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Why Xbox is poised to make the PlayStation a niche product

This new console generation is going to be much different than the previous one. To win the console war, the console must win in the overall entertainment experience, rather than primarily just gaming.

We are seeing this as Microsoft’s Xbox One and Sony’s PS4 are designed to be multi-tasking machines with a wide variety of entertainment on top of their gaming capabilities.

Last Generation with the Xbox 360 and the PlayStation 3 (PS3), we saw these systems sell about 80 million units each over the course of 8 years. Microsoft’s Xbox 360 launched in late 2005 and Sony’s machine followed to market one full year later. When comparing this market to other markets like tablets, which sold over 54 million units in the first quarter of 2014, 80 million units in 8 years seems relatively small. Of course gaming consoles aren’t as personal – they are shared with family, so it might not be the best comparison. However, it shows just how small this market is compared to other technology markets.

We have seen first-hand how getting the casual market right worked extremely well for the Nintendo’s Wii entertainment system last generation during its first few years in the market (before it fell apart in sales as the novelty wore off). However it still outsold Microsoft’s and Sony’s console by over 20million units, sitting comfortably at 100 million unit sales.

The Importance of Non-gaming aspects for Market share

With Microsoft’s recent statistics around Xbox Live, stating that over 50% of time on this service is spent consuming media and not playing games. That number is also rising since content seems to be key this generation as we are connected in more ways than ever before with social networking, on demand content, and through various devices.

These machines will evolve over time, but currently there is a major difference in how these two consoles are designed to entertain the consumer. Xbox One is taking a much bigger step towards catering to the mainstream consumer than its rival, the PS4. It aims to be the centre of your living room entertainment experience, a major differentiating advantage for Microsoft seems to be Xbox One’s TV centric approach.

Xbox One’s HDMI input provides the ability to piggy back off of an existing cable box and have a specialized TV guide operated not only with a controller but Kinect’s voice commands. The Xbox One is heavily built around this peripheral, which turns it into a completely unique experience using voice commands to do various things, such as telling it what to watch, launching and controlling apps, content browsing and offers a rich Skype experience. While Sony does offer a competitive device named “The PlayStation Eye,” it is not even in the same league in terms of capabilities – it is widely considered an afterthought and designed that way by Sony.

Microsoft recently announced that it will be producing its own big budget shows and content for its console. There are over 12 projects in the works and it seems as if Microsoft is taking this very seriously with ambitious original programming projects. Sony on the other hand seems to be concentrating primarily on the gamer and offer no signs of doing such things.

Although looking at current sales figures of these two consoles tells a more positive story for Sony at the moment, its sitting in a comfortable lead with over 7 million consoles sold compared to the Xbox One’s 5 million. This is a long battle and as these machines evolve over time with different SKU’s, price points and features, things can change drastically.

There are two major advantages Microsoft holds over its rival, which can change this console war significantly in Microsoft’s favor. In this generation of entertainment consoles they are more critical than ever.

The first advantage is the ecosystem Xbox One is tied to – it’s heavily reliant on the Microsoft Cloud and its many services, which integrate heavily with Windows 8 and Windows Phone. Not only that, but most of these services are also available on iOS and Android making it a more connected software experience than Sony’s PlayStation.

Microsoft did a smart thing by making Windows 8 Xbox One’s core operating system. This allows for universal app development across Microsoft’s platforms with the app API’s being very similar. Microsoft being a software company has this advantage over Sony, therefore we expect to see a much better offering of content on the Xbox One and integration with Windows and Microsoft services on other platforms. Sony is primarily a hardware company who doesn’t design and build its own OS, they will not will be able to duplicate this.

Sony’s deteriorating financial status

The second key advantage is Microsoft’s financial status – Sony has been financially weakened and hasn’t been able to turn a profit in many years. Sony’s CEO Kaz Hurai just recently slashed the company’s profit forecast for the business year-end in March from a previous estimate last May. They recently sold off their PC division and spun off their TV division, which in the last 10 years has lost a total of $7.8 billion.

There is increasing pressure from shareholders for Sony to sell, or spin off even more of the company’s assets. Sony’s PS4 is selling very successfully in the market, but development costs suggest it could take at least another year to turn a profit. With Sony’s troubling financial position, it will remain difficult to innovate and invest in a broader set of entertainment services on the PS4. Microsoft on the other hand doesn’t have these issues and is one of most profitable companies in the world.

There are rumors of Microsoft being in talks with Internet service providers and cable companies to sell the Xbox subsidized to their consumers. There are also rumors of a non-gaming Xbox made to compete with Apple TV, Roku and Amazon’s Fire TV, these can be game changers for the Xbox brand and Microsoft. The cloud promise of the Xbox One is a very interesting concept, although it hasn’t really showed off of its capabilities yet. The sheer scale of Microsoft’s Azure platform and what its powering today in enterprise, as well what Microsoft showed off at Build with cloud processing makes for one convincing possibility that it can provide the Xbox One significant cloud based rendering.

The gaming market is shrinking due to tablets and smartphones taking away casual gamers. In the past the only place to play games was the console. Today consoles seem to be the place for big budget games while mobile devices are for the everyday in and out gaming experience. Comparing console gaming to mobile gaming is like comparing the Movie theatre experience to YouTube – YouTube user numbers dwarf the number of movie theatre goers, but the quality of content is far better in the movie theatre – its where the consumer will spend money.

With consoles being sold at near break-even prices, a shrinking gaming market and development costs becoming significantly higher this generation, , there isn’t as much money to be made in just being primarily a gaming console. Exclusive content, interactivity with other devices around your home and apps will be this generation’s catalyst. The company that seems to have the right formula to win this, is Microsoft.

It’s hard to imagine what Sony can do to further enhance content creation without an app development community, and financial strength- while Microsoft is throwing millions of dollars at these very things.

These consoles are currently catering to the gamer with high price points and the mainstream consumer is not yet being exposed to these machines. However, two or three years from now when these consoles see lower price points, having a broader availability of entertainment services will be crucial for mainstream acceptance.

This is when the real battle for market share dominance begins, as acceptance of the mainstream market could take sales much higher than the 10 million units sold annually last generation. Having a console as a centralized hub for all your devices and integrating with core software services is essential in creating the ultimate living room entertainment system.

Looking at what both companies can offer, points to a decisive win for Microsoft and PlayStation becoming a niche device for the die-hard gamer, as this generation evolves.  Sony’s financial status will pose a large problem for investment in large data centres to compete in the cloud space, this is where Microsoft is already firmly established.  It is possibly however that as the cloud plays a very important role in gaming that Sony’s PlayStation may cease to exist.

Samsung looking into getting back with Windows Phone, but we say don’t come back without a Galaxy Windows Phone line

Microsoft and Samsung don’t have the best relationship these days over Windows Phone with the ongoing conflicts the legal patent royalties battles are causing.  According to Microsoft, Samsung has stopped paying patent royalties over intellectual property associated with the use of Android, and that turns out to be a lot of money (billions) on a yearly basis.

According to Korea Times, Samsung is reportedly looking into releasing cheaper handsets running Windows Phone as their own Tizen platform hasn’t drawn strong interest from developers.

“Samsung has run pilot programs on the stability of Windows 8.1 software on devices. It is interested in promoting Windows mobiles,” said an official directly involved.

However, this depends highly on the outcome over the legal battles between the two companies as they try to make common ground.  Microsoft and Samsung currently work together on other projects related to cloud computing and have always had a strong relationship in the past.

With Microsoft planning a huge push with Windows 10 this year, having Samsung on board can be of great benefit to the mobile part of Windows, but at what cost?  Microsoft is making lots of money off of patent royalties from Samsung, but at the same time Samsung is the largest smartphone maker in the world with a very strong brand recognition that if they properly came on board, it would be a huge boost for  Windows Phone – one that could possibly have a bigger impact than what Windows 10 could provide.  However, the key word here is “properly” meaning that Samsung gives Windows Phone equal treatment to that of the Galaxy Brand, which likely will not happen.

Samsung has made some great Windows Phones in the past with their Focus line, and the Samsung Ativ line at the launch of Windows Phone 8.  However, even though  Samsung Ativ was the first announced Windows Phone 8, it only launched in a very select few markets and saw zero advertising or promotion while not being properly supported by the company.

With the recent zero-dollar licencing, Microsoft has singed on many new manufacturers to make Windows Phone in the past few months, and these new OEMs are exclusively working on budget handsets which is essential in growing the platform’s market share.  I don’t know how much benefit Samsung getting in on the low-end with Windows Phone and limited distribution with zero advertising will help the platform.  It would certainly help if it’s properly executed, but if one looks back at the history of Samsung with Windows Phone it’s hard to imagine anything better happening if they decide to pursue the low end route.

What Microsoft really needs is a flagship from a company like Samsung to really boost mindshare of Windows mobile (phone), and if Samsung and Microsoft reach some sort agreement for Samsung to add a Windows version of their flagship Galaxy line and advertising them together, that would be a significant catalyst in helping the platform boom practically overnight.

Windows Phone needs to have a decent marketshare of high end devices in consumers’ hands, and that means a lot more to the way the platform is perceived rather than having a stronger marketshare in the low end segment.  If I had to choose, I’d choose Lumia over Samsung any day, and I’m certain that most Windows Phone users who are familiar with the platform would do the same.  If Samsung plans on getting back into Windows Phone with poor support and low end devices that see no advertising, I’d say they should stick with Android as doing a half-assed job on Windows Phone is more damaging to the platform and its user base.

Rockstar is taking the fight to Google as the search giant already received many wounds

Rockstar Bidco (Apple, Sony, Ericson, Blackberry and Microsoft) were determent to outbid (bid: $4.5 Billion) Google in 2011 for thousands of high quality patents from Nortel.  Nortel is a Canadian (Ottawa) based telecom company that owned these thousands of patents related to personal computers, modems, wireless technology, fiber optics, social networking and internet search, but unfortunately went bankrupt in 2009.  In what appeared to be an international bankruptcy scandal, this left about 30,000 people without a job, many left without a pension and/or life insurance coverage.

Google of course had their eyes on those patents (this one is just an example) and they thought they could get them on the “cheap” side ($900 Million) but things went a little different for the search giant, as the Rockstar Consortium stepped in to protect their market and bid against Google. Google was already very successful in the mobile market with Android, and the Rockstar Consortium was content to outbid Google to keep certain LTE and 4G wireless portfolio patents from Nortel out of Google’s hands.

(Reuters published a good article after the bidding war)

It did become clear to us very quickly that this was something that a bunch of big companies with humongous balance sheets had decided was strategic for them,” RPX Chief Executive John Amster said. “Clearly at a price at this level it had to be strategic, and they could afford that.

(Joe Mullin from Arstechnica notes in an article from October 31 2013)

“Patent insiders knew that the Nortel portfolio was the patent equivalent of a nuclear stockpile: dangerous in the wrong hands, and a bit scary even if held by a ‘responsible’ party.

This afternoon, that stockpile was finally used for what pretty much everyone suspected it would be used for—launching an all-out patent attack on Google and Android.  The smartphone patent wars have been underway for a few years now, and the eight lawsuits filed in federal court today by Rockstar Consortium mean that the conflict just hit DEFCON 1.”

One might believe this now called Rockstar (Bidco) Consortium did not want Google to get even stronger and they stopped them when they had to.

Rockstar Concertium was created as a new company soon after the purchase of Nortel’s patents was completed to make sure the original owners (Apple, Microsoft, etc.) could not be counterattacked, sort of the same structure as Nokia has now and is therefore much more capable of milking their ([massive]<– clicking the link is worth your long read btw) IP portfolio after they sold their mobile/handset business to Microsoft.

In October 2013, Rockstar Consortium filed a suit against Google, ASUSTek, HTC, Huawei, Pantech, LG, and ZTE for infringing patents and this week the United States Magistrate Judge decided in favor of Rockstar. However, it is not  clear if companies other than Google are affected by this decision. Cisco, a company not linked to the before mentioned lawsuit, agreed to pay $188 Million a few days ago. It might be obvious Rockstar wants to make money and Google is their next target, for now.

Google has received some blows in the past few years as well as retaliation from competitors due to the search giant taking the free software route.

  • Apple just recently replaced their search engine from Google to Bing, in their new Yosemite OS. In addition, Siri also uses Bing and has been since the beginning.
  • Google Glass has completely failed to take off and is considered a flop by many.
  • Microsoft is also unleashing a heavy assault on Google docs with Office 365, and just recently making their Office apps free on mobile all platforms with the ability to edit and create documents, while at the same time offering OneDrive as a feature with unlimited storage to all Office 365 subscribers. Microsoft also has a free version of Office on the web to further take away any reason to use Google Docs.
  • Microsoft recently launched an all out attack on the Chromebook with the offering of a free Windows licence to OEM’s selling devices for less than $250.  This has caused the recent flooding of the market with low-end Windows devices such as tablets, phones and PC’s.  We are curious on how this will affect Google and Microsoft in the next few months.
  • Mozilla (Firefox) also chose Yahoo instead of Google recently as their browsers default search engine (Yahoo uses search via Bing btw).
  • The court ruling recently and fresh from the press the news announced  by Reuters that the European Parliament is going to propose a search services split in threat to Google is definitely an interesting turn of events, and can pose a serious problem for Google.

We will keep you posted on the recent court ruling, but judging by all of the above circumstances it seems like Google is not so well liked. We have yet to see the effects of all of the above mentioned and it will certainly be an interesting time to follow Google and the surrounding controversy it has with the E.U.

Yes, Microsoft will bring other cloud saving options to Office 365 (and will kill off Google Docs in the process)

Two days ago, Microsoft dropped a bomb on the cloud industry by announcing that they were partnering with Dropbox (which you can read the press release here) to allow Office customers to save their files to their Dropbox accounts in addition to their OneDrive accounts, whether that be through Windows, the iPad, or Office Online. Many in the Microsoft camp, unsurprisingly, rejected the notion and wondered why Microsoft would partner with a rival cloud company. The answer is quite simple really: to sell more copies of Office 365 and to prevent customers from switching to solutions from Google.

OneDrive has now turned from a service to a feature

Ever since Microsoft began offering unlimited OneDrive to any Office 365 subscriber, they’ve changed the conversation about cloud storage. Prior to this announcement, OneDrive (and other cloud storage solutions) was seen as a service, as in a stand alone product that you would buy into. Now, the company has started to change the perception of cloud storage to more of a feature, as in something that just comes along with another purchase that you made. Amazon has already responded (albeit half-heartedly) to this with unlimited photo streaming storage, so this is clearly a shift that is happening.

By turning OneDrive into a feature, the company has also basically given up on the thought of gaining money from cloud storage. Now, they are using it as advertising. As a way to get people to think “hey, that’s pretty cool. Unlimited storage? Well, I’d sign up for that”, which just increases the number of people that are using a service that they actually want people to sign up for, Office 365.

Keep in mind that Microsoft had already basically done this months ago, they just called it 1 terabyte instead. Now, I realize that 1 terabyte isn’t technically “unlimited” but for most people, it basically might as well be unlimited. All this does is add buzzwords to the equation to make Office 365 even more of a no-brainer; an offer that you simply cannot refuse.

 

“Tech ‘journalists’: Satya, it’s too late for Microsoft Office

Satya: I’m gonna make them an offer they can’t refuse”

Dropbox integration costs Microsoft almost nothing, and may actually make them more money

As much as Microsoft fans, myself included, enjoys OneDrive and all of the storage that comes with it, it’s important to keep in mind that we are the minority of consumers. The majority (although not a landslide by any means) are using Dropbox. Not necessarily because it’s better, but because they were the first to market and established themselves. They also have some features that OneDrive is lacking, although they will get there.

While Microsoft likes to throw around numbers that make it appear that they are the #1 in cloud storage, it is most likely that those are people who have automatic upload on their photos and don’t use it day to day. Think about it, how many apps do you know that integrate OneDrive compared to the number that integrate Dropbox? That should be the most obvious clue.

That’s not to diminish the awesomeness of OneDrive. Many of us at Microsoft Product Reviews use it all of the time, but it is important to note these facts as it shows where the market is, and what people in general expect when they want to back up files to the cloud. By giving customers the option to use their preferred cloud storage option, Microsoft has a win-win scenario on their hands. Not only does Microsoft get to advertise that Office 365 has offered people unlimited storage for all of their files, if someone chose to eschew OneDrive (for whatever reason that may be), Microsoft gets the advertising without the cost of actually being the one who has to host your storage. As I mentioned earlier, Microsoft no longer sees OneDrive as a way to directly make money, they don’t need you to store your stuff in their particular cloud solution, they just want you to see it as a reason to buy into Office 365.

… and yes, it will eventually support Google Drive too

Look, I’m just going to be blunt and say it: Google’s dreams at productivity software are over. They’ve lost. Microsoft already has the lion’s share of productivity software on desktop and now that they’ve made Office essentially free on mobile, Google now effectively has no advantage. Before they were seen as the solutions that was “good enough” and “at least it’s free”, but now they have almost nothing.

One of the worries that Microsoft (and Dropbox to an extent) had was that since people stored their files in one company’s cloud while using the productivity software of another, that some people might just eschew both solutions in favor of a vertically integrated service such as Google Docs and Google Drive. Sure, a lot of those people might’ve gone to OneDrive, but this deal makes it so most, if not all, of these people would stay with Office.

Think about this: if you know that Word is better than Google Docs, yet both of them can save to your preferred cloud storage option, why wouldn’t you choose Word? It’s clear that unless Google can pull some Hail Mary pass, then they have no future in productivity.

What do you guys think? Does this make Office even more of a no-brainer for you? Let us know in the comments.

Thoughts on Microsoft’s quiet entrance into the wearables market

Last Wednesday Microsoft announced their Band to the world in a sort of sneaky way. Many of us followed the rumors and knew something was cooking but Microsoft surprised even the enthusiasts. I wondered how Microsoft was able to pull that off, but it seems they understand how to create a buzz in a way other companies are successful at – the original Surface RT is a great example of this.

I, for one, was surprised and went out to my local Microsoft store first thing Thursday morning. I got there at 10 am sharp and found around 13 people ahead of me just as eager as me to score one too, many more followed suit. My store didn’t have the massive lines other stores had, but people starting to fill the store afterwards.  There were definitely a few shoppers critical about it initially but I noticed that they eventually changed their minds and ended up purchasing a Band – I thought it was interesting to see.

I have been using the Band for five days now and start to love it more and more. I am not a fitness person by any means but this gadget makes me realize more about my health then I ever did before, which in some ways is actually a good thing because I am at an age where healthier living does start to matter.

This gadget is filled with sensors and very capable to keep track of your everyday life movements, the way you live your life and how well you take care of your body, where you have been and how long you have been there. Besides that, we have the Microsoft Health app that syncs to the Band so all your information is stored in the cloud.

It’s good to see that that Microsoft’s Band works with other platforms (Android and iOS) which is very smart of Microsoft and will ensure a much wider acceptance rather than being exclusive to a single platform.

This smart band is a very capable tool and collects some vital information, so I sincerely hope Microsoft protects our sensitive info and if they do decide to take the Google route, they should provide a way for users to opt out of it even if it means that the Band becomes less useful.

Let’s take a look at what is inside the Band that will track our lives in more ways than other fitness bands do. (It is a little confusing on Microsoft’s website what the 10 sensors exactly are, because they mention only 7 or 8).

1: Optical heart rate monitor

Your Microsoft Band continuously monitors and reports your current heart rate. Measurements of the fluctuations in your heart rate help add quality to your calories burned measurements and to performance stats that you get when you track runs, workouts, and sleep. See Track your heart rate for more info.

2: Accelerometer/3: Gyrometer

The accelerometer/gyrometer in your band detects motion. This info is used to calculate things like number of steps taken, which can be combined with info from your profile and heart rate measurements to estimate how many calories you burn throughout the day or during a workout. For info on tracking these measurements, see Track your calories burnedTrack your exercise, and Track your steps.

Motion and heart rate also indicate periods of restful and light sleep. For more info, see Track your sleep.

4: GPS

When you turn GPS on during distance travel activities like running, hiking, or biking, it records your route, and collects info about the distance you’ve travel. When you sync your band with your phone, you’ll find a map of your route in the Microsoft Health app so you can retrace your favorite routes later.

GPS data is also used to refine distance and speed calculations. Use the Run Tile to start and stop GPS tracking. For more info on the GPS, see Using GPS mapping.

5: Microphone (which I was a little surprised about but hey, it is a sensor)

Use the built-in microphone to speak to Cortana, your personal digital assistant (available only on Windows Phone 8.1 Update). The microphone is near the left side of the touchscreen. When Cortana’s enabled on both your phone and on your band, just press and hold the action button, and speak into the mic. See Using Cortana for more info.

6: Ambient Light Sensor

Info from the ambient light sensor can be used to adjust the brightness of your touchscreen display automatically. To use this feature, set Brightness to Auto Set. Here’s how:

From the Me Tile on your band, swipe left, and tap Settings > Brightness.

7:  Galvanic Skin Response (GSR) sensors

The GSR sensor measures the conductivity of your skin between the GSR sensor under the clasp and the secondary GSR contact point under the face of your Microsoft Band. This tells your Microsoft Band whether you’re wearing it, so it can adjust how it monitors your activities.

8: Skin temperature sensor

9: UV sensor

Get a snapshot of the UV level where you are by tapping the UV Tile, so you can decide if you need sunscreen, a hat, or maybe a few hours indoors.

10: Capacitive sensor (touch screen) which is obvious and maybe therefore not mentioned.

Anyway, I LOVE my Band. It Rocks!

Will Halo and a $50 price drop this holiday season cause a turning point for Xbox One?

In the U.S., Microsoft’s Xbox One has been outsold by Sony’s PlayStation 4 since the beginning of 2014.  When comparing to the previous generation of the console race, an interesting turn of events occurred as the U.S. was Xbox 360’s territory and with the current crop of consoles things are slowly changing, but Microsoft won’t give it up so easily.

Their answer this holiday season is a $50 price drop, Halo: The Master Chief Collection, and to a lesser degree a timed exclusive on multiplayer content with Call of Duty: Advanced Warfare.

Halo has always been the trademark of the Xbox, and is considered by many the sole reason Xbox is still around today.  There are many Halo fans which exclusively play Halo and haven’t upgraded to an Xbox One yet, and when looking at Twitch streams, many are still playing Halo 3. With  the release of Halo: The Master Chief Collection, this will have a big impact on these gamers a be a reason to upgrade, especially with a $50 discount in effect for the Holiday season.

According to VGChartz, when looking at U.S. sales figures there are almost 44 million Xbox 360s and around 3.7 million Xbox Ones sold. While just over 26 million PlayStation 3s and around 4.8 million PlayStation 4 consoles are sold.  The gap between the Xbox 360 and the PlayStation 3 is rather significant, and when looking at sales of the current generation machines, it tells two possible tales.

Either that many Xbox 360 gamers are still waiting to upgrade, or that many of them are converting over to the PlayStation 4.  If I had to take a guess, I’d say that many of them are still waiting to upgrade to an Xbox One, and the absence of Halo is a big reason that they’ve waited so long. That’s not to say that some of them haven’t converted over to Sony’s console, there are certainly converts, but I would say it’s minimal compared to the amount waiting for a reason to upgrade.

Microsoft is relentless to outsell Sony this holiday seasons and hopes to create a turning point in the console race, and releasing Halo: The Master Chief Collection can certainly make this a possibility on U.S. soil. However, nothing is certain and with such a stumble the Xbox One had around its launch and initial pricing, it has caused a shift in the console market as well as general perception, and that is definitely hard to overcome but the gap in sales between the two makes this a strong possibility.

This holiday season will be a time where we will witness the importance of the Halo franchise and see how much power it still holds in the gaming industry, as well as its potential to cause a turning point in this console race. It’ll be a very interesting time to follow console sales, and if the past is any indication, we can expect Halo to be a blockbuster success and move many consoles.

Windows phone sales could hit over 10 million by next quarter

While it would be an understatement to say that Windows Phone has gone through some rough patches, there does appear to  be some good news coming out of Microsoft’s quarterly report. The company has reported that approximately 9.3 million Lumia phones were sold within the past 3 months. This is up about 6% compared to the same quarter from the previous year.

Microsoft hasn’t broken down the specific numbers by model, but seeing how revenue from Windows Phone has gone down, it’s fair to say that they were mostly low end models such as the Lumia 530, 630, and 635, although it’s fair to keep in mind that Microsoft has also lost revenue from Nokia licensing Windows phone and they are now giving away licenses for Windows phone for $0, so there is hope for high end Windows phones, still.

Windows Phone sales could hit 10 million by the end of next quarter

If Microsoft has sold 9.3 million Lumias, then that only means that other OEMs need to sell a combined total of 700,000 for Microsoft to be selling over 10 million each quarter. Now, as I noted in my most recent Ad Duplex article other OEMs have thus far only obtained .03% of the total market.

However, if Microsoft can increase sales of their Lumias (which they almost certainly will during the holiday season), combined with a (hopefully) more broad release of the HTC One Windows, plus other OEMs, Microsoft could hit as much as 10 million or even 11 or 12 million by the next earning report.

Ad Duplex’s monthly report for October is coming up soon, so we’ll have to wait and see how well 3rd party OEMs are doing with Windows phone, so check back for that in about a week.

Source: Microsoft

Windows 10, where are the Nay Sayers?

For the past week I’ve been trying to find negative reviews on Windows 10, but they are hard to find… does Microsoft have a winner on its hands? I truly think so. When compared to the first days/weeks/months when Windows 8 came out, the internet was flooded with negativity about the new OS – it was burned down to the ground before most people even installed the preview and in my opinion killed by the media/so called reviewers in very unfair way.

Just one out of the many examples here: http://www.cnet.com/news/windows-8-is-hard-so-say-14-typical-users/

When Windows 8 first came out, it took me a week or so to get used to it, but when I got the “hang” of it I totally understood where Microsoft was going with this bold new vision on what Windows should be. Windows 8 was made and developed with mobile in mind but worked well enough for desktop users (if they took a little time to invest in it).

Mobile FIRST is the life-line for Microsoft and I was happy to see that 8.1 brought extra features and made navigating with a mouse and keyboard a lot easier for desktop users that were too lazy to figure out what 8(.1) had under the hood. I believe that Microsoft really improved the productivity experience with Windows 8.1, it’s just too bad the Windows 8 already had a bad rep by then.

Perhaps one of the most overlooked and best features in Windows 8/8.1 is search. (Just start typing your command/request) in the Metro environment and this brings you to everything available in your machine, and most of the time the first option is what you are looking for. Try it for the fun of it, type CM and CMD will pop up on the right side of you screen, or type “sk” (Skype is there) or con (Control Panel is there), type wo (and Word is there). Fortunately search is still available in Windows 10 but not as easily accessible as in Windows 8.

My experience with Windows 10 and features that really make a difference

Anyway, it does not really matter anymore as Microsoft had to please the NAY Sayers even after 8.1 but I think they did that in a very elegant way. I installed Windows 10 on a 5 year old machine yesterday and this machine FLIES compared to when it ran the pre-installed Windows 7 and, everything works flawless! NO driver issues, boot up time is at least twice as fast, it looks and feels like Windows 7 with a more up-to-date UI-so I don’t think that desktop users really have anything to complain about anymore.

Not only is everything familiar in Windows 10 but I found it has a lot of additional features like multiple (virtual) desktops, still a great “search engine” (with built-in Bing) that when you search for files on your machine, it automatically searches the internet for additional search results, and I really like that you’re able to snap four apps-with each taking up a quarter of the screen. I found that Microsoft also made File Explorer more intuitive, and for Windows 8 fans, the “Start Screen ” is still there in the form of a traditional Windows 7 Start Menu, and it works just the same with the pinning of apps and resizing of live tiles. For those who prefer the Windows 8 Start Screen, Microsoft gives you the option of bringing it back.

There is a lot more to discover and I have been using Windows 10 Preview only for two days now but I am quite satisfied with what I have found so far and I am waiting for the NAY SAYERS to stand up and fight their old fight and accuse dear old Microsoft of not doing their job AGAIN ;-)…. But with none yet standing up against Windows 10 makes me feel that Microsoft has really nailed it with this version.

 

It appears that Microsoft is really making an OS that’s familiar to everyone upgrading from previous versions of Windows, making a truly universal and versatile OS which is built to accommodate all types of devices.  I believe that this is a very important step for Microsoft to make in order to move everyone forward to Windows 10 especially to get everyone involved in the Microsoft ecosystem, something that will potentially benefit Windows Phones and tablets in a big way.

I invite readers to join us in exploring Windows 10, share your opinions (good or bad). Be a part of the ongoing growth of this new Windows that’s aimed to please desktop users and the enterprise. Let’s also make sure we don’t let Microsoft forget (at least that’s how I see it) their Windows 8 fans, as I’m a fan of the Windows 8 Start Screen. I see that with Windows 10, Microsoft is trying to accommodate the desktop users, and I’m hoping that Windows 10 Continuum doesn’t change the mobile experience too much, because I love the way Windows 8 does it. I’ve become very accustomed to how the modern Windows 8.1 experience works and I loved the out-of-box experience it gave me.

Microsoft would only require $7 per user to make Windows 10 free

With all of the excitement of Windows 10, one thing that has been left unanswered is the pricing of the licenses. That’s not all too surprising though as this release was for the enterprise segment.

It does, however, raise the interesting question of how Microsoft should go about getting people to upgrade to their latest OS. One of the rumors that has been circling around is that Microsoft might give away Windows 10 as a free upgrade to Windows 8/8.1 users via Windows Update. This rumor has been circulating after Terry Myerson’s comments at BUILD 2014 where he described the start menu as coming “in a coming update for Windows 8”, which (for Microsoft), update usually means free.

Other rumors have also been circulating such that Microsoft may give away Windows 10 for free to Windows 7 users and even XP owners. While that sounds like a great idea for getting everyone on the latest platform, will it work? And wouldn’t Microsoft be losing a lot of money? Those were my initial assumptions on the situation, but after doing a lot of research on the subject, my opinions have changed. Let’s get down to the nitty gritty and see if it would actually be worth it for Microsoft to give away Windows 10 for free.

Now before I go to far, I think I should clarify what I mean by “give away for free”. I am not referring to people who build their own PCs, OEMs, and enterprise. What I am referring to is the suggestion that maybe each Windows license should be linked to your PC and that as long as you use that PC, you own a copy of Windows, whether it be 7, 8, or 10 and that you shouldn’t have to buy another license for the same product. If you build a PC, you need a license for that PC, but once you buy it, it should be yours until you get a new PC. Similarly, if you’re buying a PC from an OEM, you own that PC and (indirectly) the license for that PC and should own the license as long as you’ve got the device.

There are actually some valid points to be made as to why the pros for going down this route would outweigh the cons.

(And no, none of those reasons have anything to do with “Well, Apple and Google do it”. All of their business models are different.)

Relatively no one buys their computer for a new OS. I realize that most of the people reading this probably have Windows 10 installed on their PC and they upgraded to Windows 8 the second they saw that $40 price tag, but the fact of the matter is that relatively no one really buys a phone/tablet/PC for a new OS, regardless of what it is. To most people, it doesn’t matter what Microsoft puts in Windows 10, they just use their computer to browse the internet, play a couple of games, and type documents, so putting a price tag on it wouldn’t gain the company much additional revenue (more on that later), but that also means that it won’t have much of an effect on OEM sales.

For further proof of this, let’s go from the world’s most popular OS to the second most popular OS, Android. At the beginning of every month, OpenSignal creates a very detailed image of the fragmentation found in Android (which you can find here).

In the report, you’ll see that Android users also never spend money to upgrade the newest OS. For example, Android phones running 2.x (which were released 4 years ago), still make up 14% of the market. Android 4.1 Jelly bean (which was released about the same time as Windows 8) still runs on over 1/4 of all Android devices.

Both OS are used by over a billion people, and 99% of them couldn’t give a care in the world about what OS their device is running. Heck, they probably wouldn’t even know what version of the OS their phone is running if you asked them. They just want it to work. It’s why Windows XP still makes up 20% of the market, because it’s “good enough”. Both require spending a decent chunk of cash to get the latest OS (Windows for buying the software and Android for buying the hardware, although you can still work around both of those if you’re into that sort of thing), and since most people require basic functions plus a little extra, there’s not much that either Google nor Microsoft can do to compel the average person to spend money on a new OS.

The PC market has pretty much grown as big as it’s going to get. This one may get a bit more controversial, but the PC market’s user-base of 1.5 billion people isn’t going to get much bigger. Now sure, as the world’s population increases, you could argue the PC market will increase too, but there’s also the fact that less and less of those people that own them are actually getting new ones. It’s not a large number by any means (probably just someone’s grandmother or someone that can’t afford a new PC), but there are some people who’s main computing device could just be their phone or a tablet.

For the sake of making this too complicated, let’s just assume that even as trends shift, the PC market will always be 1.5 billion strong. Assuming that there will be no other growth in numbers, it’s essential for Microsoft to try to get as many people on the same platform as possible, and if there is no growth from new users, then Microsoft has to do it via software.

Let me give you an example of what I mean. This isn’t a direct comparison, but it shows you why Microsoft can’t rely on a larger user-base to grow Windows: Imagine there’s 1.5 billion people living in “PC land”. Now imagine there’s a brand new OS called OS A (wouldn’t it be funny if there was some Linux distro with this name?) and it sells tons of copies, let’s say 750 million. Great, 1/2 of the PC land is on OS A and the rest have no OS (follow me on this).

Now, let’s say that a few years go by and prices of new PCs come down and the follow up to OS A comes out and it’s named OS B. Now, OS A users don’t like OS B and they don’t want to pay for something they don’t like, so they don’t upgrade; however, these new users who can now buy a PC want a new PC, but they can only buy OS B, so they buy OS B. Great, now you’ve got 1/2 of your users on one OS and another 1/2 on an older version.

What are you to do? Well, you could release a new OS called OS C. OS C seems to be like an easy transition from both OS A and OS B and is able to satisfy both crowds. Both are responding well to the upgrade, but only some of them can afford it, so now you’ll have some on OS A, some on OS B, and have the ones who want to upgrade on OS C. Your userbase is now split into three different OS.

What can you do now? Well, you can’t rely on new people coming in and helping the percentage of OS C to go up, since you’ve already sold a copy to everyone who will have one. People on OS A and OS B are satisfied with their OS and don’t want to pay the money to upgrade, but they would take it for free. So you give it away for free and suddenly you’ve got almost all of your user-base on OS C as opposed to fragmentation (which is good, because OS C contains a really nice app store that you want to push developers to, so you need users, but more on that later).

“But then how did that company make back their mon…”*slap* more on that later.

Microsoft may actually GAIN money by giving away Windows for free (no seriously, hear me out)

Now I know what some people are saying. You’re thinking “Microsoft can’t give away Windows, Microsoft IS Windows”. Not necessarily. Over at the reliable ZDNet, Ed Bott collected Microsoft’s annual reports since 2002 all the way to 2013. In it, he notes how Microsoft has successfully diversified its portfolio and how Windows actually makes up only 20% of Microsoft annual revenue, although they do still make a little over 30% of their profit (as in revenue – the cost of expenses) from Windows sales, which amounts to about $9 billion dollars.

Now, even for a company like Microsoft, who made $27 billion in profit in 2013, they still can’t just throw away 1/3 of their total profit for the sake of market share. That’s more money than some countries make in 3 years. Well, that’s when I decided to dig into the reports and crunch some numbers myself, and I think I’ve found some interesting tidbits.

Now, while Microsoft’s Windows division made $9 billion, only 35% of that came from consumers and enterprise, while 65% came from OEMs, which again, are going to be paying for the licenses. So taking that into account, Microsoft would only be losing $3.15 billion per year. Now, again, I realize they can’t throw that money away and they probably can’t rely on Azure, Office, and Server to make that back, so how would they continue to increase YoY profitability then? Well, more on that in a second (I promise that will be the last time I do that).

Over the years as more and more customers focused less on their platform and more on the services that are running on them, so has Microsoft. Satya Nadella had described the company as a “mobile first, cloud first” company in a move away from Steve Ballmer’s “Devices and Services” company, but in reality, they’re both saying the same thing, but Satya is trying to leave his own motto on the company to distance himself of the Ballmer era. You’re going to be running these services from the cloud and will be running them on mobile devices, so they’re essentially the same thing.

Which, dear reader, is how Microsoft will make its money back: Services. What? Did you think I had some dramatic conclusion that I was alluding to? No, it’s much more simple than that.

Now, I know what you’re thinking, “but Jason, how will they make over $3 billion from services per year?” Well, I know that seems like a lot, but hear me out.

Doing some rough number crunching, I took the amount of people on Windows 8 verses how many were on Windows 8.1, then took away new device sales and came up with the conclusion that roughly 30% of all Windows 8 devices have updated to 8.1 (which should be higher, but Microsoft decided to make it difficult for regular users to figure out how to upgrade). So now we have a basis on how many Windows users are willing to upgrade to the latest version.

(Now, while it would be reasonable to take away some of those numbers because of enthusiasts who know how to upgrade, I also took into consideration how much easier it would be to make the update available Windows Update as opposed to the confusion that updating via the Windows Store created, so 30% is actually a conservative number.

Also keep in mind what I said earlier about consumers not upgrading their PC just for a new OS, so this will not suddenly anger their partners, as most wouldn’t buy a new computer until their old one broke, regardless if it ran Windows 7 or Windows 10. )

So, if we take 30% of that 1.5 billion user-base who would update from their current version of Windows to Windows 10, we would get 450 million people. (Note: some of these people will  be enterprise customers who will pay for the license and services such as Software Assurance, but I’m trying to make as conservative of an estimate as I can in my initial estimates). So now, by taking that $3.15 billion that they would lose in a year and distributing that cost over those 450 million people on Windows 10, they would only need to make $7 per person in a year. Put it another way, they  would only need to make $1.75 per user in a quarter. They’ll probably earn more than that from people accidentally clicking on Bing ads.

Now, while Microsoft would only need to make $7 per person in a year, which they’ll surely do from people using Bing, looking at the MSN apps, gathering money from the Windows Store and people buying into Xbox Music and Xbox Video (of course, Microsoft has to make a compelling case for people to use the Xbox apps over other services such as iTunes), that’s just direct benefit. There are some indirect benefits to this also. Getting on the latest version of Windows could also see a benefit in Windows Phone in Xbox sales (more so the former than the latter). With people familiar with the Modern UI, they won’t see Windows Phone as so different an foreign than their current iOS or Android. It also means that they’ll be invested in the Windows Store, which using Universal apps,  means that if a person wanted to try Windows Phone out, they could already have a decent collection of apps built up and waiting for them.

Now, I would like to point out that that $7 a year is a very very conservative estimate. With the Windows Update process being much easier than it was trying to get the update to work (and not constantly fail) from the Windows Store, I honestly see no reason that that number could not jump to 50% or even 60%. That would bring the number of people using Windows 10 to approximately 825 million. I also added the enterprise in with consumers in non-OEM sales of Windows, and enterprise customers spend significantly more than consumers. I can’t find any hard numbers on the ratio of enterprise to consumers, but even if we assume that only half of that $3.15 billion are from consumers, that leaves us with about $1.6 billion for consumers in a year. Spreading that number out and you get less than $2 per person per year.

It’s also note-worthy that even though I counted Windows XP users in with Windows Vista, 7, and 8 users, they will end up having to get buy new computers anyways (just look at the system requirements), so they’ll end up paying Microsoft more than that $2-$7 a year anyways.

Another added benefit is that with those 825 million users that I previously mentioned, Windows 10 would become the single largest operating system on the planet, and if Microsoft can get people to stop using the desktop and start using the Windows Store (which is their master plan, anyways), then that could make the Windows Store the go to app store for developing apps. If that happens, say goodbye to the app gap on Windows tablets and Windows phones, which will also increase their uptake from consumers.

Obviously these numbers aren’t exact and only Microsoft knows precisely how much they would make off of this. They’ve got professional accounts that do nothing all day but think of different ways to make Microsoft more money, and I’m sure that this idea is on their radar. I do think, however, that these numbers show a compelling case for Microsoft to give away Windows as a free update to all of it’s users.

What do you think? Should Microsoft give away Windows 10 as a free update? Let us know in the comments below!