Windows is the ‘socket’ for Microsoft subscriptions, CEO says

At one point, Windows was an operating system that you could specifically buy, take home, and install on a PC. And it still is. But more and more, Microsoft sees Windows as a vehicle for its paid subscription services, which Microsoft chief executive Satya Nadella rather elegantly spelled out Tuesday afternoon.

As part of the company’s third fiscal quarter 2022 earnings call, Nadella was asked to comment on the strength of the PC market, and the durability of the PC business long term.

“I think on the commercial side, I think it’s well understood is that Windows is the socket for Microsoft 365,” Nadella responded, describing the relatively recent launch of Windows 11 and Microsoft 365, and the fact that both are “resonating super well.”

The “socket” metaphor seems particularly apt, given that Microsoft hasn’t really seemed to care how consumers paid for Windows — Windows 10 and 11 are free upgrades if you already own a Windows license, and Microsoft has let this free upgrade loophole languish for years. Microsoft really hasn’t seemed to care whether or not consumers actually bought Xbox Game Pass Ultimate, or just used a cheap loophole to take advantage, as long as people are using it.

The backstory here, though, is that Microsoft loves subscriptions, especially those that can be slotted into an enterprise budget as the “cost of doing business.” It’s absolutely part of the modern Microsoft mentality to encourage business users to sign up for as many paid Microsoft subscriptions as they can. And no, this isn’t new — Microsoft turned on the money spigot in 2017 with Microsoft 365, and it’s happily bashed its own standalone Office product to encourage customers to sign up for a subscription. Heck, Windows is even its own (business) subscription, too — very meta.

Microsoft also sees Windows as a vehicle for consumer PCs. But here, it’s slightly different. Nadella and Microsoft care about usage: growing browser share with Microsoft Edge, for example. Nadella highlighted the engagement with its Microsoft Start personalized news service — which now boasts 500 million monthly active users, Nadella said — as a way to encourage people to use Microsoft products (and presumably see ads) as well.

The idea, then, is for business users and everyday folks alike to simply use Windows as a gateway to Microsoft software and services. If that service is free, Microsoft will prioritize its use. If it’s paid, Microsoft will do everything to make that subscription service “sticky,” and invaluable. And it’s always looking for more.

“[The] PC remains a very important category in people’s lives as what we’ve discovered during the pandemic, and if anything the intensity of usage has increased,” Nadella said. “There will be cyclical demand that we’ll go through but the number of use cases is definitely I think structurally increased.”

Note than Nadella said nothing about the number of PCs sold. All Microsoft cares about is selling subscriptions, and Windows will continue to be the socket they’ll fit into.