1. Inventory prep has been spectacular. This past weekend I happened by a Best Buy store (as you can imagine I do this pretty often) and there was not one single PC for sale with Vista on it.  Lots of Windows 7 machines, however, all of which were marked “not for sale until October 22.”  Someone did a great job in the supply chain making this happen. This will give Win 7 a tremendous boost out of the gate.

 

2. First ad deals have been well-thought out and innovative.  At their initial introduction I was very critical of MS pricing for Win7 upgrades.  Over $100 is far too much to move the population rapidly off of Vista (and according to NPD’s 2009 Household Penetration Study – 25 percent of households have a desktop running Vista and 40 percent  have a notebook with Vista  - so there are a lot of folks to move).  But, I think the initial offer in some of last Sunday’s circulars, which offered a Win7 upgrade for just $50 ($70 off) with the purchase of a Win7 PC, is brilliant.  It gives incentive to some of that huge XP installed base to do the right thing and upgrade into a new PC while offering them a way to cost-effectively upgrade that companion notebook they have bought in the last two and one-half years which is running Vista.   We hope to see lots more innovative offers focused on those multi-PC households as they represent the biggest opportunity for new sales and upgrades as well.

 

3. The work done with PC OEMs to align product cycles with Win 7 has also been spectacular.  Never before has the industry launched such a variety of new form factors, price points, technology upgrades, and design innovations at one time. With Win7 delivering improved capabilities in power management, networking, media, and touch the variety of systems available appeal to a wider range of buyers than ever before. This selection ought to help drive PC sales through the holiday season, not just as replacements, but to get consumers to begin rethinking what the right level (i.e. much higher) of PC ownership and usage should be in their home and entice them to reconnect more strongly with the PC experience.

As PC sales and boxed copy sales begin today we will keep our eye on the sales trends in our retail tracking service to get confirmation that consumers also see the change Win 7 has brought to the PC industry.  We expect to see increased marketing and merchandising focused on the upgrade buyer and the multi-PC household opportunity that dovetails with the Win 7 story.  And of course we will be waiting with bated breath for the opening of the new Microsoft stores and how Microsoft tries to interpret the retail interaction between consumer and PC and the buying experience.

No discussion about Microsoft ever leaves everyone happy. In this case I am mightily disappointed in a couple of aspects of Microsoft’s upgrade plans for non-PC buyers. First, is the pricing on the Windows 7 Home Premium upgrade. Besides the fact that $119 is a price point that fits nowhere in these economic times, it is still way too much for the software. While I acknowledge that this is down from Vista pricing, that is damning with faint praise. It is in Microsoft’s best interests to erase all vestiges of Vista from consumers’ homes, and by making the upgrade expensive (and a bit painful, more on that in a moment) Microsoft is creating a large disincentive for consumers to move to a far superior platform with a better user experience. Doubling down on the disappointment is the fact that this is only a one user license. In a world (at least in the U.S.) where most homes are moving into a multiple PC environment it would enhance the consumer home experience if they could upgrade all their home PCs at a single low price with a single boxed purchase. Although I don’t think it is exactly equivalent, Apple’s Snow Leopard pricing model ($29 for a one user license and $49 for a five user license) is much more appropriate to driving adoption and raising customer satisfaction levels. This is a direction I would have much preferred to see Microsoft head into.

Finally, what was interesting? The intention of a limited availability sale on Windows 7 (at $49 per copy) fulfilled only through the channel is a boon to the channel and the industry. It certainly addresses at least some of our pricing concerns and adds a few benefits to the marketplace. A program like this will deliver incremental customer traffic at retail, early customer excitement about a new product to the industry, and should prove to be a great early indicator as to customer demand and interest. Maybe some of the learning here could lead to some revisions in the go-to market planning down the road.

 
No one is going to claim that PC software is a retail growth segment (according to NPD’s retail tracking service sales dollars from PC software have been essentially flat, at around $3.4 billion over the last four years). And although our online channel tracking has grown from 11.5% of sales to 17%, there is still an appetite from the consumer for the physical manifestation of the product. As my colleague Russ Crupnick pointed out a few months ago in discussing music, there remains tremendous value in the disc, and I would add, in the store it was bought in. So, although online sales are gaining share consumers are still treating those purchases much like they would a purchase in the store, and seeking the safety and comfort of the physical media. There is no denying that content like PC software, movies, and music are losing space in the brick and mortar world, but we are far away from an industry where either the shopping or the content is delivered digitally. If one-third of all buyers who actually downloaded their software then asked for the disc too, then I would posit that the day of the virtual store (and virtual content) is still pretty far away.

The web enthusiasts would have us believe that everything will be in the cloud and exclusively online and they are eagerly singing that song. But at least for a solid majority of consumers the canary is still in full voice.