Why Is Microsoft Offering Windows 10 For Free?

Microsoft wants to make Windows 10 definitive break from Windows 8, which was criticized by users and tech commentators. User favorites such as the Start button will make a return, and people will also be able to use a traditional mouse or trackpad instead of a touch screen, but perhaps the biggest departure is the fact that Windows 10 will be free for a year, writes Erik Sherman for CBS.

How will Microsoft replace Windows revenue?

Questions have arisen as to how Microsoft can afford to give away a product which provides so much revenue for free. One argument is that Microsoft cannot afford not to give it away, because Google has made so much headway with its free Android and Chrome platforms. Microsoft has been forced to bring consumers back into its sphere of influence in any way they can.

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Another point is that Microsoft plans to make money through additional services, a strategy that the company spoke about last December. The company is slowly fleshing out its Windows 10 strategy and more details are starting to appear, although the Windows 8.1 marketing strategy is likely to be kept.

Windows 8.1 licenses were given away for free to manufacturers for use in devices with a screen size of up to 9 inches, while larger screens received a subsidy if they used a version of the operating system which contained hooks into Microsoft’s Bing search engine. Although revenue dropped, the number of units sold increased.

Windows 10: Advertising and app sales integral to new strategy

Advertising revenue from Bing and games improved the financial outlook, whereas the compound annual growth rate for Windows revenue was -16% over the last two years. The revenue from Bing and games boosted that figure to -1% overall.

Windows 10 looks like it will follow the same approach, with Microsoft relying on app sales to drive revenue. Windows 10 will be able to run tweaked versions of Android and iOS apps, which means that developers could work with a large number of software packages on the new Windows.

One-time licensing fees could be replaced by an “annuity conversion,” which could be a new way for the company to hook some clients into paying an annual fee.