Super-cheap Surface tablets mean Microsoft's gone mad

If it's any good, it doesn't need a Poundstretcher price tag

Surface

This week's big tech rumour is a doozy: Microsoft's Surface tablet will cost just $199 when it goes on sale in October. Never mind the iPad: at that price, the Surface is a KindleFireNexus7iPadMiniKiller.

Well, it would be if that price tag is real.

I don't think it is, because there's only one reason Microsoft would be willing to do something that crazy: to risk absolutely everything to build market share for the UI formerly known as Metro.

By "everything", I really mean "everything". If Microsoft wanted to sell $199 tablets, it should have made Windows Phone ones.

Let's assume that $199 is the street price, and that it's not conditional on buying a $400 keyboard, a pricey subscription to something or a data plan for the Surface's non-existent 3G/4G radio. On that basis, Microsoft will lose a packet on every single Surface it sells. For what?

Surface tension

There's apps, of course, of which Microsoft will take a cut - but as we've seen on iOS and Android, apps don't generally succeed with massive price tags. According to figures from ABI Research, 70% of app users spend "either nothing or very little", and the average spend of $14 per month is distorted by the 3% of app users who account for nearly 20% of total purchases.

The median sum is just $7.50 per month; if Microsoft got 30% of that, it'd bring in a whopping $27 per year. To get that, Microsoft would be foregoing Windows revenues - OEMs pay Microsoft for every copy of Windows they install; Microsoft, of course, doesn't - and it would be foregoing Office revenues too, because every Surface RT tablet will have Office Home & Student 2013 RT on it.

That missing money might not just apply to Surface tablets: it might apply to all Windows RT ones. Why make a Windows RT tablet when everybody's going to look at your price tag and go "Good God! You could buy three Surfaces for that!"? Grumblings from the likes of Acer indicate that OEMs are worried, and it isn't hard to imagine them abandoning Windows RT altogether.

If Surface is as good as it appears to be, it'll sell even at iPad-esque prices; it doesn't need a Poundstretchers price to make it competitive. I'm beginning to wonder if the low price thing is actually a smear campaign by Microsoft's aggrieved OEM partners. "Let's tell everyone the Surface is $199!" they cackle. "Then when Microsoft says it's $399, everybody will be like 'OMG Micro$oft sucks!!!!!' and we'll win the internets!"

Maybe not, but there's still an irony here: by going directly after Apple, Microsoft's now experiencing exactly the same rumour-mongering and inflated expectations that Apple's been dealing with for years. We know a $199 Surface doesn't make sense, but if Microsoft doesn't do it we'll still be disappointed.