Microsoft's Free Windows Offer Pays Off

John Lister's picture

Microsoft's decision to ditch Windows licensing fees for small-screen devices has led to a raft of ultra-cheap Windows-enabled gadgets. Approximately 50 new manufacturers have taken advantage of the offering, with some Windows devices sold in the far East now costing less than a copy of Windows itself.

The move came earlier this year and is thought to be a response to the huge success of Google's Android operating system. Android is particularly popular with manufacturers because it's free to install onto their devices. That said, as tablet computers and smartphone prices have continued to drop, the license fee for Windows has become an increasingly significant portion of manufacturing cost.

For example, a manufacturer wanting to install Windows 7 on a device will normally pay around $50 for a license. While that price point might be affordable for a full-size computer, it makes a huge difference in the economies of scale for a tablet that might retail for $199 or less.

Nine Inches The Cut-Off Point For Free Windows License

Under the new rules, manufacturers no longer have to pay a Windows license fee for smartphones or tablets with a screen size of below nine inches. While that cuts out the largest tablet devices, it does cover a wide range of budget tablets at around the seven inch mark. Microsoft now says the offer will continue indefinitely. (Source:

The offer has been successful thanks in part to the decision to make Windows 8 much more suitable to touchscreen devices without a mouse or keyboard. That policy is going to be kept in place and enhanced for the next system, Windows 10, though there's no word yet on whether the free licensing deal will cover the new system.

At the moment, event the cheapest Windows tablets in the US cost around $120. However, at a recent industry event in Hong Kong, two little-known manufacturers unveiled Windows tablets that cost the equivalent of just $65 -- far less than a consumer would have to pay for a copy of Windows on their PC. (Source:

Ultra-Cheap Tablets Technically Limited

To be fair, the devices, made by Emdoor and Ployer, are both low-spec in terms of hardware. They only have 1GB of RAM, which will severely limit how smooth the device operates applications. That said, both devices offer a quad-core processor, which will help them better handle the multitasking that people expect from a Windows device.

It may be some time before Windows tablets get that cheap in the US, but the removal of the license fee may well kick off a virtuous circle: the more people buying Windows devices at the budget prices, the more developers will develop apps, in turn making the devices much more attractive to potential customers.

What's Your Opinion?

Would you be tempted by a sub-$100 Windows tablet? Do you think Microsoft is right to offer free licenses? Has the choice of operating system affected your decision to buy -- or not buy -- a tablet device?

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pdegroot's picture

I like the headline, which is perhaps intentionally ironic, suggesting that when you give away something that you previously charged for it can still "pay off."
It will no doubt spur more Windows tablets, but the more of these the people buy (rather than replacing a PC, for example), the less money Microsoft makes. You could argue that they're trying to beat Android, but since they get royalties from Android, replacing a royalty-paying Android device license with a free Windows license also costs Microsoft revenue.
I remember Steve Ballmer saying a few years ago that "free is not a business strategy," in reference to Linux.
The strange thing about that is that no company has used free more effectively as a strategy than Microsoft.
Beat Netscape? Make IE free.
Beat Real Networks? Make media conversion, streaming, and desktop clients free
Beat Symantec? Make antivirus free. (OK, so the quality of the MS product is appalling, but a lot of people still use it instead of a paid version.)
Beat VMware? Make hyper-v free (still a work in progress)
And now to beat Apple and Android. This one is different because in every other case Microsoft gave away something that it didn't have a significant current revenue stream from. (I call this asymmetrical competition--give away something that means little to you, but a lot to the competitor, in exchange for picking up revenue elsewhere, such as using System Center as the primary revenue generator for server virtualization while giving away the hypervisor).
In this case, MS is giving away one of its crown jewels. Deals like this could vacuum out the market for PCs costing more than $200. As procs get faster without costing more, memory and flash storage gets cheaper per GB, and so on, many people will have a significant temptation to deploy these devices wherever possible.
The fly in the ointment for business customers will be that MS won't install Windows Pro on these devices for free, so business customers will have to figure out how to manage with consumer editions if they want to go the <$200 route. Since PCs with Windows Pro will probably cost 2x to 3x more, there will be some temptation to try it.