Diminishing Returns

NPD’s 2010 Security Software Topical uncovered some interesting trends this year, some of which we released in a press release today, but some of the other tidbits require a little more nuanced reading into the last 3 years of data.

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Fighting The Installed Base Battle

Microsoft released the consumer version of Office 2010 to retail a few weeks ago, and according to NPD’s Weekly Tracking Service the results are mixed. Units and dollars are down from Office 2007’s initial two weeks of sales but are in line, and in fact slightly ahead of, sales trends of Office 2007 so far this year. This fact highlights the challenges for Microsoft going forward for Office. A strong product launched into a saturated market faces considerable headwinds. Even so, sales of Office 2010 in general have to be characterized as a bit disappointing during the first two weeks.
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I Don’t Trust Digital Stuff

That sentiment is not mine, but it is one that comes through loud and clear from NPD’s latest Online Software Purchasing Report. And while it may be a stretch, these findings may also offer us some insight into consumers’ acceptance of owning virtual content going forward. Consumers are clearly used to buying (and renting) things digitally, iTunes is the largest music store in the U.S. according to NPD, and Netflix streaming is undeniably rocketing in popularity as it is incorporated into more and more devices. But strangely it always feels that computer software remains behind the adoption curve. Sometimes it’s bandwidth, sometimes it’s security, sometimes it’s awareness (or just plain interest), and sometimes it’s just comfort; but consumers desire to download real productivity software is clearly behind where they are in getting their other virtual content.

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Windows 7 Launch Starts Here!

As Windows 7 begins its assault on the consumer retail marketplace today, so far, despite a few questionable decisions, the marketing, merchandising, and retail preparation appear to be clicking on all cylinders.  Since I’m not a product reviewer I can’t comment on how “insanely great” Windows 7 might be, but I can give Microsoft kudos for the preparation and first spate of advertising.  Let’s look at 3 buckets.

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Windows 7 Pricing: The Good, The Bad, And The Interesting

Microsoft released lots of interesting details today on Windows 7 release schedules and pricing. There were three main announcements: First, and one that is pretty good but that has already been widely reported, is that PC upgrades on Vista machines bought between now and the end of October would be free from Microsoft, with any cost (normally S&H) being charged by the PC OEM. This is within expectations and is the good for both the consumers and the OEMs. We should see a very minimal stall from the transition as these very low cost upgrades are offered to consumers. In addition, the excellent timing of the general availability of Win7 (between back-to-school and Black Friday) ensures that student buyers can’t wait until general availability to buy and holiday consumers are taken care of. All-in-all a big A+ for timing, pricing, and for ensuring that this will be the smoothest transition within the industry of any Windows OS upgrade yet.

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The Canary In The Coal Mine Is Still Breathing Heavily

PC software has oftentimes been linked to the canary in the coal mine. As purchasing and downloading software virtually has become so pervasive some say PC software is the precursor to the death of the store, just like the canary warned the miners of old. In that spirit I would like to point out that NPD just released a new report from our software group about online software purchasing. One of the issues we highlighted in the press release deserves more insight as it directly addresses this. According to the report, 63% of PC software sales online were downloads, that is a virtual sale and delivery, but approximately one-third of those folks opted to also have a shiny disc sent along. And 37% said they didn’t want a download, just the disc (and the pretty box!!). Adding it up that means that 59% of all online buyers wanted the box. So, while some segments of the industry may tout that virtual product and the cloud will make the store (or the box) obsolete, the consumer’s perception is not quite the same.

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