released – 10.0-10.4 support only the PPC architecture, while 10.6+ support only Intel.  It is possible to apply all versions of Windows since XP on some PCs.  Not advisable, but possible.
  2. Source data.
  3. OS 10.8 requires at least a Core 2 Duo, which is the baseline for every Mac produced since 2007 (as far as I know).
  4. Microsoft has, yet again, changed their SKUs, so it’s hard to trace the upgrade path.
  5. The Mac Pro line is the notable exception, since it is the only product line that can be meaningfully customized after-market without voiding the warranty.
  6. Windows revenue is bundled with Windows Live revenue, and I haven’t found the breakdown between the two.  I believe this is separate from their Online Services Division, which lost $1.4 billion.

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