And that led to Nadella's most important statement of the entire afternoon: "In a world of ubiquitous computing we want Windows to be ubiquitous," he said. "And that doesn't mean one price and one business model on all that."
Is a Windows subscription next?
Nadella didn't elaborate on his comments, but we can read a bit more between the lines. In the past few weeks, we've heard reports that Microsoft plans to launch a free or subsidized version of Windows, perhaps in conjunction with an upcoming eight-inch Surface tablet. Microsoft has already decided to eliminate licensing fees for eight-inch tablets and other mobile devices, meaning that the company will aggressively compete in the low-end tablet space, where Android has a virtual stranglehold over the rest of the market.
At the same time, Microsoft would love to lock you into a long-term subscription. Microsoft's Hood touted the success Microsoft has had with its Office 365 subscriptions — 4.4 million Office 365 Home subscribers, up 1 million during the quarter, and a doubling of users in revenue in the corporate space. "Where we will add the most value is in the subscription," Hood said, whether it be in Office 365 and Office for iPad, Xbox Live Gold, or some other platform as a service.
So far, that has not included Windows — but it certainly looks like it could. Remember, Microsoft has upped its cadence of product releases. So far, the only leaks we've heard of involve either a free version of Windows or one subsidized by Bing. But it's not unreasonable to think that Windows could move to a subscription model, too — call it Windows 365.
Consider the success that Microsoft has had with Office 365, and the way in which a recurring revenue stream has Hood and other Microsoft executives licking their lips. And Microsoft has pushed out new updates to Windows (and Windows Phone) at a faster pace than ever before. Right now, buying Windows 8 allows users free upgrades to Windows 8.1 and future updates. But as those releases blur together — what's the difference between Windows 8.1 and Windows 8.1 Update 1, really? — it seems reasonable that Microsoft might experiment with a subscription model option.
Consumers used to self-contained ecosystems surrounding Windows XP or Windows 7 might shrug. But Microsoft's goal of tying its platforms together via universal apps has already forced a corresponding change upon its app pricing model. Something like an all-you-can-eat deal for a Windows Phone-PC-Xbox ecosystem is probably quite a stretch for now, but ways in which the company can tie users to its platform — via regular payments, and shared data and services roaming across devices — is already where Microsoft is heading.
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