News - Microsoft fires warning to Windows 7 pirates

[kalniel]

and as for piracy, main cause off it is high prices, if everything was priced desently and was avalible, then there would be no one bothered spending hours on it trying to crack it etc.

Hi Georgy291, please read the above post by Saracen

[Saracen]

i think your talking absolute rubbish here, A DVD costs £1 at most and box for it costs further £1 at most, so total production cost would not be more than a £5, and they charge £200 for it so a small price cut wouldnt harm them

and as for priceing off w7?

there was a hexus article few weeks back, they described expected costs, and they described expected editions to be released.

and as for piracy, main cause off it is high prices, if everything was priced desently and was avalible, then there would be no one bothered spending hours on it trying to crack it etc.

take HAWX for instance? is it really worth £30 its charged for atm? i played it over my friends house and i think its more off a £5 game at most. its way too short and is made to be a arcade game, how can you justify £30 for that? (just checked £34.99 on steam)

Do you know how many man-hours went into developing Win7? Do you know how many staff were working on it? Do you know what it cost to provide the office space the people do9ingthat work used, or the power to run the heating and/or air-con? Do you know what the price at each stage of the distribution is, and how it relates to profit? Do you know hat MS marketing strategy is? Do you know what the advertising programs cost? Do you even know how much it cost to buy the hardware that was used by the development team?

The cost of a product like a piece of software isn't the unit cost of production. You have to look at all the costs incurred over the life of a product, because they all have to be paid for. If you've had hundreds or thousands of programmers, and support staff, working on a project for a couple of years, ALL the costs that that entails have to come out of profit on future sales.


I'm well out of touch, but for a brief period many years ago, I was in control of a record (vinyl) pressing plant. The cost of record was quite a bit more than the unit production cost, because unless you undertake all the work prior to the point where you press the record or stamp a DVD, or print a box, you've got nothing to put on the record or in the box.


So my point was that unless you know what those costs are, you don't know what the effect of a cut in price will be on profits. If the cost of getting a product to market, including paying for fixed costs, is £150 and you sell it for £200, you make £50. If you sell 1000 of them, you make £50,000.

But if you cut the price by 20%, you now make £10 per unit, and so profits drop from £50,000 to £10,000 .... i.e. a 20% cut in price results in an 80% cut in profit. Similarly, a 25% cut in price, on those figures eliminates your profit entirely and you make £0.

If, however, the "reduce price and you reduce piracy" argument works, then costs will go down because sales have gone up. If you've got an amount of fixed costs not dependent on unit production, such as those development costs, then if you sell more units, the element of costs representing those fixed costs goes down, per unit.

But by how much?

If you make 1000 units, and your fixed costs are £1000, then you have to include £1 per unit sold to cover those costs. But if you cut price and sell 1200 units, the fixed costs are still £1000, so you now need to include 83.33p per unit to cover costs.

Therefore, whether doing that is worthwhile or not depends on what proportion of your costs are fixed, what happens to sales in response to price cutting, and what the overall cost levels were in relation to price.


If you're making £12 profit per unit of something, and you cut prices by £10, you're now only making £2 per unit. Assuming all other factors don't have a bearing on costs, you need to sell 6 times as many just to make the same profit you were before. So unless your sales go up by more than that, you make more profit at the higher price with lower sales.



The figures I gave before weren't any form of estimate as to what the costs or margins on Win7 actually are. They were examples. And very simple examples at that. So no, I'm not talking rubbish. I'm talking basic cost accounting.

I don't know what MS's costs are. Nor do you. And unless you do, you're just guessing about what the effect of a price cut would be.

As for HAWX, whatever that is, I certainly didn't justify any price for it. But whether it's "worth it" is a subjective judgement EACH buyer has to make. If it isn't worth it, don't buy it. If the masses agree with you, either price will come down or the product will fail. What ANYTHING is worth is what a buyer will pay for it, not what YOU will pay for it. I might be prepared to pay £30 for one shirt, but another one might be such that I wouldn't wear it if it was given to me at no charge. For instance, I put football team shirts at a value of £0.00p, because I couldn't be bothered to sell it again, and wouldn't be seen dead wearing one. But to a supporter of that team .....?

So .... back to Win7 again. Suppose MS cut some money off the price? For example, £30. How much would sales increase by as a result? My bet .... not much. But for all the millions of people that would have bought it at £200, you've lost £30 in revenue per person. So unless sales go up by enough to pay that back, and more, MS would lose money by cutting the price.

They are a commercial entity. They're there to offer product, and to maximise profits for the owners of the company ..... which, by the way, largely consists of financial institutions like the pension funds that will pay all our pensions in the future. They're not a charity providing operating systems at some notional "fair" price, or determining product pricing as some sort of social service. They're a business, out to make money.


So given that MS are the only ones that actually DO have all the costings, and have the marketing people to do the research, and I;d bet my eye teeth they've done market testing on price elasticity of demand to see what would happen if they cut prices, I'll repeat the question I asked in the last post ..... if they thought they'd make more money by cutting prices, why wouldn't they have done exactly that? After all, they have the numbers, and we don't. A clear inference is that they don't believe they would make more profit by cutting price, and if they don't, why would they?

[Saracen]

.....

Oh, and thats why OEM is cheaper, not because it doesn't come in a box, but it comes with no direct support from Microsoft.

That, and the fact that by the OEM market, they get a layered structure to their offerings and address a market that wouldn't pay retail prices.

It's like Tesco offering budget, standard and "finest" versions .... they target a different demographic. Pretty successfully too. And it's pretty much a no-lose scenario. You might attract new customers with the "finest", you might well get some standard ones to up-switch, and those that were going to buy lower spec versions probably will regardless of the existence of the higher models. Either way, you win. The psychology of Tesco products and MS OEMing will be different, but the basic principle is the same .... customer differentiation and segmentation.

[pipTheGeek]

I own 3 PC's and a laptop. The laptop came with Vista, the PC's are running XP. If I wanted to upgrade to Vista Ultimate retail it would cost me around £600! I think that is too much for an OS. Because of this I will stay on XP as long as I can. If when I am forced to move it is still going to cost £600 then I will probably pirate it. I am hoping that the upgrade editions of Windows 7 will be a sensible price and that that might provide me with a shiney new OS at some point.

[Splash]

What features exclusive to Ultimate do you actually need though? And would you actually need retail, or would an OEM license suffice?

If you're just upgrading the XP machines then you can use the retail upgrade, £156.43 at eBuyer. This brings your total upgrade costs to a little over half of the £600 you're quoting. The Home Premium upgrade which will likely do all you need comes in at £64.27 at the same place, so reducing your potential required outlay to upgrade 2 PCs from your £600 down to £128.54. Shop around - it's very easy to simply look at the cost of a retail license for the very top of the line and simply say that it's too expensive, but that's like saying that cars are too expensive and justifying it by quoting the cost of a brand new Aston Martin. Of course it's a little harder for people to simply download a pirated copy of an Aston Martin off the internet, so nobody thinks in those terms.

[Georgy291]

i hear every time steam knock few quid off a game, their sales sky rocket and their downloads bandwidth is chocked. So my principle does stick to lower price, more people buy it, les piracy.

Its just some companies dont want to charge less for it, to make the product look better. Take any posh sports car, its only posh because none off us can aford it and those who do show off.

same with MS i can quite easily justify, they want to make a OS seem desent, if they charged cheap for it, people might think its pile off rubish.

As for covering costs, i think its done pretty quick any how, your forgeting that MS also does tons off ads everywere, that subs in some development cost. and if it was charged more desently then alot more people would buy it, instead off downloading. look at pirate bay and amound off vista downloads. and now think how many off those only done it because they think cost off it was too much?

[Hicks12]

That part about steam doesnt really count... they lower the price so people actually buy from them instead of retail as steam is normally very expensive so they are not stopping people pirating the game.

The price is fine, £60 for home premium OEM is great and not really expensive when you compare it to XP which is £100?. I dont see how you justify the price cutting, if all music tracks were 10pence would people still download? Yes. Because its easy and you are still getting it for free!Films are not that expensive but they get pirated aswell which is the same as many things including £5 games!.

Everything is pirated, you cant stop it until you make it impossible to actually pirate it because even making it harder doesnt stop it as its normally one person who cracks it then uploads it for the public to use so they dont even need knowledge to bypass this protection.

PS: It is spelt decently(not having a go, just pointing out).

[1stfret]

Well, i am in line to buy Win7 when it gets released. But i am hoping the price will be more reasonable than Vista!

[Splash]

i hear every time steam knock few quid off a game, their sales sky rocket and their downloads bandwidth is chocked. So my principle does stick to lower price, more people buy it, les piracy.

Let's take another example - Spotify makes it free to listen to pretty much any music you like. Has it stopped people downloading albums for free that they could probably buy for a tenner if they looked in the shops?

Its just some companies dont want to charge less for it, to make the product look better. Take any posh sports car, its only posh because none off us can aford it and those who do show off.

You think it costs the same to develop and make something like an Aston Martin DB7 as it does to make a Tata Nano?

same with MS i can quite easily justify, they want to make a OS seem desent, if they charged cheap for it, people might think its pile off rubish.

Linux is free - surely that means it has a larger market share by your logic?

As for covering costs, i think its done pretty quick any how, your forgeting that MS also does tons off ads everywere, that subs in some development cost. and if it was charged more desently then alot more people would buy it, instead off downloading. look at pirate bay and amound off vista downloads. and now think how many off those only done it because they think cost off it was too much?

Produce some verifiable Microsoft cost statistics and people might listen to you, until then it's all guesswork.

Actually here's an interesting question - did you buy a copy of MS Office? Do you think that the cost of Office or Windows pays *purely* for that product? I'd be willing to put money on the fact that profits get ploughed back into R&D for future releases. Your argument is far oversimplified, and despite the fact that Saracen is making some very good points about the wider picture you choose to stick your fingers in your ears and shout "Lalalala I can't hear you. And you're wrong" despite being unable to provide any form of proof to your argumnet. Let me simplify it for you - you think Windows should be cheaper because you want Windows to be cheaper. Anything else is fluff and nonsense.

[lodore]

Hello,
who really needs vista ultimate?
if you need business stuff use business if you use for home use get home premium.
Or simply keep xp for now and then get windows 7 pro to get both home and business features.
most people will be fine with oem versions of windows since they dont change hardware much.
I agree that people pirate software because its so easy to.
if you could buy a car cloneing machine for £3000 im sure tons of people would clone their car and give it to their friends.
you cant really clone cars or hardware etc so people buy them.
People dont seem to relise people make software to earn a living.
most people thinks that since tons of people pirate software its ok to and dont even bother checking the price of software.

I do remember seeing powerpoint on its own for £300 in pcworld years ago and thought wth!

the main reasons people dont use linux is the following: 1. they dobnt know about it. 2. they know about it but think its devloped by nerds for nerds. 3. the software they use doesnt work on linux for example games or business software. those are the main reasons anyway. 4. they have tryed it but they are so used to windows so they keep using windows.

I do wish windows was more reliable. linux supports far more platforms and manages to be alot more stable from the start. plus use less disc space. debian desktop takes roughly 3gb's of space with some programs. qwindows 7 takes 8.8gb just for the OS.....
overall i like windows and windows 7 has some good stuff such as the new taskbar. one of the best software for windows is windows live messenger imo. i do block the adverts espically since some can be quite dodgy...
I know a programmer who pirates software. quite ironic really.

[shaithis]

Anyone who can afford to be building more than one new PC over a 3 year lifecycle is surely able to afford either a retail license (so they can transfer to a new build) or a new OEM license for the new build.

There is a big difference between being able to afford to and believing you should do.

So, because someone upgrades their motherboard (could be a £50-60 motherboard), they then need to re-purchase the £130 OEM operating system or pay ~£300 for a retail licence in the first place.

It's daylight robbery and there should be some way to challenge some companies EULAs.

And the "Then don't use it argument" isn't valid. Microsoft played a crafty game to get games developers on-board early which means the vast majority of PC games require Windows to run. Giving most PC gamers absolutely no choice of OS.

[shaithis]

It's like Tesco offering budget, standard and "finest" versions

Not really. With your example each product is different and contain different ingredients.

The difference between OEM and retail is one has a hugely inflated price and the other has restrictions to stop you using it if you change something.

It would be like having to throw a perfectly good packet of "budget biscuits" away because you decided to change your biscuit tin (using your example).

[Saracen]

Not really. With your example each product is different and contain different ingredients.

The difference between OEM and retail is one has a hugely inflated price and the other has restrictions to stop you using it if you change something.

It would be like having to throw a perfectly good packet of "budget biscuits" away because you decided to change your biscuit tin (using your example).

That's why I said it's "like" what Tesco do .... and I was talking about marketing strategy, not the product. OEM products are about segmentation. They're about getting volumes of products on machines. They're about getting your product onto machines and into users hands that wouldn't buy full retail product. If MS can get a return from millions of machines sold by Dell, HP etc, they're going to be getting paid by many people that wouldn't buy an OS retail .... either because they'd use an old OS, or because they'd use Linus (etc) or because they'd pirate it.

It also reduces overheads substantially, because they pass the marketing and support costs of those users onto the OEM, and because they just sell volume licences and lete the OEM do most of the rest.

There's three main OS markets - retail, corporate and OEM .... though clearly, there's an element of overlap. Though as with Tesco, there's an element of product differentiation too. The OEM versions don't have some "ingredients" .... like being able to transfer from machine to machine.

But that's all part of the marketing mix. An OS may well substantially outlast the life of a given hardware mix. I've had XP on several generations of hardware, and I've STILL got W2K on one machine, which I've been changing periodically for, oh, a very long time.

One reason why I use retail versions of the OS on almost all my machines is precisely because it's cheaper for me to buy the retail OS than it is to keep shelling out for the OEM. I'm buying the "finest" because it suits my needs.

But you have that choice, don't you? Buy the OEM, and accept that you can't (legally) transfer it, or buy the retail, and you can. As I said, it's market segmentation.

But any analogy only goes so far. Which is why I said it was "like" what Tescos did, not exactly the same as that.

[Saracen]

i hear every time steam knock few quid off a game, their sales sky rocket and their downloads bandwidth is chocked. So my principle does stick to lower price, more people buy it, les piracy.

Its just some companies dont want to charge less for it, to make the product look better. Take any posh sports car, its only posh because none off us can aford it and those who do show off.

same with MS i can quite easily justify, they want to make a OS seem desent, if they charged cheap for it, people might think its pile off rubish.

As for covering costs, i think its done pretty quick any how, your forgeting that MS also does tons off ads everywere, that subs in some development cost. and if it was charged more desently then alot more people would buy it, instead off downloading. look at pirate bay and amound off vista downloads. and now think how many off those only done it because they think cost off it was too much?

Why do you think MS want to, or should, charge "cheap" for it?

They, like any other company, charge what the market will bear. They charge in a way as to maximise, over time, profits. The people that run the company have a legal duty to do that, because they don't own the company - shareholders do. As I said before, it's not about selling it as cheaply as they can, it's about maximising revenue and profit .... though not necessarily in the short term.

And ask yourself why Steam have regular discounting sessions? Same reason as MS .... to maximise profits. One way for any company to maximise profits over time is to build their user base. Why do Tesco (etc) advertise sales? Why to companies do BOGOFs? To get people through the door.

Why do Sky knock on people's doors and offer substantial discounts to people that subscribe? To build userbase, of course. They're buying market share with that discount, because they know that a good proportion of users, once signed up, stay signed up.

Why do banks offer "tempter" rates on their ISA products, but only for year one? Because they know that a lot of people will open accounts and deposit money based on that headline rate, but leave it there after the rate drops when you're no longer getting that tempter rate.

Why do (or did) credit card companies offer interest free periods on balance transfers? Because they want to take customers away from their competitors.

When a supermarket offers you a BOGOF, or a credit card company offers you a period interest-free, or a bank offers you a bonus savings rate, they're NOT doing it because they're nice people. They're doing it for the same reason MS set their pricing as they do, and for the same reason Steam offer regular deals ..... it's to maximise profits over time

The product is different with Steam and MS, as is the market position, so the strategy will vary, but the motivation is identical.



Oh, one more thing. Do you work for a living? If so, do you seek to get as high a level of pay as you can, or do you tell your employer to give you a pay cut, because you can scrape by on less?

Again, it's the same thing. I sell my time to clients, and I charge what the market will bear. Some clients will get better rates than others, either because they buy more time or because they can't afford the higher rates.

For instance, if I write an article for the Telegraph, I get a MUCH better rate than if I wrote one for PC Pro, which in turn, pays better than Computer Video Magazine. I very much doubt CVM could have afforded to pay the rates the Telegraph paid, but in neither case was I asking for a lower rate. And not would the vast majority of people. And my logic was exactly the same as both MS and Tesco .... I seek, over time, to maximise income. Don't you?

[kalniel]

And the "Then don't use it argument" isn't valid. Microsoft played a crafty game to get games developers on-board early which means the vast majority of PC games require Windows to run. Giving most PC gamers absolutely no choice of OS.

Then don't be a PC gamer. No-one is forcing you to play games on a PC, and the cost of the OS is just one of the required costs of being a PC gamer, just like a (more expensive and shorter lived) graphics card is.

If you don't feel it's worth the money to be a PC gamer then try console gaming. Or if you don't feel console gaming is worth the money then try board games or whatever. There is always something to do.

[shaithis]

Then don't be a PC gamer. No-one is forcing you to play games on a PC, and the cost of the OS is just one of the required costs of being a PC gamer, just like a (more expensive and shorter lived) graphics card is.

If you don't feel it's worth the money to be a PC gamer then try console gaming. Or if you don't feel console gaming is worth the money then try board games or whatever. There is always something to do.

Well, I cannot use jopypads to play FPSers, ergo I am stuck with the PC.

If I want to play on the PC, I need a Microsoft OS.

Newer games require newer OSes.

No, I do not think they are worth the money but other then "stop gaming" what others choices do I have?

Thats right, I break Microsoft EULAs....but the bottom line is I should not be made to feel like a thief because of their monopoly and unfair practices in the market.