I think these pictures say a lot about why OS X Lion costs $29 and Windows 7 costs $119+:
Since the unit cost of software is minimal1, software companies effectively make up the unit prices.
Apple’s price for Lion is symbolic. Surely the development cost of their OS was less than what Microsoft had to invest in Windows 7; but with $29 per sold copy, and with much less Mac computers than PCs out there, it’s clear that Apple will never match the sales numbers of Windows XP or Windows 7.
Phil Schiller said that there are some 54 million active Mac users out there. Let’s be optimistic and say 30% of them buy Lion in the next quarter. This makes about $470M in revenue, which is less than 2% of their Q3 2011 revenue.
In addition, Apple pre-installs Lion on every new Mac from now on, even giving free upgrades to people who bought a new Mac just before the upgrade came out. But since they update their OS more frequently, more people actually buy the upgrade for their old Macs.
Apple could easily give Lion away for free without making a dent in their revenue graph. But at the same time, they won’t make profit in software department with a price like this; the design, development and testing of such a big software product easily costs billions.
In contrast, Windows 7 made up 27% of Microsoft’s revenue ($4.4B of $16.4B total) according to their last reported quarter. If they price it at, say, 50% of the current price, their overall revenue could go down 10% or more!
Of course, Microsoft doesn’t really sell Windows copies to users directly. They sell OEM licenses and company-wide business licenses. Which means, almost nobody buys a new version of Windows in any store, online or retail. And of course this means that the naming and pricing of all those different Windows versions does only reflect the funny ideas of Microsoft’s marketing department.
Micosoft is very dependent on Windows (and even more so, Office) sales and profits, while Apple is depending on hardware sales. Still, the shop prices of Windows 7 are almost as symbolic as Lion’s $29 price tag.
So, if you ever wondered about the strange difference in pricing of recent version of OS X and Windows: The prices say nothing about development costs, the product’s quality, its value for the customer, or the value it has in the eyes of the company which sells it.
They just make it up.
1 Or almost Zero in Lion’s case. Upload transfer costs might not even add up to $0.01.