Windows 10 is more expensive than Windiws 8. The price listed is $120 for Home and Pro at $200. But that's without taxes because in my country that's $148 for Home and $298 for Pro, after taxes. And I've seen this notion flying that Windows is cheap, but I want whatever you guys are smoking.

Windows 10 retail includes Microsoft support and the right to transfer it from one PC to another. Almost nobody buys it, or if they do (like me) it's usually on a cheap launch offer.

Most copies of Windows are configured, tested, pre-installed, locked to a single PC (not transferrable), and supported by PC manufacturers. They get it at discounted rates, which typically range from $0 to about $45. That's cheap if you think of it as $1 per month over 4 years.

PC manufacturers typically add "crapware" to consumer PCs. These are programs that they get paid to distribute (much like websites that collect $1 if they foist Chrome or the Google Toolbar on you). With luck, they can get the cost of Windows down to $0. They can also get extra discounts or even cash support for advertising from Microsoft and/or Intel for making certain statements, eg recommending Windows or playing Intel's bongs in a TV advert.

In some cases -- for example, if enough users subscribe to the bundled AV software -- the charge for Windows turns negative, ie they make a profit. With a really efficient OEM, the consumer may pay less than $0 for the pre-installed copy of Windows (other costs being hidden).

Since you can buy Windows laptops for £150/$199, the suppliers are clearly not paying $120 or more for Windows.

OK, on the differences of the retail license, you've got a solid point.

In my country (Romania) the laptops with Windows are easily $70 more expensive than those without Windows. I know this because every time I'm looking to buy a laptop I'm doing my research and end up amazed by the difference, given all the crapware they come with, which as you are saying, should subsidize the price.

Big companies like Dell and Lenovo (which owns IBM's old PC business) get the best deals. Smaller companies get worse deals: I've had that complaint from UK manufacturers. Small Romanian companies may get even worse deals.

But I would have thought Acer and Asus would be competitive, because they're global suppliers....

I think the parent poster meant, Windows (including 10, presumably, per Microsoft's 2014 announcement) is free to OEMs for devices with a screen size < 9 inches.

Yes, although I should correct my own statement:

Windows 8.1 with Bing has been free on devices with smaller than 10-inch screens

The actual deal was not free: you paid $10 for it, and then Microsoft gave you $10 for setting the default search engine to Bing.

So, according to Microsoft, it was not "free" it was "zero paid".