Under the clever headline "Microsoft's Non-Family Values" blogger Dave Methvin lays out the logic behind charging $120 to upgrade a single Windows XP or Windows Vista machine to Windows 7. After all, Apple only charges about $25 for an OS upgrade (and offers attractive "family" pricing for multiple licenses). Not surprisingly the answer to "Why does Microsoft charge so much?" boils down to "Because it wants to and it can." The reason Microsoft wants to is the alliance--some would say "unholy alliance"--between hardware makers and Microsoft.
Basically, if it costs $120 and a bunch of hassles to get your old notebook running Windows 7, and a new notebook can be had for $400 with Windows 7 installed, there's a good chance you will opt to buy the new notebook, which helps the hardware makers--keeps the production lines moving and the cash flow coming--and helps Microsoft justify the huge fees it charges the many different computer makers who need the rights to install Windows 7. Of course, that $400 notebook is usually an under-powered teaser model and the PC makers hope you will go for the $1,000 models once they get you in a buying mood.
A good example is my own Sony VAIO that I bought new with XP installed about 4 years ago. No way is Sony going to support Windows 7 on that machine. Sony wants me to buy a new machine. Period. (And if the refusal to support Windows 7 is not incentive enough, Sony apparently has a backup plan that consists of making the fan get so loud and annoying I am forced to retire the thing or lose my sanity.)
Unfortunately, unholy alliances being what they are, Microsoft can't offer a $20 per PC upgrade deal even if it wanted to. The hardware makers would scream foul. They would lose out on sales of new hardware AND face demands for drivers and support and all the related hassles that hardware makers hate to deal with (mainly because they are expensive).
How ironic that I have a reliable 4 year-old computer that delivers entirely adequate performance under Windows XP or 7 yet is a dissappointment to the company that made it. Reminds me of the car industry.