REDMOND, Wash., October 7, 1998 — Microsoft’s critics seem to want it both ways – one day they say the price of Microsoft software is too low, the next day they say it is too high. The facts are clear: Windows 98 actually costs less than most comparable operating systems, and the prices of Microsoft’s applications software have fallen faster than those of many competing products. Windows has always provided great value to consumers, and Microsoft is continually improving Windows to offer even greater value in the future.
Over the years, Microsoft has led the software industry in delivering more for less, consistently making high-quality technology available at low prices to a broad range of consumers. That philosophy of offering high value and high volume at low cost is at the heart of Microsoft’s business model, and is the foundation of the company’s success.
The prices of Microsoft’s applications and other packaged software have fallen sharply over the years. Since 1990 the retail price of Microsoft Word has dropped by 25 percent, that of Excel by 32 percent, and that of Office by 50 percent. Since Encarta Encyclopedia was launched in 1993, its price has declined by 85 percent. “Street” prices of Microsoft’s applications software – the discount prices paid by most consumers – have dropped even further.
Moreover, Microsoft’s prices routinely have fallen faster than those of its competitors. Metro Computing, an independent market-research group, has estimated that the typical street price of Microsoft Word fell by 47 percent between 1991 (the first year for which Metro Computing made such comparisons) and 1998, compared with an 18 percent decline in the street price of rival Corel’s WordPerfect. The street price of Microsoft Excel dropped by 42 percent during the same period, compared with a 40 percent decrease in the street price of Lotus 1-2-3.
The price of most desktop operating systems – such as Windows – has remained low and relatively stable during the 1990s, with the exception of Unix derivatives such as Sun’s Solaris, IBM’s AIX and SCO’s UnixWare, which were priced high when they entered the market and still carry premium price tags.
Compared with other desktop operating systems, Windows 98 is clearly good value. The street price of a Windows 98 upgrade is currently $89, compared with $110 for the OS/2 Warp 4.0 upgrade and $430 for Sun’s Solaris 2.6. Apple’s Macintosh OS, the only operating system available to Mac users, has a street price of about $99.
Any comparison of the price of the Windows operating system over time must take into account that, until the launch of Windows 95, PC users wanting a graphical user interface had to have DOS on their computers as well as Windows. Factor in the cost of a DOS upgrade, and the price of Windows has remained little changed since 1990. Furthermore, anyone trying to build their own Windows clone from separately available components today would pay at least $400.
But while the price has held steady, the functionality of Windows has increased immensely. Each new version of Windows has included numerous new features and improvements. Windows 98, for example, includes the Web-based WebView user interface; a more efficient file system; faster launching of applications; complete Internet integration; USB support; self-maintenance; improved reliability and troubleshooting; support for multiple monitors; better and faster 3D graphics, improved game support; and Web TV support.
The amount a typical PC user spends on Windows each day compares favorably with the price of other everyday items. At a typical street price of $89, and assuming a buyer uses the operating system for 3 years, a Windows 98 upgrade will cost consumers 8 cents per day. That’s less than the cost of breakfast cereal, basic cable service, a subscription to the Wall Street Journal or a morning cup of coffee. For consumers who purchase a PC already equipped with Windows, the cost is even lower.
Although a few Microsoft critics have tried to make the case that its product pricing is anti-consumer, it simply doesn’t ring true. The company has based its success on high-value, high-volume, low-cost computing, and consumers have supported that approach by purchasing Microsoft’s products in record numbers.