I don't think cash flow is Microsoft's overriding concern at the moment. They'll still get plenty of steady income from their corporate cash cows. Right now, I think Microsoft is more worried about the existential threat of a world where people are weaned off Windows. They want Windows 8 to be used in as many places as humanly possible. If they can maintain their ubiquity, their overall ecosystem is secure. They will gladly trade a little profit from the consumer OS market to stay entrenched.

If that were true, then I would have also expected them to ease up on the anti-piracy measures.

They did. By lowering the price. I used to have 2 PC's running pirated copies of windows. Not anymore, they are both running Windows 8 I purchased at a reasonable price of 39.99.

As far as I know that is an upgrade price, which you can only get if you already own a legitimate copy of a previous version.

I do have Windows Vista OEM licenses which give me the right to upgrade to 8, just no windows 7 licenses which i used to run 'illegally'.

But I believe Microsoft knows what they are doing, cause the upgrade assistance does not check if you are running a legit version. It either means they were too trusting that users will be running legit versions before upgrading or it means that they deliberately left this hole in order to get a revenue from users who would otherwise just install a pirated version of their new OS.

The non-upgrade price is lower too unless I badly misremember how much Windows 7 went for.

It seems to be really hard for any big company to be "OK" with piracy, even if that company wants to get its software in as many hands as possible. They simply crave control. This is even somewhat reasonable, as pirate versions may be unreliable in ways that the official version isn't, thus giving a bad impression of your software. They would rather just sell the official version dirt cheap.

"I would have also expected them to ease up on the anti-piracy measures"

Are there any specific anti-piracy measures you're referring to, or just the presence of them?

Actually many who should have paid $39.99 didn't, and instead paid only $14.99. The reason is that the form which asks you about your supposedly "new" notebook purchased can be completed with fake info's and you would instantly get the discount code in your email. I know this because there were talks about it on many forums.

Microsoft's traditional strength has been their ability to lock users into their ecosystem. Windows revenue has been important for them, but as long as Windows helps them secure stable/improving positions for their other products and services, they could profitably license Windows for $0.

Most sales are OEM, not retail upgrades. Doubt OEM prices have changed dramatically.

Perhaps they've found a way to bring the costs of managing their app store down enough that they can turn a profit on it.

It is intriguing though.

There was an upgrade discount when Win 7 came out, too, down to $50 [1]. Additionally, as others have pointed out, it's unclear how many of the 40M licenses are upgrades vs. OEM licenses.

[1] see http://www.tomshardware.com/news/windows-7-upgrade-discount-..., for instance

Most of those are probably OEM licenses which are sold at a pretty steep discount to manufacturers and I believe make up the lions share of any windows release in terms of raw license "sales"...e.g. Dell may purchase a block a 5 million OEM licenses at some sort of discount...50-60% off of retail.

I think Apple & Microsoft both are trying to move to yearly or at least two year release cycle. Windows and Mac OS X upgrade prices otherwise does not make sense compared to prices for 4 year cycles.

Lower prices with shorter release cycle = same revenue.

Complicating the picture is that "licenses" includes upgrades and OEM copies. If I had to hazard a guess, I'd imagine that the OEMs represented a modest bump over Windows 7 - basically just reflecting the expansion in the market for PC's - but that the bargain basement upgrade price convinced a lot of enthusiasts to upgrade on day one.

Anecdotal, but even the dyed in wool Windows guys I know (gamers, .net programmers, etc.) were slow to upgrade to Vista and Windows 7. $120-$300 upgrades that didn't improve performance were hard to justify - the money was probably better spent on graphics cards and games.

According to http://www.forbes.com/sites/netapp/2012/10/11/windows-8-rele..., Microsoft plans to spend 1.5 - 1.8 Billion dollars marketing Windows 8. That's 45$ of marketing costs per copy of Windows 8 sold to date.

A very small percentage of Windows is software-only; something like 10%. And sales to consumers represents a smallish fraction of revenue & profits compared to enterprise sales.

So the lower price for upgrades will not have a huge impact on MS's revenue (or profit).