Path: utzoo!utgpu!news-server.csri.toronto.edu!mailrus!wuarchive!brutus.cs.uiuc.edu!psuvax1!rutgers!mcdchg!chinet!patrickd
From: patrickd@chinet.chi.il.us (Patrick Deupree)
Newsgroups: comp.windows.ms
Subject: Re: Windows programming in C
Message-ID: <1990Jun27.163921.2125@chinet.chi.il.us>
Date: 27 Jun 90 16:39:21 GMT
References: <118500024@uxa.cso.uiuc.edu> <41900010@sunb3>
Organization: The Whitewater Group, Evanston, IL
Lines: 66

In article <41900010@sunb3> meyer@sunb3.cs.uiuc.edu writes:
>Let's put it this way:
>	Assume:  for each developer, 10 users will be created.  (an average)
>
>	Marginal cost =   1 developer @	$500.00		500.00

Actually, I don't think they make this much off every copy of the SDK sold
since most all of their sales are through dealers that charge somewhere along
the lines of $300, which probably means that Microsoft is making somewhat
less.

>	Marginal Revenue= 10 users @ $100.00           1000.00
>	(Street price of Windows)

To be fair, the software resellers will charge around $100 (the suggested
retail is $150 for Windows 3.0) so you can figure that Microsoft is making
somewhat less per sale.

Now, as you'll see Microsoft would still make more from selling low cost
SDK's however they'll not make nearly as much as this projection would
indicate.

So, if Microsoft dropped the retail price of the SDK to $150 they would have
to either sell direct or they'd have to take a serious cut in their profits
to go through their dealers.  Selling direct would be tricky since the
required enhancements to their sales staff would be difficult to deal with.

>One must also keep in mind that the development of the SDK, to a major degree,
>was NECESSARY to the development of Windows 3.  Without putting the time and 
>effort into the SDK, Windows 3 would never have been.  Therefore, SDK 
>development costs are, for the most part, a sunk cost.  They are more properly 
>recovered from the sales of the final product, the environment.

I'm sure that, if the SDK didn't exist, it would mean the price of Windows would
go up.  Selling the SDK is a way of dividing the profit into two smaller
chunks instead of one large one.

>And for Pete's sake,
>provide upgrades for the poor S.O.B. who bought the last version of the SDK,
>and helped to make that version successful.

Hmm, I wasn't aware that Microsoft was not offering an SDK upgrade.

>By your method, Patrick, the other developers are being charged for the
>development of the environment, as well as having to pay for their own
>development.  Since this, too, must then be passed on to the user, this serves
>to drive the applications' prices up, which results in a fewer number of users
>buying the environment because they can't afford the applications they want to 
>use, or because the costs to the users outweigh the perceived benefits.

Now, just to make one thing clear, I've not been talking as a spokesperson for
either Microsoft or ourselves.  My interest in this topic is purely economic
since I've always had a love for marketing philosophy and economic
strategy (or should that be marketing strategy and economic philosophy?)

I would like to note that the price of Actor most likely does not have to do
with the $300 or so that we've spent on the SDK or the $700 we've spent on
On-Line.  Quite frankly, this is a drop in the bucket compared to the man
hours spent creating, maintaining, and enhancing Actor, the Toolkit, WinTrieve,
Language Extensions, and Object Graphics.

-- 
"Organized fandom is composed of a bunch of nitpickers with a thing for
 trivial pursuit."  -Harlan Ellison

Patrick Deupree ->	patrickd@chinet.chi.il.us