Hasn’t Microsoft historically sold the XBox at a loss, making up the revenue in licenses and sales of the games? Being an OEM of their own OS is somewhat unprecedented as it is, is it so unusual to expect them to do the same with this to be able to costs on price where it may matter most?

Hasn't Microsoft historically sold the XBox at a loss, making up the revenue in licenses and sales of the games? Being an OEM of their own OS is somewhat unprecedented as it is, is it so unusual to expect them to do the same with this to be able to costs on price where it may matter most?

Asked by aidanwalsh

That’s a fair point except for the fact that Windows has traditionally been one of the key pillars of their entire business. You could argue that just by doing the Surface, they’re risking that multi-billion dollar empire. But if they sell the Surface at $199, they actively trying to destroy the way that business has operated for decades.

And sure, it is certainly better to disrupt yourself than be disrupted, but I would argue that they’ve already been disrupted by the smartphones and tablets, they just haven’t fully felt the effects of that yet. In other words, I think it’s too late, and the self-destruction of the Windows business would just mean they would have *less* time to find that next pillar of the business.

Also, in your equation, what is Microsoft going to make money off of after selling the Surface with Windows at a huge loss? Office? If that’s the case, they better be ready to be a business about half as large as they currently are.

Update: As many people have pointed out, Office won’t be offsetting any Surface losses because it’s bundled with Windows RT. So if that’s really their model, what will their “razor blades” be?